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TMI Blog2016 (6) TMI 418X X X X Extracts X X X X X X X X Extracts X X X X ..... According to the Ld. counsel, the notice issued on 10.06.2011 was beyond the period of limitation for completing the assessment under Section 149 of the Act. Referring to the order of this Tribunal dated 31.05.2010 in I.T.A. Nos.327 & 328/Mds/2010 , the Ld.counsel submitted that there is no finding or direction by this Tribunal to assess the income. 3. According to the Ld. counsel, in fact, when the appeal came before this Tribunal for the assessment years 2003-04 and 2004-05, this Tribunal found that the transfer took place in the year 2000. Therefore, the capital gain cannot be taxed for the assessment years 2003-04 and 2004-05. There is neither a finding that the capital gain has to be taxed in the assessment year 2001-02 nor any direction to assess the same in the assessment year 2001-02. Therefore, according to the Ld. counsel, the Assessing Officer cannot take the benefit of Section 150(1) of the Act for reopening the completed assessment after expiry of limitation provided in Section 149 of the Act. Referring to Section 150(1) of the Act, the Ld.counsel pointed out that the Assessing Officer may reopen the assessment notwithstanding anything contained in Section 149 of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as subject matter of appeal, then provisions of Section 150(1) of the Act is not applicable. In this case, according to the Ld. counsel, the order of the Tribunal was passed on 31.05.2010. The limitation period had already expired, therefore, no order can be passed under Section 150(1) of the Act in the guise of reopening under Section 147 of the Act. The Ld.counsel has also placed his reliance on the judgment of the Apex Court in K.M. Sharma v. ITO (2002) 254 ITR 772. Therefore, according to the Ld. counsel, the Assessing Officer ought not to have reopened the assessment in the guise of giving effect to the order of the Tribunal for the assessment years 2003-04 and 2004- 05. 6. The Ld.counsel further submitted that the CIT(Appeals), referring to the contention of the assessee that there was no specific finding or direction of the Tribunal in the order dated 31.05.2010, observed that there was an inference that the finding of the ITAT is that the capital gain is to be taxed in assessment year 2001-02. According to the Ld. counsel, on the basis of the inference there cannot be any assessment under Section 150(1) of the Act. The language used by the Parliament is "finding or directi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er the higher authority. Therefore, according to the Ld. D.R., when the Assessing Officer passed an order giving effect to the order of the Tribunal for assessment years 2003-04 and 2004-05, it has to be deemed that the order of the assessment was passed giving effect to the finding contained in the order of this Tribunal. Therefore, according to the Ld. D.R., the CIT(Appeals) has rightly confirmed the order of the Assessing Officer. 8. We have considered the rival submissions on either side and perused the relevant material on record. Initially the assessee filed the return of income for assessment year 2001-02 on 25.04.2005 consequent to the notice issued under Section 148 of the Act, disclosing the loss of Rs. 56,758/-. However, the Assessing Officer reopened the assessment under Section 147 of the Act and determined the loss at Rs. 2,442/- by an order dated 30.03.2006 instead of Rs. 56,758/- claimed by the assessee. 9. The assessee filed appeals before this Tribunal against the orders of the lower authority for assessment years 2003-04 and 2004-05 in I.T.A. Nos.327 & 328/Mds/2010. The main contention of the assessee before this Tribunal was that the capital gain arising out o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te / revisional order was passed within the period of limitation available for reopening the assessment. In this case, on the date of appellate order, i.e. 31.05.2010, the limitation period had expired. Therefore, the order passed by the Assessing Officer by issuing notice for reopening the assessment on 10.06.2011 is barred by limitation. 