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TMI Blog2018 (5) TMI 237X X X X Extracts X X X X X X X X Extracts X X X X ..... tion filed in the main appeal. Therefore, the limitation would run when the last direction was given by the Hon'ble High Court. No merit in the submissions of the assessee that the assessment so framed is time barred. Direct the Registry to fix the appeals for hearing on merit of the case related to other grounds raised by the assessee/revenue. - Decided against assessee. - I.T.A. No. 356/Ind/2012 And I.T.A. No. 390/Ind/2012 - - - Dated:- 24-4-2018 - SHRI KUL BHARAT, JUDICIAL MEMBER AND SHRI MANISH BORAD, ACCOUNTANT MEMBER For The Assessee : Shri P.M.Choudhary, Sr. Adv. and Shri P Anand, Advocate For The Respondent : Shri R.P.Maurya, Sr. DR ORDER PER KUL BHARAT, J.M. : These two cross appeals by the assessee and Revenue are directed against the order of Commissioner of Income-tax (Appeals)- II, Indore, dated 19th March, 2012, pertaining to assessment year 1996-97. 2. The assessee has raised following revised grounds of appeal :- 1. That the learned CIT(A) erred in not deciding the question of validity of the fresh assessment overlooking the directions of the Hon'ble Supreme Court in its order dated 05.04.2007 in SLP(Civil) No.5740 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eedings by eventually dropping the proceedings u/s 148. That on the facts and in the circumstances of the case the transaction should have been accepted as genuine on the basis of consistency and it is prayed that the transaction may now be accepted as genuine. 6. That the learned CIT(A) failed to appreciate that the burden to prove that the transaction was bogus and non genuine lay on the department and the department has failed to bring any cogent material on record to disprove the transaction. That on the facts and in the circumstances of the case, the department having miserably failed to discharge its onus and has tried to convert good evidence into bad evidence, it is prayed that the transaction be treated as genuine. 7. That the learned CIT(A) erred in confirming the disallowances made by the Assessing Officer of 20 of deferred revenue expenses of ₹ 42,62,163/- on the alleged premise that the said claim has not been allowed in AY 1995-96. That on the facts and in the circumstances of the case the said disallowance is wrong and contrary to the directions of the Hon'ble ITAT in order dated 11.12.2000. 8. That the learned CIT(A) erred in upholding th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issue on merits and do not raise any objection, the authorities has no jurisdiction to set aside the orders on the ground of irregularity in service. 18. In our opinion, the Tribunal but for no valid reasons devoted much of their time in deciding the issue of notice. It was in our view, not called for in the facts of this case at least. It was too technical rather than substantial. It was a clear case where assessee disclosed their total income at ₹ 5,97,920/- whereas they were assessed at ₹ 1,20,26,780/-. What was more a matter of serious concerned was the forged and bogus claims made by assessee in claiming depreciation. All these claims on a detailed inquiry made by Director of Investigation at Bombay exposed the assessee in indulging in evading payment of tax. The assessee was given full opportunity to defend. They did avail of full opportunity and contested the case by filing documents and written submission. We are not however concerned on this issue because the Tribunal has remanded the case for inquiry on some matters. It is now for AO to complete the inquiry as directed by the Tribunal and pass final assessment orders. Needless to observe the AO will agai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... IT (A) in Appeal No IT-401/ 09- 10/477 for A Y 1996-97. Since this is second round of litigation, it would be appropriate to set out the background of the matter. A) The appellant is a Limited Company, duly incorporated and registered under the Companies Act, 1956 and is engaged in the business of leasing , financing , merchant banking , stock broking etc . The appellant filed its return for the year under consideration i.e. A Y 1996-97 on 29/11/96 declaring total income at Rs 5,97,920/- . The appellant had claimed 100% depreciation on leased assets ( Milk canes) each costing less than Rs 5,000/- ,total claim amounting to Rs 1,08,27,800/-. The appellant's original assessment was completed by AO vide his original assessment order dated 22/03/1999 determining total income at Rs 1,20,26,780/- as against returned income . The AO among various disallowances, also disallowed appellant's claim of Rs 1,08,27,800/- for 100 % depreciation on milk canes. (copy of original assessment order dated 22/03/99 passed by DCIT at Page 1 to 25 of the Paper Book compilation - 1). B) Aggrieved by the said order, the appellant unsuccessfully preferred an appeal before CIT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inst the said order of the ITAT, department preferred an appeal u/s 260A before the Hon'ble High Court of MP , Indore Bench, Indore being ITA No 22/2001 . The department, however, confined its challenge only to annulment of assessment and did not challenge the other part of order of ITAT regarding set aside of assessment and remand to AO. Thus, the decision of ITAT on merits and the order of remand attained finality, requiring AO to pass fresh order of assessment within the statutory period of limitation prescribed u/s 153(2A) . It is further important to note that the department did not pray for any stay of the other part of the ITAT's order , as such , the said direction of remand continued to remain operative with a consequence that the prescribed period of limitation u/s 153(2A) for giving effect to ITAT's direction started running from the date of ITAT. Needless to mention that in absence of any power being vested in the ITAT to stay the operation of its own order that too after disposal of the appeal , the restraint order passed by ITAT