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TMI Blog2015 (10) TMI 2018X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Act. Since the Assessing Officer has acted in accordance with law, the assessment order cannot be called to be illegal or irregular and that is why the Tribunal has not set aside or cancelled the assessment order. But on account of change of circumstances, the Tribunal has directed the Assessing Officer to adjudicate the issue of claim of exemption under section 11 of the Act in the light of registration under section 12A of the Act granted to the assessee. Since the Tribunal has neither set aside nor cancelled the assessment order and issued directions for compliance to the Assessing Officer, the case of the assessee certainly falls under clause (ii) of sub-section (3) of section 153 of the Act and for this subsection, no time limit is prescribed under the Act. Therefore, it cannot be said that the order passed by the Assessing Officer was barred by limitation. But from a careful perusal of the order passed by the Assessing Officer, we find that the Assessing Officer has simply computed the quantum of refund instead of adjudicating the claim of exemption raised under section 11 of the Act in the light of grant of registration under section 12A of the Act to the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n so far as it is prejudicial to the interests of revenue u/s 263 of the Act. 2. BECAUSE the Id. Commissioner of Income-tax has erred in law and on facts in invoking jurisdiction u/s 263 on the ground that the Tribunal, in the remand order dated 30.01.2009 received by him in March, 2009, had not set aside the impugned assessment order, therefore, period of limitation u/s 153 (2A) assumed by the A.O. was not applicable to the order dated 8.8.2013 in consequence to such remand order, but it was in the nature of a direction within the purview section 153 (3) (ii) of the Act for which there is no limitation except the Instruction of CBDT No. 1914 dated 2.12.1993 to give appeal effect within 2 weeks of receipt of the appellate order. 3. BECAUSE the Id. Commissioner of Income-tax has erred in law and on facts in invoking jurisdiction under section 263 to set aside the refund order dated 08.08.2013 u/s 240 which was admittedly passed as per law laid down by the apex Court in CIT v. Shelly Products (2003) 26 IITR 367 at page 381-382 (SC) since the Assessing Officer was denuded of an authority to make any variation to the returned income beyond the period of limitation u/s 153 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce being revenue neutral due to eligibility of the appellant to exemption of its income u/s 11 of the Act. 3. The facts in brief relating to the controversy involved in these appeals borne out from the record are that during the assessment year 2001-02, the original assessment was framed by the Assessing Officer denying benefit of exemption under section 11 of the Act, as registration under section 12A of the Act was not available with the assessee. Later on, the matter was travelled to the Tribunal through an appeal filed by the assessee as well as the Revenue and during the course of hearing, the Tribunal has noted that now registration under section 12A of the Act has been granted to the assessee. The Tribunal accordingly remanded the matter back to the Assessing Officer to adjudicate the issue raised through grounds No.4, 5 and 6 relating to the claim of exemption under section 11 of the Act afresh keeping in view exemption available under section 11 of the Act due to grant of registration under section 12A of the Act to the assessee, vide its order dated 30.1.2009. 4. Following the said order of the Tribunal during assessment year 2001-02, the Tribunal has issued simil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... set aside the order of the Assessing Officer and the Tribunal has rather directed the Assessing Officer to examine the claim of exemption under section 11 of the Act in the light of the fact that registration under section 12A of the Act is granted with retrospective effect. Therefore, the provisions of section 153(3)(ii) of the Act would apply and not the provisions of section 153(2A) of the Act. The relevant observations of the ld. Commissioner of Income-tax in I.T.A. No. 824/LKW/2014 are extracted hereunder for the sake of reference:- 4.1 The main contention of the assessee is that no order of fresh assessment was made by the A.O. in pursuance of the directions of Hon'ble ITAT dated 30.01.2009 within the time limit as prescribed under section 153(2A) of the I.T. Act and, therefore, the same attained finality. This submission of the assessee is not found acceptable in as much as the limitation laid down as per provisions of section 153(2A) of the Act is not attracted/applicable in respect of the directions given by the Hon'ble ITAT in its order dated 30.01.2009 A perusal of the findings of Hon'ble ITAT clearly reveals