11. We have carefully gone through the judgment of the Apex Court in K.M. Sharma (supra). The Apex Court, after considering the provisions of Section 150(2) of the Act, found that sub-section (2) of Section 150 puts embargo on reopening assessments, which have attained finality on expiry of period of limitation. The Apex Court also found that sub-section (2) of Section 150 makes it clear that reassessment permissible under Section 150(1) of the Act would not be available to Department when the period of limitation for such assessment or reassessment has expired at the time it is proposed to be reopened. In this case, the Revenue proposed to reopen the assessment on 10.06.2011 by issuing a notice under Section 148 of the Act, on which date, the period of limitation was admittedly expired. The Apex Court further found that sub-section (2) of Secti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the relevant years in question have attained finality on the expiry of the period of limitation under section 149 of the Act. On a combined reading of sub-section (1) as amended with effect from April 1, 1989, and sub-section (2) of section 150 as it stands, in our view, a fair and just interpretation would be that the authority under the Act has been empowered only to re-open assessments, which have not already been closed and attained finality due to the operation of the bar of limitation under section 149." 12. We have also carefully gone through the judgment of Karnataka High Court in Spences Hotel (P) Ltd. (supra). In the case before Karnataka High Court, it found that Section 150(1) of the Act begins with the words "notwithstanding anything contained in Section 149". Therefore, the notice issued to the assessee, pursuant to the finding of the Tribunal with regard to escaped income for assessment, was found to be valid. Referring to Section 150(2) of the Act, the Karnataka High Court found that placing reliance on Section 150(2) was misplaced. The Karnataka High Court had no benefit of going through the subsequent judgment of Apex Court in K.M. Sharma (supra). In view of fin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -90 to 1994-95. The assessee challenged the notice before the Allahabad High Court on the ground that the assessments cannot be reopened. The Allahabad High Court, by placing judgment of Apex Court in K.M. Sharma (supra), found that the words "or by a court in any proceeding under any other law" were inserted by Direct Tax Laws (Amendment) Act, 1987 with effect from 01.04.1989. The Allahabad High Court found that the notice was issued after 01.04.1989, i.e. after the amended Act came into effect from 01.04.1989 and accordingly, rejected the contention of the assessee. 15. We have also carefully gone through the judgment of Madras High Court in Vellore Electric Corporation (supra). In the case before the Madras High Court, the issue arose for consideration was whether the period of limitation prescribed for reopening the assessment was applicable even for an order passed by the Assessing Officer by invoking the provisions of Section 150 of the Act. The Madras High Court, by placing reliance on the judgment of the Apex Court in K.M. Sharma (supra) found that the plain language of sub-section (2) of Section 150 clearly restricts the application of sub-section (1) of Section 150 to en ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oceedings. If there is no proceeding before it or if the assessment year in question is also not a matter which would fall for consideration before the higher authority, section 150 of the Act will have no application. 62. In ITO v. Murlidhar Bhagwan Das [1964] 52 ITR 335 (SC), it was held (page 339) : " The proceedings would be in time, if the second proviso to section 34(3) of the Act could be invoked. The question, therefore, is what is the true meaning of the terms of the second proviso to section 34(3) of the Act. It reads : ' Provided further that nothing in this section limiting the time within which any action may be taken, or any order, assessment or reassessment may be made, shall apply to a reassessment made under section 27 or to an assessment or reassessment made on the assessee or any person in consequence of or to give effect to any find ing or direction contained in an order under section 31, section 33, section 33A, section 33B, section 66 or section 66A.' Prima facie this proviso lifts the ban of limitation imposed by the other provisions of the section in the matter of taking an action in respect of or making an order of assessment or reassessment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e only that which is necessary for the disposal of an appeal in respect of an assessment of a particular year. The Appellate Assistant Commissioner may hold, on the evidence, that the income shown by the assessee is not the income for the relevant year and thereby exclude that income from the assessment of the year under appeal. The finding in that context is that that income does not belong to the relevant year. He may incidentally find that the income belongs to another year, but that is not a finding necessary for the disposal of an appeal in respect of the year of assessment in question. The expression ' direction' cannot be con strued in vacuum, but must be collated to the directions which the