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TMI Blog2015 (5) TMI 587X X X X Extracts X X X X X X X X Extracts X X X X ..... 2005-06. 2. M/s. Rastriya Ispat Nigam Limited, (for short the assessee), the Government of India undertaking, is engaged in the business of manufacture and sale of Iron and Steel products. For the Assessment Year 2005-06, the assessee had filed return of income on 28-10-2005 declaring NIL income after setting off of unabsorbed depreciation of Rs. 3081,03,64,095/-. The assessee admitted total income of Rs. 3099.81 Crores and claimed set off of unabsorbed depreciation of Assessment Years 1993-94 to 1998-99 aggregating Rs. 3914.69 Crores. Further, the assessee admitted book profit under Section 115JB of the Act at Rs. 1107.17 Crores and the tax thereon was worked out at Rs. 86.81 Crores. The return of income was accordingly processed under Section 143(1) of the Act on 31-03-2006, accepting the income returned, and it resulted in refund of Rs. 28.91 Crores. Thereafter, a case of the assessee was taken up for scrutiny and re-assessment was completed under Section 143(3) of the Act, vide order dated 26-03-2007, determining the total income at Rs. 3127,21,34,124/- and after setting off of the unabsorbed depreciation to the extent of the income so determined, the taxable income under norm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tood at the relevant time, depreciation to the extent it was not adjusted in any assessment could be carried forward and treated as depreciation for subsequent year, and so on until the entire unabsorbed depreciation was adjusted against the income. By Finance Act (No.2), 1996 w.e.f 04-07-1997, a time limit was introduced for adjusting the unabsorbed depreciation. After this amendment, such an unabsorbed depreciation could be carried forward only for a limited period of eight assessment years, subsequent to the year in which depreciation was computed. On the basis of a clarification issued by the Finance Minister, the Central Board of Direct Taxes issued Circular No.762, dated 18-02-1997 clarifying that depreciation computed upto 1996-97 i.e., prior to the amendment with effect from 1997, could be carried forward and considered for set off against income under any head for Assessment Year 1997-98 and seven subsequent assessment years. The Parliament again amended Section 32 of the Act by Finance Act, 2001 w.e.f.01-04-2002 and the original provisions of Section 32 of the Act were restored, removing the time limit of eight years that was introduced with effect from 04.07.1997. In vie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... submitted that the proposed rectification under Section 154 of the Act for the Assessment Year 2005-06 is barred by limitation. After inviting our attention to the order of assessment under Section 143(3) of the Act dated 26-03-2007, he submitted that the order of reassessment under Section 147 of the Act dated 19-03-2010 did not disturb the said order (26.03.2007) of assessment made under regular provisions of the Act, and what was considered in the reassessment was only computation of income for the purpose of levy of Minimum Alternative Tax under Section 115JB of the Act. In short, he submitted that income under the regular provisions of the Act and the computation thereof was not touched in the order dated 19.03.2010. He, therefore, submitted that limitation provided in Section 154(7) of the Act would begin to run from the end of the financial year in which the order sought to be rectified was passed i.e., order dated 26-03-2007. He submitted that the last date of the previous year was 31-03-2007 and four years limitation under Section 154 (7) would expire on 31-03-2011 and, therefore, notice under Section 154 of the Act issued on 31-08-2012 was hopelessly barred by limitation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... we deal with the question, it would be advantageous to reproduce the relevant portion of Section 154 of the Act, which reads thus:- Rectification of mistake. 154. (1) With a view to rectifying any mistake apparent from the record an income -tax authority referred to in section 116 may,- (a) amend any order passed by it under the provisions of this Act; (b) . (c) . (1A) Where any matter has been considered and decided in any proceeding by way of appeal or revision relating to an order referred to in sub-section (1), the authority passing such order may, notwithstanding anything contained in any law for the time being in force, amend the order under that sub-section in relation to any matter other than the matter which has been so considered and decided. (2) Subject to the other provisions of this section, the authority concerned- (a) may make an amendment under sub-section (1) of its own motion, and (b) shall make such amendment for rectifying any such mistake which has been brought to its notice by the assessee [or by the deductor], and where the authority concerned is the Commissioner (Appeals), by the [Assessing] Officer also. (3) .. (4) .. (5) .. (6) .. (7) Save ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deem it appropriate to look into these judgments in detail, to appreciate and to find out whether these judgments support their submissions. 