that the Hon'ble ITAT neither cancelled ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r this Act) . A bare reading of the above provisions makes it clear that where the Hon'ble ITAT has given any finding or directions for recomputation or making reassessment and has not cancelled or set-aside an assessment, then provisions of section 153(3)(ii) of the Act will be applicable and such an order giving effect to the directions of Hon'ble ITAT u/s 254 of the Act can be passed any time as per provisions of section 153(3)(ii) of the Act. The limitation of re-assessment or order u/s 254 was, therefore, governed as per the provisions of section 153(3)(ii) of the Act. The A.O. passed an order u/s 254 of the I.T. Act on 08.08.2013 and the order so passed was not hit by any statutory limitation. However, the A.O. failed to recompute the income of the assessee in accordance with the directions of Hon'ble ITAT. It is this lapse, on the part of A.O., which rendered the order to be erroneous and prejudicial to the interest of revenue. 4.2 The reliance placed by the assessee on the decisions viz., {CIT Vs Shelly Prducts (2003) 261 ITR 367 ( SC) and Harihar Nath Agarwal P. Family Trust Vs ACIT, 264 ITR 612 (Alld) is not tenable in as much as the assessee's ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssment, reassessment or recomputation could be made at any time. The distinction between section 153(3) and 153(2A) is that provisions of section 153(3) are to operate only in a situation where assessment, reassessment, or re-computation is necessary to give effect to any finding or direction contained in an appellate order. The extended period is available only in a case where the Assessing Officer acts upon finding or direction of an appellate authority . Section 153(2A) applies to the situation where the assessment order is set aside or cancelled by a superior authority. 4.5 The assessee's submissions have been carefully considered with reference to the relevant provisions of law. A perusal of clause (ii) of sub-section (3) of section 153 reveals that where the re-assessment is made in consequence of or to give effect to any finding or direction contained in an order u/s 254, the re assessment may be completed at any time and the time limitation prescribed under other sub-sections of section 153 do not apply to this class of re assessment. Had the Hon'ble ITAT simply set-aside or cancelled the assessment in the case of the appellant u/s 254 of the Act, the time l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at a direction by a statutory authority is in the nature of an order requiring positive compliance, but when it is left to the option and discretion of an Assessing Officer whether or not to take action, it cannot be described as a direction. In the case of Khalsa Provisions Vs. CIT (1982) 135 ITR 817 (Del.) M/s Basu Distributors Pvt. Ltd Vs Income Tax Officer 292 ITR 29 (Delhi HC), it was held that in a case where the Appellant Asstt. Commissioner/ITAT set-aside the assessment and intended the income Tax Officer to do a fresh assessment on the lines indicated in the order, there was a clear direction to that effect. In view of above, it is held that the purpose of section 153(3) is to lift the bar of limitation to make an effective order of assessment. In the instant case, there was a clear finding as well as a direction given by the Hon'ble ITAT and therefore, the Assessing Officer in accordance with the provisions of section I53(3)(ii) of the Act was Well within his powers to pass an order u/s 254 of the I.T. Act at any time in consequence of the finding/direction given by the I.T.A.T. Therefore in view of the above facts and settled principles of law, the objection of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r dated 31.01.2009. 7. The assessee has raised further objection that the Commissioner cannot initiate proceedings u/s 263 of the Act with a view to starting fishing and roving inquiries in the matters or orders which had already concluded. That apart, the show-cause notice dated 23.7.2014 is against the well-accepted policy of law that there must be a point of finality in all legal proceedings. The assessee has upon the judgments in the cases of viz. Sirpur Paper Mills Ltd. Vs Income Officer 114 ITR 404 and Parashuram Pottery Works Co. Ltd Vs Income Tax 106 ITR 1. 