Appellate Assistant Commissioner can give under section 31. Under that section he can give directions, inter alia, under section 31(3)(b), (c) or (e) or section 31(4). The expression ' directions' in the proviso could only refer to the directions which the Appellate Assistant Commissioner or other tribunals can issue under the powers con ferred on him or them under the respective sections. Therefore, the expression ' finding' as well as the expression ' direct ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l or other order excludes any income from the total income of the assessee for an assessment year, the assessment of such income for another assessment year shall, for the purposes of both section 150 and section 153, be deemed to be one made in consequence of or to give effect to any finding or direction contained in the order. Similarly, Explanation 3 says that where by an appellate, revisional or other order any income is excluded from the total income of one person and held to be the income of another person, the assessment of income of such other person shall, both for the purposes of section 150 and section 153, be deemed to be one made in consequence of or to give effect to any finding or direction contained in the order, provided, of course, such other person was given an opportunity of being heard before the said order was made. What is, however, clear is that Explanations 2 and 3 do not purport to obliterate or remove the restriction contained in sub- section (2) of section 150. They, no doubt, refer to section 150, but for a limited purpose, mentioned above. A review of the above provisions makes it clear that the Act provides certain time limits both for initiation of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... planation 2 is that if any income is deleted from assessment in a higher proceeding on the ground that it is not the income of that year, steps may be taken under section 147 to assess it as the income of another year, without any limitation applying to the issue of notice under section 148 or to the completion of the assessment or reassessment..." With great respect, we think that this observation overlooks the provisions contained in sub-section (2) of section 150. However, inasmuch as the case before us is not one falling under Explanation 2 to section 153, we do not think it necessary to refer the matter to a larger Bench." 19. By respectfully following the judgment of the Apex Court in K.M. Sharma (supra) and the judgment of Madras High Court in Vellore Electric Corporation (supra), this Tribunal is of the considered opinion that the order of the Assessing Officer is barred by limitation, therefore, the same cannot stand in the eyes of law. Accordingly, the orders of the lower authorities are set aside. 20. In the result, the appeal of the assessee is allowed. ORDER PER CHANDRA POOJARI: ACCOUNTANT MEMBER I have gone through the draft order proposed by the learned Judicial ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ich the his Lordships have observed that Sec. 150(1) brings within its ambit only such cases where reopening of the proceedings may be necessary to comply with an order of the higher authority and for the said purpose, the records of the proceedings must be before the appropriate authority and that It must examine the records of the proceedings. If there is no proceeding before it or if the assessment year in question is also not a matter which would fall for consideration before the higher authority, s. 150 of the Act will have no application. 7. The learned CIT(A) erred in relying on the decision of B.A.R.Abdul Rahman Sahib Vs ITO (100 ITR 541), Ambaji Traders Vs ITO (105 ITR 273) &t DCIT Vs Spencers Hotel (208 CTR 224) to affirm the order of re-assessment. The learned CIT(A) ought to have seen that the fact of the aforesaid case is distinguishable in so far as the Tribunal has given a specific finding that the income will have to be assessed for a particular assessment year however in the instance case there is no such finding or direction. 8. Assuming without conceding that the order of the Hon'ble Tribunal contains a finding /direction to assess the income for the A.Y. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e was escapement of income notice under section 148 of the Income Tax Act was served on the assessee calling upon the assessee to file its return of income for the A.Y.2001-02. In response to the aforesaid notice the assessee filed its return of income on 25.04.2005 admitting total loss of Rs. 2,442/- which included business loss of Rs. 56,758/-, lease rentals of Rs. 31,500/ and claimed expenses amounting to Rs. 54,316/-. The Assessing Officer vide his orders dated 30.03.2006 completed the assessee's assessment under section 143(3) r.w.s 147 disallowing the expense of Rs. 54,316/ - claimed by the assessee and determined the total income of the assessee at Rs. 2442/-. 