10.1 In Hind Wire Industries Limited (supra) Sub-section (7) of Section 154 of the Act, as it then stood, fell for consideration, in particular the expression from the date of order sought to be amended therein, of the Supreme Court. The background facts against which the Supreme Court considered the said provision are that the assessee was assessed for income tax originally under the assessment order dated 21-09-1979. The assessee had filed a petition for rectification of the said order under Section 154 of the Act on the ground that the Income Tax Officer had not taken into consideration the shift allowance available to the assessee. Consequent upon this application, the assessment order was rectified on 12-07-1982. Thereafter, the assessee again applied for rectification of the fresh order of 12-07-1982 on 4th July, 1986 contending that while he was entitled to depreciation on factory building at the rate of 10%, he was allowed the depreciation only at the rate of 5%. The Income Tax Officer dismissed the assessees claim on the ground that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hankar Ghose, learned senior counsel referred us to the decisions of the Patna and Karnataka High Courts in Bihar State Road Corporation v. Commr.of Income-Tax, (1986) 162 ITR 114 at 130 and Commr Income-Tax, Karnataka-II Bangalore v. Mysore Iron and Steel Ltd., (1986) 157 ITR 531, respectively which decisions have taken the contrary view. However, in view of the decisions of this Court referred to above, we are of the opinion that the view taken by the Tribunal in the present case is the correct one. We, therefore, set aside the impugned order of the High Court and restore that of the Tribunal. The appeals are allowed accordingly with no order as to costs. (emphasis supplied) 11. The Supreme Court in M/s.Alagendran Finance Ltd., (supra) considered the question whether for the purpose of computing the period of limitation envisaged under Sub-section (2) of Section 263 of the Act, the date of order of assessment or that of the reassessment, is to be taken into consideration?. The question arose for consideration against the facts that the assessee had filed its returns for the Assessment Years 1994-95, 1995-96 and 1996-97 on 23-11-1994, 27-11- 1995 and 26-11-1997 respectively and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dgment in Hind Wire Industries Limited (supra) in paragraphs 9 and 10 observed thus:- 9. We may at this juncture also notice the decision of this Court in Hind Wire Industries Ltd. (supra) wherein the decision of this Court in V. Jaganmohan Rao v. CIT and CEPT (75 ITR 373) interpreting the provisions of Section 34 of the Act was reproduced which reads as under : "Section 34 in terms states that once the Income tax officer decides to reopen the assessment, he could do so within the period prescribed by serving on the person liable to pay tax a notice containing all or any of the requirements which may be included in a notice under Section 22(2) and may proceed to assess or reassess such income profits or gains. It is, therefore, manifest that once assessment is reopened by issuing a notice under sub-section (2) of Section 22, the previous underassessment is set aside and the whole assessment proceedings start afresh. When once valid proceedings are started under Section 34(1) (b), the Income-tax Officer had not on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wholly without jurisdiction rendering the entire proceeding a nullity. (emphasis supplied) 12. In Hind Wire Industries Ltd. (supra) the Supreme Court considered the provisions contained in Section 154 of the Act, in the light of almost similar facts. The only difference is that, in the case before the Supreme Court, the assessee had filed a petition for rectification of the re-assessment order dated 12.07.1982 contending that while he was entitled to depreciation on factory building at the rate of 10%, he was allowed only at the rate of 5%. In this backdrop, the Supreme Court held that the assessee would be entitled for rectification if his petition under Section 154 of the Act was within the time. 12.1 In M/s.Alagendran Finance Ltd., (supra) the question of Limitation was raised in the proceedings under Section 263 of the Act. While dealing with the question, on the facts and in the circumstances of the case, the Supreme Court observed that the order passed by the Commissioner of Income Tax would clearly demonstrate that only that part of order of assessment which related to lease equalization fund was found to be prejudicial to the interest of the Revenue. The proceedings for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with respect to a part of the matter covered by the initial assessment order. The result of reopening the assessment is that a fresh order for reassessment would have to be made including for those matters in respect of which there is no allegation of the turnover escaping assessment. As it is, we find that in the present case the assessment orders made under Section 12A were comprehensive orders and were not confined merely to matters which had escaped assessment earlier. In the circumstance, the only orders which could be subject-matter of revision by the appellant were the orders made under Section 12A of the Act and not the initial assessment orders. In the case of J.Jatganmohan Rao v. Commr. Of Income-tax and Excess Profits Tax, Andhra Pradesh (1970) 75 ITR 373 : AIR 1970 SC 30-0), this Court dealt with Section 34 of the Indian Income-tax Act,1922, which relates to reassessment in the case of income escaping assessment. It was held by this Court that once assessment is reopened, the previous under-assessment is set aside and the whole proceedings start afresh. Ramaswamy,J., speaking for the court observed: Section 34 in terms states that once the Income-tax Officer decides to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by adopting an obstructive attitude. It is difficult to conceive that such could be the position in law. 16. Observations made by the Supreme Court in Commissioner of Income Tax Vs. Sun Engineering Works Pvt. Ltd.,(198 ITR 297 ) are also relevant to appreciate and understand the provisions contained in Section 147 of the Act better. The relevant observations read thus: Section 147, which is subject to Section 148, divides cases of income escaping assessment into two