7.1 The objection of the assessee is not tenable. The case laws cited by the in its support are entirely distinguishable on facts and law. The Hon'ble ITAT vide order dated 31.01.2009 had given certain findings and directions to the Assessing Officer to recompute the income of the assessee in accordance with exemption available u/s 11 of the I.T. Act and, therefore, the A.O. while passing the order u/s 254 of the Act dated 08.08.2013 ;has, without application of mind, revised the income at Nil. Such order passed by the A.O. u/s 254 dated 8.8.2013 was, therefore, erroneous as the A.O did not adjudicate the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ious decisions. In Malabar Industrial Co. ltd. vs. CIT (2000) 243 ITR 83, it was observed: There can be no doubt that the provision cannot be invoked to correct each and every type of mistake or error committed by the Assessing Officer. It is only when an order is erroneous that the section will be attracted. An incorrect assumption of facts or an incorrect application of law will satisfy the requirement of the order being erroneous. In the same category fall orders passed without applying the principles of natural justice or without application of mind . The Division Bench of the High court of Madras in Venkatakrishna Rice Co. vs. CIT (1987) 163 ITR 129 (Mad) have interpreted prejudicial to the interests of the Revenue . The Hon'ble High Court held: In this context, (it must) be regarded as involving a conception of acts or orders which are subversive of the administration of revenue. There must be some grievous error in the order passed by the Income Tax Officer, which might set a bad trend or pattern for similar assessments, which on a broad reckoning, the Commissioner might think to be prejudicial to the interests of Revenue Administration. (emphasis supplied). The rel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ected the Assessing Officer to make a fresh assessment considering the computation of income as per provisions of section 11 of the Act and adjudicate properly the issue restored back by the Tribunal with certain directions, in accordance with law after providing fair and reasonable opportunity to the assessee. 10. Aggrieved, the assessee has preferred these appeals against the respective orders of the ld. Commissioner of Income-tax. The main contention raised by the ld. counsel for the assessee is that the Assessing Officer was required to pass a consequential order pursuant to the directions of the Tribunal within the period prescribed as per provisions of section 153(2A) of the Act and since the Assessing Officer has not passed an order within the specified period, the order passed by the Assessing Officer under section 254 of the Act on 8.8.2013 in both the years are not valid orders and has no legal sanctity. Therefore, no cognizance of the same can be taken by the ld. Commissioner of Income-tax to initiate action under section 263 of the Act. 11. So far as merit of the order is concerned, there is no dispute that the Assessing Officer has not passed the order consequent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wherever assessment, reassessment or recomputation is made on the assessee or any person in consequence of or to give effect to any finding or direction contained in an order under section 250, 254, 260, 262, 263 or 264 or in an order of any court in a proceeding otherwise than by way of appeal or reference under this Act, provisions of sub-section (3) (ii)of section 153 of the act would apply and no time limit is prescribed for completing the assessment, reassessment or recomputation, pursuant to the directions. 14. In the instant case, the Tribunal has not set aside the assessment order. The Tribunal has directed the Assessing Officer to re-adjudicate the issue of claim of exemption under section 11 of the Act in the light of registration under section 12A of the Act granted to the assessee. Since these directions were given without setting aside or cancelling the assessment, the provisions of sub-section (3) (ii) of section 153 of the Act would apply and the Assessing Officer was not required to pass an order within a particular time limit. Therefore, the order passed under section 254 of the Act by the Assessing Officer is not barred by limitation and the ld. Commissioner of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the interest of the Revenue, because while granting exemption under section 11 of the Act, the Assessing Officer is required to examine the fulfillment of requisite conditions prescribed under section 13 of the Act. 17. But in this case, the sole dispute is with regard to the validity of the order passed under section 254 of the Act. According to the assessee, this order of the Assessing Officer is barred by limitation and has no legal sanctity, therefore, no cognizance of the same can be taken for initiating action under section 263 of the Act in view of the provisions of section 153(2A) of the Act, which prescribes time limit for passing an order consequent to the directions of the appellate forum; whereas the Revenue s stand is that the order is to be passed by the Assessing Officer pursuant to the directions of the Tribunal as per provisions of section 153(3)(ii) of the Act, in which no time limit is prescribed for passing an order. Therefore, now the issue before us is, whether in such type of situation, which part of section 153 of the Act would apply for passing an order consequent to the directions of the Tribunal? Before dwelling on the issue, we feel it