3.4 An enquiry was conducted with Mrs. Nirmala Ravindran, one of the Directors of the assessee company by the Investigation Wing of the Income Tax Department. A statement u/s. 131 was recorded from her on 03.02.2005. The issue of Capital Gains Tax liability arose regarding sale of Company's property at No.9, Dhandapani Street, T. Nagar, Chennai for Joint Development of the said property with M/s. Doshi Housing Ltd. 3.5 No income related to the capital gains was offered for this year. During the course of assessm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed as residence by Mrs. Nirmala Ravindran, one of the Directors of the assessee company, one flat was sold in March 2003 and remaining flats were sold during the Financial Year 2003-04. 3.7 Subsequently, assessee had filed the return of income for the assessment years 2001-02, 2003-04 & 2004-05 in response to the notices u/s 148 and 142(1) on 25.04.2005 respectively. In the returns filed, the assessee admitted LTCG of Rs. 13,70,752/- and Rs. 60,79,708/- for the assessment years 2003-04 and 2004-05 respectively and paid the tax on the Capital Gains as per return of income. The Long Term capital gains were related to the sale of land in a Joint venture. 3.8 The assessee had computed the capital gains and paid taxes as under: S. No. AY Computation of Capital Gains as per assessee's working Date of Payment Amount Remarks 1. 2003-04 13,66,883 22.11.2004 4,00,000 For sale of flat 2. 2004-05 53,19,925 22.11.2004 17,00,000 For sale of flat 3- 2004-05 60,158 For sale of 40% of undivided share in land 3.9 In the Assessment Year 2003-04, the assessee company had computed the Long term capital gains as under:- Total consideration on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of land sold(5458.06x25x4.63) 6,31,770 65,48,720 Long Term Capital gains at the time of sale of lands to allottee of flats 1,37,50,191 Long Term Capital gains on sale of flats 1,46,12,090 Total Capital Gains (1,146,12,090 + 1,37,50,191) 2,83,62,281 3.11 The assessee filed appeals before the CIT(A). In regard to adoption of Guideline value on transfer of property u/s. 50C, the CIT(A) had upheld the order of the Assessing Officer but regarding adoption of guideline value for determining the Fair Market Value as on 1/4/1981, the CIT(A) has directed the AO to adopt a value of Rs. 143 per sq.ft. 3.12 For the AY 2004-05, the CIT(A) has directed the Assessing Officer to adopt the consideration at Rs. 1,40,32,800 for the 40% undivided share of land disposed of by the assessee and regarding full value he upheld the order of the Assessing Officer as provision 50C is binding. 3.13 While disposing the Revenue appeal, ITAT estimated the fair market value of the property as on 01/04/1981 at 85 sq.ft. as against 143 per sq.ft estimated by CIT (A). 3.14 However, the ITAT separately adjudicated the assesse's appeal for the assessment years 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mputation in consequence of or to give effect to any finding under this Act by way of appeal, reference or revision or by a Court in any proceeding under any other law." 4.3 The CIT(Appeals) observed that the provisions of sec.150(1) begins with the words "notwithstanding anything contained in sec.149" and it states that "notice may be issued at any time" to give effect to any finding or direction contained in an order passed by any authority in any proceeding under the Act. The notice issued to the assesse was pursuant to the finding of the Tribunal. Thus, the time limit set out in section 149 has no relevance to the present case. 4.4 Regarding the contention of the assessee that there is no specific direction of the Tribunal and hence, sec.150 cannot be invoked, the Commissioner of Income-tax(Appeals) observed that the Tribunal in his order observed as under: "Having observed the fact that the transfer of the asset has already taken place in the year 2000, capital gains cannot be taxed in the AY 2003-04 & 2004-05" Thus, it is clearly inferred that the finding of the ITAT is that the capital gains is to be taxed in AY 2001-02 as the year of transfer of property is FY 2000-01. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssed in an appeal, revision etc. Explanations 2 and 3 clearly illustrate and clarify the meaning of the words "in consequence of or to give effect to any finding or direction" contained in an appellate, revisional or any other order. 4.8 The CIT(Appeals) observed that sub-sec.