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TMI Blog2010 (11) TMI 101X X X X Extracts X X X X X X X X Extracts X X X X ..... aid return as filed by the assessee. Instead, he framed the assessment under Section 143 (3) of the Act by assessing the income at Rs. 12,05,724/- vide orders dated 18th July, 1996. In the process, the Assessing Officer made additions on three counts which are as under:- (i) The depreciation claimed by the assessee on used gas cylinders was denied by the Assessing Officer invoking Explanation-3 to Section 43 of the Act. (ii) Certain rents on the property let out by the assessee to the tenant which were deposited in the court which the assessee had not accepted and in respect of which the Assessing Officer was of the opinion that the rent was released by depositing in the Court and exigible to tax. (iii) The claim of Rs. 368374/- as business expenses was not allowed holding that the assessee‟s income was not exigible under the head „income from business‟. 4. While passing this assessment order, the Assessing Officer also directed initiation of penalty proceedings under Section 271 (1) (c) of the Act on the ground that the assessee had concealed particulars of income under the aforesaid heads. 5. The assessee filed appeal against this order of the Assessing Of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion of law which has been extracted in the beginning. 11. The issue thus is as to whether clause (a) is applicable in the instant case or it is clause (c) which is applicable i.e. whether six months period is to be counted from 2nd August, 2004 or 28th February, 2005. We extract herein below Section 275(1) (a) of the Act:- "Bar of limitation for imposing penalties. (1) No order imposing a penalty under this Chapter shall be passed- (a)In a case where the relevant assessment or other order is the subject matter of an appeal to the Commissioner (Appeals) under section 246 or an appeal to the Appellate Tribunal under Section 253, after the expiry of the financial year in which the proceedings, in the course of which action for the imposition of penalty has been initiated, are completed, or six months from the end of the month in which the order of the Commissioner (Appeals), or as the case may be, the Appellate Tribunal is received by the Chief Commissioner or Commissioner, whichever period expires later." 12. In N.A. Malbary and Bros. Vs. Commissioner of Income-Tax, Bombay North., 51 ITR 295, which was a case under the Income Tax Act, 1922 the Assessing Officer had passed fir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sioner. In cases where the proceedings are not completed with the order of the Appellate Assistant Commissioner or the Appellate Tribunal, Sub-clause (ii) would have no application but when there is no appeal, penalty can be levied within a period of two years from the end of the financial year in which the proceedings are completed. The emphasis is on the words "the proceedings . . . are completed". When the proceedings imposing penalty, initiated with the assessment originally made, were subsequently dropped and set aside after the proceedings for assessment which were taken in appeal to the higher authorities and were set aside with an order of remand with a direction to make a fresh assessment, it cannot be said that the proceedings for assessment were completed on the date when the first order of assessment was made. As pointed out, the emphasis is on the words "proceedings . . . are completed", The effect of the order of remand is to remove from the file the order appealed against and when the original order of assessment is taken away, there is no assessment. As such, it is the or.der passed subsequently which is relevant and not the earlier one, which had been set aside. "T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment which is the subject-matter of appeal. The appellate authority, on an appeal against an order of assessment, has power to confirm, reduce, enhance or annul the assessment or to set aside the assessment and refer the case back to the Income-tax Officer for making a fresh assessment in accordance with the directions given by such authority (section 251). Evidently the effect of an appellate order is that the order either stands confirmed, reduced or enhanced or it stands annulled or set aside. In the case of confirmation, reduction or enhancement, the original order of assessment stands modified to the extent of the directions given by the appellate authority. In the case of annulment the order becomes non est. In case an order is set aside, the authority has to start the entire process afresh and make a fresh order of assessment complying with the directions given by the appellate authority. It is thus clear that what remains as a final order after giving effect to the orders of the appellate authorities is an order of assessment under Section 143 or 144. It cannot be anything else." 15. The aforesaid discussion leads to one direction namely the answer to the question formula ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er to the file of the assessing officer with the directions to tax only the interest income earned by the assessee during the year under account" 17. In respect of issue at Sl. No.2 above, the Tribunal found that the assessee was not engaged in finance business, as it found that lease agreement was in fact a financial transaction, and that advancement of loan was not the regular activity of the assessee and, therefore, income earned there from could not be held as his business income. Thus the opinion arrived at was that the Assessing Officer was justified in treating this income as income from other sources. The Tribunal, thereby set aside the order of the CIT (A) and restored that of the Assessing Officer. Thus, deciding the issue, the Tribunal gave following directions:- "Accordingly we set aside the order of the CIT (Appeals) on this count and restore that of the assessing officer for all the assessment years and direct the assessing officer to compute the interest earned by the assessee during the year and tax the same instead of lease rental income" 18. In this backdrop, we have to understand the exercise undertaken by the Assessing Officer which resulted in the passing of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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