appropriate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or assessment, reassessment or recomputation shall be made under section 147 after the expiry of 1one years from the end of the financial year in which the notice under section 148 was served: Provided that where the notice under section 148 was served on or before the 1st day of April, 1999, but before the 1st day of April, 2000, such assessment, reassessment or recomputation may be made at any time up to the 31st day of March, 2002. Provided further that where the notice under section 148 was served on or after the 1st day of April, 2005, the provisions of this sub-section shall have effect as if for the words one year , the words nine months had been substituted. Provided also that where the notice under section 148 was served on or after the 1st day of April, 2006 and during the course of the proceedings for the assessment or reassessment or recomputation of total income, a reference under sub-section (1) of section 92CA Provided also that where the notice under section 148 was served on or after the 1st day of April, 2010 and during the course of the proceeding for the assessment or reassessment or recomputation of total income, a reference under sub ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e may be the order under section 263 or section 264 is passed by the Commissioner on or after the 1st day of April, 2010, and during the course of the proceeding for the fresh assessment of total income, a reference under sub-section (1) of section 92CA is made, the provisions of this sub-section shall, notwithstanding anything contained in the second proviso, have effect as if for the words one year the words two years had been substituted. (3) The provisions of sub-sections 4(1), (1A), (1B) and (2) shall not apply to the following classes of assessments, reassessments and recomputations which may, subject to the provisions of sub-section (2A) be completed at any time-- (ii) where the assessment, reassessment or recomputation is made on the assessee or any person in consequence of or to give effect to any finding or direction contained in an order under section 250, 254, 260, 262, 263 or 264 or in an order of any court in a proceeding otherwise than by way of appeal or reference under this Act; (iii) where in the case of a firm, an assessment is made on a partner of the firm in consequence of an assessment made on the firm under section 147. Explanation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ded. (vi) the period commencing from the date on which an application is made before the Authority for Advance Rulings under sub-section (1) of section 245Q and ending with the date on which the order rejecting the application is received by the Commissioner under sub-section (3) of section 245R, or (vii) the period commencing from the date on which an application is made before the Authority for Advance Rulings under sub-section (1) of section 245Q and ending with the date on which the advance ruling pronounced by it is received by the Commissioner under sub-section (7) of section 245R, or. (viii) the period commencing from the date on which a reference or first of the references for exchange of information is made by an authority competent under an agreement referred to in section 90 or section 90A and ending with the date on which the information requested is last received by the Commissioner or a period of one year, whichever is less, (ix) the period commencing from the date on which a reference for declaration of an arrangement to be an impermissible avoidance arrangement is received by the Commissioner under sub-section (1) of section 144BA and ending ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -section (2A) would apply. But as per sub-section (3)(ii) of section 153 of the Act subject to provisions of sub-section (2A) of the Act, the assessment, reassessment or recomputation is to be made on the assessee or any person in consequence of or to give effect to any finding or direction contained in an order under section 250, 254, 260, 262, 263 or 264 or in an order of any court in a proceeding otherwise than by way of appeal or reference under this Act at any time and no time limit is prescribed. Meaning thereby, wherever an order is passed consequent to the findings or the directions of the appellate forum without setting aside or cancelling the assessment, there is no time limit for compliance of the directions or findings of the appellate forum. 19. On this issue, our attention was invited to various judicial pronouncements. 