(3) of sec.153 wipes away the time limit prescribed by the Act in certain situations. The presence of such enabling provision was necessary as a pragmatic measure. For example, the AO may wrongly assess in the year X which ought to have been assessed in the year Y. This may come to ling in the appeal filed. If the AO wishes to proceed for the year Y, the time limit for making assessment or reassessment in Y prescribed by sub-ss.(1) and (2) of sec.153 might have expired. It is in such a situation that sub-sec.(3) comes to the rescue of the Revenue. Explanation 2 to sec.153 has the effect of enlarging the period of limitation for completion of an assessment or reassessment. 4.9 The CIT(Appeals), after relying on certain decisions, held that if any income is deleted from assessment by the order of a higher authority on the ground that it is not the income of that year, steps may be taken u/s.147 to assess it as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... recomputation may be taken, then no notice u/s.148 can be issued. The rational behind this provisions is not to confer upon the AO the jurisdiction to reopen an assessment which the Act did not otherwise possess. It says that where the reassessment proceedings would have been barred by time even at the point of time when the order which became subject matter of the appeal, revision etc., was passed, resort cannot be made to sub-sec.(1) of sec.150. 6. An example may make the position clear. Supposing for the assessment year 1999-2000 the AO includes an item of income which on appeal is held to relate to the assessment year 1998-99. This finding on appeal can be utilized to reopen the assessment for the assessment year 1998-99 without any time limit by virtue of the provisions of sec.150(1), the reason being that had the AO been aware even when he completed the assessment for the assessment year 1999-2000 that the income was assessable in the assessment year 1998-99, he would and could have included the income in that assessment year itself. This in turn postulates that an assessment or reassessment for the assessment year 1998-99 would have been permissible at the point of time w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssment or recomputation could not have been made at the time the order which was the subject matter of the appeal, reference or revision, as the case may be, was made by reason of any other provision limiting the recomputation may be taken. In the very nature of things, such other provision limiting the time for issue of notice u/s.149 has to be reckoned with only on the date on which the assessment order for the assessment years 2003-04 and 2004-05 was passed, which was on 30.3.2006 and 28.12.2006 respectively. The AO could have issued notice u/s.148 within the time limit as provided by sec.149(1)(b) of the Act as it stood on that date. Therefore, this contention of the ld. AR cannot be accepted. The AO is very well within the time limit to issue notice u/s.148 of the Act for the AY 2001-02 as on the date of assessment for the AY 2004-05 i.e.28.12.2006 (being the latest date). Since there is a direction of the Tribunal in the AYs 2003-04 & 2004-05 that the transfer of asset took place in the year 2000, in view of the provisions of sec.150(2) of the Act, the extended time is available to issue notice u/s.148 for the AY 2001-02. Thus, notice for reopening of assessment issued on 10. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent of income-tax. Therefore, the single Judge committed an error in law by quashing the same, as the same is contrary to the finding recorded by the Tribunal with regard to the escaped taxable income derived by the assesse. The legal submission made by the counsel placing reliance upon s. 150(2) in justification of the order of the single Judge is misplaced for the reason that the above provision is not applicable to the case on hand." Thus, in my opinion, when by an order of the Tribunal, the income is excluded from the total income of the assessee for assessment years 2003-04 and 2004-05, then the assessment of such income for the assessment year 2001-02 shall be deemed to be one made in consequence of, or to give effect to any finding or direction in that order (in appeal) for the purpose of lifting the ban of limitation under Explanation 2 to sec.153(3). Reliance is placed on the following judgments : (i) Kamlapath Motilal vs. CIT (SC) 193 ITR 338 (ii) Mahadeo Prasad Rais (Decd. By LRs.) vs. ITO (SC) 192 ITR 402 (iii) Ashwani Dhingra v. CCIT (All.) 141 Taxman 651). In view of the above, in my opinion, the provisions of sec.150(1) are applicable. Thus, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hand, the learned Accountant Member, formulated the following three questions while referring the matter to the Hon'ble President u/s 255(4) of the Act: (1) Whether, on the facts and circumstances of the case, the notice issued is barred by limitation