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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 ..... 1-02 on 25.04.2005 in response to notice issued under Section 148 of the Act, disclosing the total loss of ₹ 56,758/-. The Assessing Officer completed the assessment under Section 143(3) r.w.s. 147 of the Income-tax Act, 1961 (in short 'the Act') by an order dated 30.03.2006 determining the total loss at ₹ 2,442/-. Subsequently, the Assessing Officer issued another notice purported to be under Section 147 r.w.s. 150 of the Act on 10.06.2011. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issue notice under Section 148 within a period of six years in case the income assessable to tax exceeded ₹ 1 lakh or more. In this case, even the six-year period expired on 31.03.2008. Therefore, the issue of notice under Section 147 r.w.s. 150 of the Act on 10.06.2011 is beyond the period of limitation. 5. The Ld.counsel for the assessee further submitted that Section 150(2) of the Act clearly says that if the time limit expired at the time of the order which was 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1975) 100 ITR 541 and submitted that sub-section (3) of Section 153 wipes the limitation provided in Section 153(1) and 153(2) of the Act. Referring to sub-section (2) to Section 153, the Ld. D.R. pointed out that if any income was excluded from the total income of the assessee for an assessment year, then for assessing that income for another assessment year should be considered as one made consequent to the order giving effect to the finding or direction contained in the order 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3.2008. Therefore, the limitation for reopening under Section 147 of the Act expired on 31.03.2008 when the Tribunal passed the order on 31.05.2010. Therefore, this Tribunal is of the considered opinion that the Assessing Officer cannot take any advantage on the basis of the order of this Tribunal dated 31.05.2010 by invoking Section 150(1) of the Act. This Tribunal is of the considered opinion that the Assessing Officer can pass an order under Section 150(1) of the Act provided the appellate / 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) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... come final and may have been found liable to reassessments or recomputation either on the basis of orders in proceedings under the Act or orders of courts passed under any other law. The High Court, therefore, was in error in not reading the whole of the amended sub- section (1) into sub-section (2) and coming to the conclusion that the reassessment proposed on the basis of the order of the court in proceedings under the Land Acquisition Act could be commenced even though the original assessments for 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd 29.05.1993 by the orders of Punjab Haryana High Court. Interest was also paid on 21.08.2001 from the date of taking over the possession of the land. Subsequently, the assessee shifted to Noida in the year 1991 and doing business there. After receiving the interest on the compensation amount on 21.08.2001, the assessee filed revised return on 14.01.2001 for assessment years 1995-96 to 2001-02. The Assessing Officer reopened the assessment by issuing notice under Section 148 for the assessment years 1989-90 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 (sup ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oint of time whatsoever. Such a proceeding can be initiated only within the period of limitation prescribed therefor as contained in section 149 of the Act. 61. Section 150 (1) of the Act is an exception to the aforementioned provision. It brings within its ambit only such cases where reopening of the proceedings may be necessary to comply with an order of the higher authority. For the said purpose, the records of the proceedings must be before the appropriate authority. 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, 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, assessmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te, revisional or reviewing tribunal within the scope of its jurisdiction. If the intention was to remove the period of limitation in respect of any assessment against any person, the proviso would not have been added as a proviso to sub-section (3) of section 34, which deals with completion of an assessment, but would have been added to sub-section (1) thereof. 64. In regard to the question that what would be the meaning of the term finding or direction , it was held (page 345) : A ' finding', therefore, can be 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... order dated 31.05.2010 cannot be considered either as finding or direction . 18. We find that the Andhra Pradesh High Court in in CIT v. G. Viswanatham (1988) 172 ITR 401 considered an identical issue and observed as follows at pages 408 409 of ITR:- A reading of these Explanations clearly shows that they merely 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. Explanation 2 says that where an appellate, revisional 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 on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he time limits fixed under section 153 for making the assessment, reassessment, etc. (vide paragraph 2 at page 545). It would immediately be seen that sub-section (2) of section 150 does not refer to section 153. It only refers to any other provision limiting the time within which any action for assessment, reassessment or recomputation may be taken . The word taken refers only to initiation of proceedings and not to completion. Similarly, at page 547, the Bench observed: the effect of section 150 and this sub-section (section 153(3)) read with Explanation 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. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... earned Commissioner of Income Tax ought to have seen that the assessing officer does not get unbridled power under section 150(1) of the Income Tax Act to open any assessment order. The restrictive covenant for application of section 150(1) is clearly dealt with in section 150(2) of the Income Tax Act and that Section 150(2) deals with circumstances in which section 150(1) is not applicable. 6. The Learned Commissioner of Income Tax ought to have seen that the case of the appellant is squarely covered by the decision of the Apex court in CIT Vs Green World Corporation in which 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e builder providing 60% of the building to be put up the said property and, a further sum of ₹ 10,00,000/-. 3.3 For assessment year 2001-02, the assessee company did not file return of income u/s 139(1). Consequent to a search conducted in the premises of Dr. Rajadurai, who happened to be the tenant of the assessee, it came to the notice of the department that assessee has not filed its return of income for the assessment year 2001- 2002 although it had rental income on lease of Flat No.3A, Doshi Apartments, Old Door No.9(New No.17), Dhandapani Street, T.Nagar, Chennai-600017. Since there 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 ₹ 2,442/- which included business loss of ₹ 56,758/-, lease rentals of ₹ 31,500/ and claimed expenses amounting to ₹ 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... V agreement dated 25th December 2000 wherein the consideration for the transfer of 40% of undivided share of the land shall be in full settlement of the cost of 60% area constructed and allotted to the owner by the developer part consideration of ₹ 10.00 lakhs paid by the developer to the owner . The AO accepted the submissions of the assessee and the assessment was completed for AY 2001-02 on 30.03.2006. 3.6 A.Ys. 2003-04 and 2004-05: Upon completion of property and as per the joint development agreement the property was handed over to the assessee during the last quarter of 2003. Assessee received 9 flats (17442 sqft). Two flats were used 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 ₹ 13,70,752/- and ₹ 60,79,708/- for the assessment years 2003-04 and 2004-05 respectively and paid the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y had stated that the following portion of land were sold in the relevant previous year and computed the Long term capital gains at ₹ 60,79,708:- Construction Cost of the building (Note 1 below) 1,18,64,975 Initial cash component, non-refundable 10,00,000 Monthly rentals given 7500x41 months 3,07,500 Total consideration received 1,31,72,475 Less: Indexed value of 40% of cost of land exchanged (Note 1) 68,07,395 Less: Cost of construction of the area compensated to the lessee Mrs. Nirmala Sft 4010 Less: Improvement cost to building, that Stands demolished 4,50,000 (1,24,11,974) Capital Gains on the sale of 40% of the land the developer A 7,60,501 Total construction on the sale of 5 apartments owned by the company sold during the relevant previous year 1,66,15,100 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rted in 251 ITR 532 held that no capital gains would arise for the assessment years 2003-04 and 2004-05 since the assessee had entered into development agreement as early as 25.12.2000 and had also handed over possession of the property on the same date. Thus, the ITAT deleted entire addition. 3.15 Thereafter, the assessing officer issued notice under section 148 of the Act to the assessee on 10.06.2011 and re- opened the assessee s case for the assessment year 2001-02. The assessing officer re-opened the said assessment on the basis of observation in Para 6 of the order of the ITAT for the A.Ys. 2003-04 2004-05 in ITA Nos. 327 328/Mds/2010. 3.16 On the basis of the aforesaid reasons, the AO reopened the assessment for the aforesaid assessment year and completed the assessment vide his order dated 25.3.2013 assessing the entire capital gains in the assessment year 2001-02 on the basis of the development agreement dated 25.12.2000. 4. With regard to time limit for reopening the assessment, before the Commissioner of Income-tax(Appeals), the assesse submitted as follows: The appellant invites the attention of the learned Commissioner to section 149 of the Income Tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for the purpose of making an assessment or reassessment or recomputation in consequence of or to give effect to any finding or direction contained in an order passed by any authority in any proceeding under this Act by way of appeal, reference or revision or by a Court in any proceeding under any other law. Thus, section 150(1) provides that the time-limit set out in section 149 does not apply in the following situation: a) any assessment or reassessment or recomption is sought to be made b) in consequence of or to give effect to any finding or direction c) such finding or direction is contained in an order passed d) this provision is however not applicable to independent time-limit of four years provided by the proviso to section 147 under some special circumstances. 