20. In the case of Instruments and Control Co. vs. Chief CIT (supra), it has been held by the Hon'ble Gujarat High Court that sub-section (2A) of section 153 of the Act, was introduced with effect from April 1, 1971. Correspondingly, the words subject to the provisions of sub-section (2A) were added in sub-section (3) of section 153 of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 153 of the Act excludes the applicability of the period of limitation in the circumstances more precisely indicated in clauses (ii) and (iii) thereof. Having relied upon the judgment of the Hon'ble Apex Court in the case of Rajinder Nath v. CIT, 120 ITR 14, in which the Hon'ble Supreme Court has interpreted the words in consequence of or to give effect to any finding or direction contained as incorporated in clause (ii) of sub-section (3) of section 153 of the Act and held that clause (ii) of section 153(3) of the Act is limited in meaning. Their Lordships of the jurisdictional High Court has held that as section 153(3)(ii) of the Act, there must be disposal of a particular case in respect of a particular assessee and in relation to the particular assessment year. 23. Similar views were expressed by the Visakhapatnam Bench of the Tribunal in the case of Raghava Health Care Ltd. vs. DCIT (supra), in which it was held in the light of the judgment of the Hon'ble Apex Court in the case of Murlidhar Bhagwan Das, 52 ITR 335 that there is a fine distinction between the application of section 153(2A) and section 153(3)(ii) of the Act. Section 153(2A) of the Act would appl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... additions have been made by the Assessing Officer and the appellate authority sets aside one or some of the issues to the file of the Assessing Officer, that situation would not give rise to a fresh assessment and in that case section 153(3)(ii) of the Act would apply. 24. This issue was also examined by the Hon'ble M.P. High Court in the case of Gulabchand Motilal vs. CIT (supra), in which it was held that prior to the insertion of sub-section (2A) in section 153 of the Act by the Taxation Laws (Amendment) Act, 1970, where an assessment was set aside or cancelled under section 146 or on appeal, revision or reference the Income-tax Officer could complete the fresh assessment any time because such a case was governed by sub-section (3) of section 153, which provided that the provisions of sub-sections (1) and (2) of section 153 would not apply to cases covered by section 153(3) of the Act. This resulted in delay and harassment to the assessee and, hence, subsection (2A) was inserted in section 153 by the Taxation Laws (Amendment) Act, 1970, introducing a time limit and by virtue of subsection (2A) of section 153 of the Act, assessments covered by subsection (2A) of secti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the appeal before the appellate authorities is either set aside or cancelled by the appellate authorities and the Assessing Officer is required to frame fresh assessment in pursuance to the directions of the appellate authorities. But as per section 153(3)(ii) of the Act earlier assessment which was subject matter of appeal before the appellate authorities was not to be set aside or cancelled, rather appellate authorities issue directions for assessment or reassessment or recomputation of the income of the assessee in terms of the directions without setting aside or cancelling the assessment which is subject matter of appeal before them. Under this sub-section, any order or direction of a court in proceedings otherwise than by way of appeal or Reference under this Act is also required to be complied with by the Assessing Officer not only relating to the assessment year in dispute, but also for other assessment years. The language used in both the sub-sections are different, but wherever the case falls within sub-section (2A) of section 153 of the Act, sub-section (3)(ii) would not apply. 27. Keeping in view the aforesaid legal position, we now examine the facts of the case. In t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve argument of the assessee that the order under section 254 of the Act pursuant to the directions of the Tribunal, is barred by time and it has no legal sanctity in the eyes of law and is merely a piece of paper. If that be the case, this order of the Assessing Officer computing quantum of refund cannot be executed and more so it cannot be enforced. If refund is not granted to the assessee, the same may be recovered from the assessee. We, however, have already held in the foregoing paragraphs that the assessment orders passed by the Assessing Officer vide his order dated 8.8.2013 are not barred by time, as no time limit is prescribed for passing an order under section 153(3)(ii) of the Act. We accordingly find no infirmity in the orders of the ld. Commissioner of Income-tax, who has rightly set aside the orders of the Assessing Officer, as it was not passed in compliance of the directions of the Tribunal. We accordingly confirm the orders of the ld. Commissioner of Income-tax in both the assessment years. 29. In the result, both the appeals of the assessee are dismissed. Order was pronounced in the open court on the date mentioned on the captioned page. - - TaxTMI - TMIT ..... X X X X Extracts X X X X X X X X Extracts X X X X
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