clauses i.e. viz. (a) those due to the non-submission of return of income or non-disclosure of true and full facts and (b) other instances. Explanation (1) defines as to what constitutes escape of assessment. In order to invoke jurisdiction under Section 147(a) of the Act, the ITO must have reason to believe that some income chargeable to tax of an assessee has escaped assessment by reason of the omission or failure on the part of the assessee either to make a return under Section 139 for the relevant assessment year or to disclose fully and truly material facts necessary for the assessment for that year. Both the conditions must exist before an ITO can proceed to exercise jurisdiction under Section 147(a) of the A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der passed under Section 21 of the U.P. Sales Tax Act (15) 1948, i.e.18-01-1980 (for short the Sales Tax Act)? In this case, the original assessment order for the year 1975-76 was passed on 07-02-1979. The reassessment order under Section 21 of the Sales Tax Act was passed on 18-01-1980. Thereafter, in 1982 the assessee filed an application under Section 22 for the Assessment Years 1975-76, 1976-77, 1977-78 and 1978-79 for rectification on the ground that turnover in respect of purchases made on behalf of ex U.P. Principals had been wrongly assessed to sales tax. 17.1 The Sales Tax Officer rejected all applications, whereas the appellate authority allowed the applications relating to Assessment Years 1976-77, 1977-78 and 1978- 79 and dismissed the application for the Assessment Year 1975-76 on the ground that application for rectification was barred by limitation. The Sales Tax Tribunal allowed the appeal filed by the appellant/assessee for the year 1975-76 on the ground that the application was within limitation, holding that the original assessment order dated 07-02- 1979 had ceased to exist on the reopening of the assessment and the reassessment order being passed on 18-01-1980 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issued under that section the original order of assessment gets re-opened and thereafter any order made under S. 21 of the Act alone would be the order of assessment in respect of the period in question. Section 21 of the Act does not require the assessing authority to pass an order deciding whether it is necessary to proceed with the inquiry under that section or not before passing an order of assessment or reassessment under that section. The only order which the assessing authority is required to make under S. 21 after a notice is issued to the dealer under that section is an order of assessment or reassessment. It is not required to pass first an order whether it should proceed with the reassessment proceedings or not. Such a preliminary order is not contemplated under S. 21 of the Act. Hence the order dated 18- 1-1980 has to be treated as an order of assessment even though it is not in the form in which an order of assessment has to be passed and not as an order merely on the question whether the reassessment proceedings under S. 21 of the Act should be proceeded with or not. In other words, it should be held that the assessing authority had adopted the earlier order as the or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fied order passed by an Income-Tax authority. There cannot be any doubt that the re-assessment order under Section 147 read with Section 148 of the Act is also any order which could be rectified by issuing a notice under Section 154 of the Act. In other words, the words any order in Section 154 (1) (a) of the Act would mean even the re-assessment order under Section 147 of the Act. Merely because in the case under Section 154, it is the same Officer who invokes the jurisdiction and in the case under Section 263, it is a superior Officer, would not mean or it cannot be stated that both the expressions, any order and the order, as occur in Sections 154 and 263 respectively would have the same meaning. The word the clearly denotes the specific order, while the word any would mean any order passed by the Income-Tax Authority. 20. In Hind Wire Industries Limited (supra), the Supreme Court was dealing with the provisions of Section 154 of the Act, as has fallen for our consideration in the present case, and in that case the subject matter of re- assessment was distinct and different and that the rectification sought was in respect of the same subject matter which was considered in the o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a notice under Section 154 of the Act would have to be decided on merits. It is true that the jurisdiction under Article 226 of the Constitution can be exercised in a case where the action complained of is without jurisdiction or is taken/initiated on assumption of power not vested in the Officer. It is well settled that where the exercise of power ex facie appears to be without jurisdiction, the Court would be inclined to interfere but even in that case lack of jurisdiction would have to be revealed from the notice and reasons on the face thereof and not by discussion on merits. Challenge to the notice under Section 154 of the Act, in the present case, is not on the ground of jurisdiction or assumption of power not vested in the authority. The petitioners have already filed their objections, which respondent No.1 will have to decide, after following due procedure and taking into consideration the reply filed by the petitioners, by passing a speaking order. The 1st respondent is bound to furnish reasons for deciding the notice and deal with all contentions urged by the petitioners in their reply. In the circumstances, we are not inclined to entertain the second question raised for ..... X X X X Extracts X X X X X X X X Extracts X X X X
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