4.6There is clear finding by the ITAT and AO is duty bound to follow it. He is justified in initiating proceedings u/s 147 in order to give effect to the observations and findings of the ITAT. Thus the CIT(Appeals) rejected the contentions of the assesse and dismissed this ground of appeal. 4.7 Regarding the applicability of sec.150(2) of the Act, the Commissioner of Income-tax(Appeals) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee is in appeal before us. 5. It is seen from the above that the assessment for the year 2001-02 was reopened on the basis of the findings of the Tribunal in the assessment years 2003-04 and 2004-05 in ITA Nos.327 328/Mds/10 dated 31.5.2010. As the Tribunal observed that transfer of asset has already taken in the year 2000, the capital gains cannot be taxed in the assessment years 2003-04 and 2004- 5. In order to give effect to the above findings of the Tribunal, the Assessing Officer initiated proceedings u/s.147 of the Act by duly issuing notice u/s.148 of the Act on 10.2.2011. It is seen from the records that sec.149 prescribed time limit for issue of notice u/s.148 of the Act. This section was amended by the Finance Act, 2001 w.e.f. 1.6.2001 describing different time limits than those prescribed prior to the said date. Different time limits have been prescribed depending upon the amount, income chargeable to tax that has escaped assessment. Sec.150 makes provision for cases where an assessment made in pursuance of an order on appeal, reference or revision or an order of a Court in any proceeding under any other law. Sub-sec.(1) of sec.150 says that the time limits ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessment was completed, an assessment or reassessment of the income for the assessment year 1998-99 (in this example) would have been barred by time. 7. Keeping in view of the above, let me examine the facts of the present case. The assessment for the assessment year 2001-02 completed u/s.143(3) r.w.sec.147 vide order dated 30.3.2006. The assessment for the assessment years 2003-04 and 2004-05 was passed on 30.3.2006 and 28.12.2006 respectively (Ref. AO s order at page 12). The assessment for the assessment years 2003-04 and 2004-05 was subject matter of appeal before the Tribunal and the Tribunal in its order dated 31.5.2010 observed that transfer of capital has already took place in the year 2000, capital gains cannot be taxed in the assessment years 2003-04 and 2004-05. 8. The question for consideration is whether 28.12.2006, the date on which the assessment for the assessment years 2003-04 and 2004-05 was framed, the AO could have taken action by issue of notice u/s.149(1)(b) of the Act. As it stood w.e.f. 1.6.2001, no notice u/s.148 shall be issued for the relevant assessment year, if four years but not more than six years from the end of the relevant assessment year ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... b-sec.(1) of sec.150 came to the assistance of the department. Regarding the contention of the assessee that there is no finding or direction of Tribunal in his order cited supra, when the Tribunal observed that the transfer of capital asset has already taken place in 2000 and the capital gains cannot be taxed in the assessment year 2003-04 and 2004-05, is not correct. It implies that if the income is included from the total income for one assessment year under appeal then it is natural that it is open to the Assessing Officer to bring the deleted income by the appellate authority to taxation in another assessment year to which assessment year it is related. 9. Being so, when the Tribunal excluded the capital gains in assessment years 2003-04 and 2004-05 and observed that transfer of capital asset has taken place in the year 2000, the AO has rightly brought to tax capital gains in the assessment year 2001-02. This view of mine is supported by the judgment of the Karnataka High Court, relied on by the ld. DR, in the case of Dy CIT vs. Spences Hotel (P) Ltd. (208 CTR 224), wherein it was held that Notice under s. 148 for asst. year 1976-77 issued on 17th Nov., 1998, on the basis o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Being so, in the interest of justice, I remit the issues relating to ground Nos. 9 10 to the file of the Commissioner of Income- tax(Appeals) for fresh consideration. 