in Para 37 could not have the effect of excluding such stay period for computing limitation u/s 153(2A) . E) The appellant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessment. The Division Bench of the Hon'ble High Court again without noticing the statutory provisions, allowed the application filed by department and extended the time for completion of assessment vide its order dated 19/1/2007 passed in MCC No 654/2006 directing the AO to complete the assessment within the period of six months from the date of its order. Copy of the said order dated 19/01/07 found at page no. 77 to 78 of paper book compiliation 1) Hon'ble High Court observed that ---- Considering the submissions made by learned counsel for the appellant / revenue, we allow this application and direct that now, the assessment order be passed within a period of six months from today. Other directions contained in order dated 03-01-2005 shall remain intact. JJ It may be important to note that the said order was passed by the High Court without issuing any notice and without giving any opportunity of hearing to the appellant. G) Aggrieved by said order the appellant then filed SLP before Hon'ble Supreme Court, which was disposed off by the Hon'ble Supreme Court vide its order dated 05/04/07 passed in SLP No 5740/2007 . The Apex Court with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... id order of CIT(A) . As to the merits of the appeal, CIT(A) has upheld the order of AO regarding disallowance of depreciation but has granted substantial relief to assessee on other issues regarding various other disallowances made by AO . The department has also filed an appeal against the relief granted by CIT(A) . K) During the pendency of this appeal before Hon'ble Tribunal, the appellant filed a writ petition under Article 226 of the Constitution of India being WP No 1073/2013 (Copy of petition at Page No 202 to 222 of Paper Book compilation - 1). L) The Hon'ble High Court vide its order 12/02/2013 passed in WP No 1073/2013 permitted the appellant to withdraw the petition, however, the Hon'ble High Court has observed that the grounds raised by petitioner ( appellant here) shall be considered by Tribunal keeping in view the observations made by Supreme Court . It is further observed by the Hon'ble High Court that it is needless to say that in view of the judgment of the Supreme Court, point raised by the petitioner (appellant here) about limitation is open for decision before the Tribunal. The appellant submits that the present appeal is required to&# ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ry period of limitation, as such, the impugned order dated 12/07/2007 passed by the AO being hopelessly barred by limitation is illegal, bad in law and without jurisdiction. As to the ITAT' s direction restraining the AO from passing fresh order of assessment in its order regarding annulment is reversed by the Hon'ble High Court, it is most humbly submitted that there is no statutory provisions whereby the ITAT can grant stay of further proceedings after disposal of the appeal. It is no doubt true that ITAT has power to grant a stay during the pendency of the appeal before it. At this stage it may be relevant to mention that only provision for exclusion of the period of limitation in clause (ii) of Explanation 1 below section 153(3), according to which while computing the period of limitation for purposes of said section, the period during which the assessment proceeding is stayed by order or injunction of any court is to be excluded . It is well settled that ITAT is not a court and hence the restraint order passed by the ITAT cannot have the effect of excluding the period of restraint, accordingly the limitation for purpose of fresh assessment will have to be reckoned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... more. In this context a reference can be made to the decision of Gujarat High Court in the case of Jawer Jivan Mehta reported in (1998) 111 S TC 199 , where their lordships have held that ---- ----- in order to avail of the benefit of exclusion under the second proviso to section 42(l) (of Gujarat Sales Tax Act, 1969) , the assessment proceedings must be stayed before the expiry of the period of limitation. Any order made after the period of expiry of limitation staying the assessment proceedings cannot relate back to revitalize the proceedings. At the expiry of the period of three years from the dates stipulated in section 42 (l)(a) , the authority to make an assessment order ends. No order can be made thereafter unless the proceedings are stayed while they are alive and during the period when an order could have been made by the concerned authority. A reference may also be made to the decision of Karnataka High Court in case of P Vittalpai and other V s Ag Income Tax Officer reported in 104 ITR 794 , where it is held that no court has any jurisdiction to extend the period of limitation nor the judgment of any court could be construed in that manner , referring ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4 ITR 794 .(Karn) it must be stated that this court has no jurisdiction to extend the period of limitation prescribed under the said section nor the operative portion of the direction issued by this court in WP No 1769 1770 of 1967 could be construed in that manner. All that this court observed was that the respondent would be at liberty to assess the petitioner and his brothers for the relevant assessment years in accordance with law. If the proceedings against the petitioners were barred by time, the respondent cannot take advantage of the directions issued by this court. b) CIT VS Escorts Farm Pvt Ltd reported in 180 ITR 280. The decision of Tribunal is correct when it stated that the effect of holding that the assessment was barred by time is that all further proceedings pursuant to the said decision would be infructuous. The ITO gets jurisdiction to pass an assessment order if it is within limitation. If the assessment is barred by time, then any decision on merits