as provided under sections 149(1)(b), 150(1) and 150(2) of the I.T. Act, 1961, as the same has been issued in consequence to the order passed by the Tribunal for the assessment years 2003-04 & 2004-05? (2) Whether, on the facts and circumstances of the case, the ratio laid down by the Supreme Court in the case of CIT vs. Green World Corporation (2009) 314 ITR 81 is applicable to the present case which is delivered on different context? (3) Whether, on the facts and circumstances of the case, the ratio laid down by the Chennai Bench of the Tribunal in the cases of Sun Metal Factor (I) (P.) Ltd. vs. ACIT (2010) 124 ITD 14 and Sriram Capital Ltd. vs. DCIT in ITA Nos.512 & 513/Mds/2015 dated 26.6.2015 is applicable to the facts of the present case, as the above orders are delivered on different context? 3. At the time of hearing, the parties were directed to examine the points of difference and to bring forth appropriate/ comm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 48, r.w.s 150 of the Act, for the assessment year 2001-02 and accordingly, issued a notice on 10.6.2011. The case of the assessee that the proceedings for the assessment year 2001-02 are barred by limitation and hence notice issued u/s 148 r.w.s 150 is beyond the period of limitation, was not accepted by the Assessing Officer as well as the CIT(A) and accordingly assessment was made wherein the amount receivable on transfer of asset was brought to tax. Before the Tribunal, the case of the assessee was that there was no finding or direction by the ITAT while disposing of the appeals for assessment years 2003-04 and 2004-05 with regard to taxability of the capital gains in assessment year 2001-02 and hence, on the basis of mere observation, the proceedings for the assessment year 2001-02 cannot be reopened; the Assessing Officer cannot take the benefit of sec. 150 of the Act for reopening the completed assessment after expiry of limitation provided u/s 149 of the Act. It was also contended that even if the observation of the Tribunal is considered as a finding or direction, the Assessing Officer is entitled to reopen the assessment only when it is not barred by limitation period of m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... consideration the binding judgment of the Apex Court in the case of K.M.Sharma (supra). 10. He also referred to the judgment of the Apex Court in the case of CIT vs Green World Corporation (2009) 314 ITR 81, to emphasise that if no proceedings were pending before the authority before the expiry of limitation period, such proceedings cannot be reactivated merely on the basis of a subsequent order passed by the appellate authority. In conclusion, the learned Judicial Member observed that even if it is assumed that there is a finding or direction, still the provisions of section 150(2) of the Act comes into play in which event the proceedings which were already barred by limitation cannot be reactivated. He thus, set aside the orders passed by the lower authorities. 11. The learned Accountant Member, on the other hand, observed that the assessee has not offered any income related to capital gains in the assessment year 2001-02 and only during appellate proceedings it was submitted that by virtue of the joint development agreement, the transfer took place in December 2000. It was thus observed that only based upon a finding by the Tribunal, while adjudicating the assessee's appeals ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... limitation expired in 2008 whereas the Tribunal has passed an order, while disposing of the appeals for assessment years 2003-04 and 2004-05, in 2010, by which date no proceedings can be said to have been pending and hence, even if it is assumed that the order of the Tribunal contains a finding or direction, still reopening of assessment is bad in law because it is beyond the period of limitation, as held by the Hon'ble Madras High Court in the case of M/s Goldmine Investments (supra). 16. The learned Departmental Representative, on the other hand, strongly relied upon the order passed by the learned Accountant Member and submitted that the order of the Tribunal should be treated as a finding or direction based on which the Assessing Officer is entitled to reopen the assessment. With regard to interpretation placed by the learned Accountant Member, vis-à-vis the non-applicability of limitation period prescribed in sec. 150(2) of the Act - in the backdrop of the language employed in sec. 149 and 150(1) of the Act - the ld. Departmental Representative fairly admitted that the decision of the Hon'ble Madras High court in the case of M/s Goldmine Investments (supra) sq ..... X X X X Extracts X X X X X X X X Extracts X X X X
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