11. In the result, the appeal of the assessee is partly allowed for statistical purposes. ORDER SHRI D. MANMOHAN, VICE PRESIDENT On account of difference of opinion between the learned Accountant Member and learned Judicial Member, the matter was referred to the Hon'ble President for nominating a Third Member under section 255(4) of the Income Tax Act, 1961, to resolve the points of difference. It may be noted that even while framing the points of difference, there was a difference of opinion. According to the learned Judicial Member, the following questions need to be resolved: (1) In the facts and circumstances of the case, in the absence of any specific finding/direction to assess the income for the assessment year 2001- 02 in the order of this Tribunal dated 31.05.2010, can there be an inference/presumption, especially, when no proceeding for the assessment year 2001-02 was before the Tribunal, as held by Apex Court in CIT v. Green World Corporation (2009) 314 ITR 81? (2) In the fa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g out of the respective orders of Hon'ble Members. On going through the same, and after discussing the matter with the parties, I have reframed the points of difference as under: 1. Whether the notice issued u/s 148 r.w.s 150(1)of the Act dated 10.6.2011 for the assessment year 2001-02 is based on any finding or direction issued by the ITAT in I.T.A.Nos.327 328/Mds/2010? 2. In the event of holding that there is a finding or direction, whether the notice issued u/s 148 of the Act dated 10.6.2011 is barred by limitation or not? 4. Since both the parties have agreed to the reframed questions, I have proceeded to dispose of the points of difference accordingly. 5. Facts necessary in this context are referred to in brief. In respect of the assessment year 2001-02, the assessee disclosed total loss of ₹ 56,758/- in response to notice u/s 148 of the Act whereas the assessment was completed by determining the total loss at ₹ 2,442/- by an order dated 30.3.2006. 6. It is to be noticed that there was an agreement for joint development of property on 25.12.2000 and the assessee handed over the possession of the property to the builder on the same date ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssment since the Tribunal while disposing of the appeals in assessment years 2003-04 and 2004-05 had made the relevant observation only in the year 2010. Reliance was placed upon several judgments including the judgment of the Apex Court in K.M.Sharma vs ITO (2002) 254 ITR 772. 8. The learned Judicial Member has observed that while disposing of the appeals for assessment years 2003-04 and 2004-05, the limited contention of the assessee was that the capital gains arising out of the transfer of asset cannot be taxed in assessment years 2003-04 and 2004-05 which was ultimately accepted on the ground that the joint development agreement was entered into on 25.12.2000 and the possession of the property was also handed over on the same date. This cannot be equated to a finding or direction. He also analysed the provisions of sec. 150(1) and 150(2) of the Act to highlight that the provisions of sec. 150(1) are not applicable in respect of assessment year in which the assessment, re-assessment or re-computation could not have been made if the proceedings are already barred by limitation by the date the Tribunal passed the order and the AO initiated proceedings. He further observed that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed in reopening the assessment by issuing notice u/s 148 r.w.s 150 of the Act since it amounts to a direction or finding by the Tribunal. 12. With regard to time limit for reopening of assessment, the learned Accountant Member was of the opinion that the provisions of sec. 150 of the Act enable the Assessing Officer to issue notice. This section clearly says that Notwithstanding anything contained in section 149 notice may be issued at any time and thus, there is no time limit for reopening the assessment in the instant case. He was thus, of the opinion that the Assessing Officer was justified in reopening the assessment and it is not barred by limitation in view of the overriding provisions of sec. 150(1) of the Act. 13. On account of difference of opinion, the matter was referred to the Hon'ble President u/s 255(4) of the Act and the Hon'ble President, in turn, was pleased to nominate me as Third Member to resolve the points of difference. As already stated hereinabove, the precise points of difference were reframed and placed before both the parties who have accepted that the points of difference as reframed would correctly focus the issues. Arguments wer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the Tribunal, while disposing of the appeals for assessment years 2003-04 and 2004-05, a casual observation was made to deal with the issue before them as to whether the capital gains is attracted in assessment year 2003-04 and 2004-05; but there is no specific finding or direction that it is assessable to tax in assessment year 2001-02. Even if it is assumed that there is a finding or direction, in my humble opinion, the Hon'ble Madras High Court, in the case of M/s Goldmine Investments (supra), has considered an identical issue wherein it was held that in respect of any assessment year wherein further proceedings are barred by limitation, the same cannot be reopened merely by virtue of an opinion expressed by any higher forum at a later date i.e. subsequent to the date of limitation period. In fact, the judgments of the Apex Court are also on the same lines. Having regard to the circumstances of the case, I am of the view that the reopening of assessment is bad in law since the proceedings u/s 148 of the Act are sought to be initiated by issuing a notice after the period of limitation. In the light of the above findings, the reframed questions are answered as follows: ( ..... X X X X Extracts X X X X X X X X Extracts X X X X
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