would be of no consequence, and for the same reason, the decision, on merits, by the appellate authorities would also be of no consequence and would have to be ignored. c)CIT Vs Kamladevi reported in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot also be a ground to extend the time for completion of assessment when the statue does not provide for it. Accordingly, their Lordships' declined the prayer of petitioner in that case for extension of time by court under Article 226 on the ground of the difficulties of the assessee in furnishing information sought by the AO . The appellant therefore submits that from the above judgment, it becomes clear that if the High Court cannot extend the period of limitation even while exercising its extraordinary powers conferred upon it by Article 226 of the constitution, it can certainly not extend the statutory limitation while exercising appellate jurisdiction u/s 260A of the IT Act . Needless to observe that while exercising appellate powers u/s 260A, the Hon'ble High Court functions under the provisions of the Act and hence in absence of specific power to extend the period of limitation, the Hon'ble court; could not grant further time beyond the limitation prescribed under section 153(2A) to the department for completion of fresh assessment. The extension could only be granted within the four comers of section 153(2A). It is therefore prayed that no advantage ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Vs Bhan Textile Pvt Ltd reported in 300 ITR 176 (Del) . It is , therefore, most humbly submitted that in view of the above factual and legal position, which find support from the judicial pronouncement , the impugned order passed by the AO clearly barred by limitation and deserves to be quashed. It is also submitted that the effect of the order passed by Supreme Court permitting the appellant to take all relevant grounds including the point raised in SLP before Supreme Court viz that this department was not entitled to extend the period of limitation is that virtually the order of extension dated 19/01/07 passed by High Court is set aside by Supreme Court and the question of limitation is made open for decision on merits . The position stands clear by the recent order and the direction of the Hon'ble High Court contained in its order dated 12/01/2013 passed in WP no. 1073/2013 where the Hon'ble High Court specifically directed the Tribunal to consider the question of limitation, keeping in view the observation of the Supreme Court It has further being clarified that the point raised about limitation is open for decision before the ITAT. In this view of the matter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d the CIT? ( 4) Whether on the Facts and in the circumstances o{ the case, the ITAT was justified in setting aside the judgment and orders passed by the A. O. and the CIT quashing the assessment on the point of non service of notice and resultantly lacking o{ jurisdiction to initiate the proceedings (or assessment o{tax ? ( 5) Whether on the facts and in the circumstances of the case the judgment and orders passed by the ITAT is bad in law? 5. The High Court vide its order dated 03.01.2005 allowed the appeal of department and set aside ITAT's order regarding annulment of assessment, AO was directed to complete enquiry as per ITAT's order within 6 months and pass final assessment order, on 03.01.2005. 6. The Hon'ble High Court allowed department's application for extension of period for completion of assessment. The department was allowed to complete assessment within further period-of six months from the date of High Court's order dated 19.01.2007. 7. Appellant challenged the said order dated 19.01.2007 before Supreme Court and Supreme Court without expressing any opinion on merits, observed that in the event of passing of assessm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by the High Court giving extension to the Department to complete the assessment. According to the assessee, there was no reason for giving extension in the present case. We do not wish to express any opinion on this point at this stage. However, we make it clear that in the event of the passing of the assessment order being challenged by the assessee in appeal before the Commissioner of Income Tax (Appeals), it would be open to the assessee herein to take all relevant grounds including the point which has been raised in the present special leave petition, namely, that the Department was not entitled to extend period of limitation. 10. In the light of the order of Hon'ble Supreme Court, there is no dispute with regard to the fact that the impugned assessment is also to be tested on the issue of limitation. The ld. Senior Counsel for the assessee has taken us to the various provisions of the Income-tax Act, 1961. Now, the moot question is whether the action of the AO, that is, passing of assessment order in pursuance of the direction of the Hon'ble High Court is barred by limitation ? For the purpose of limitation, Section 153 of the Income-tax Act, 1961, is the rele ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... om the AO, if satisfied, may allow an additional period of six months to give effect to the order. ( 6) Nothing contained in sub-sections (1) and (2) shall apply to the following classes of assessments, reassessments and recomputation which may, subject to the provisions of sub-sections (3) and (5), be completed ( i) 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 u/s 250, Section 254, Section 260, Section 262, Section 263 or Section 264 or in an order of any court in a proceeding otherwise than by way of appeal or reference under this Act, on or before the expiry of twelve months from the end of the month in which such order is received or passed by the Principal Commissioner or Commissioner, as the case may be; or ( ii) 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 u/s 147, on or before the expiry of twelve months from the end of the month in which the assessment order in the case of the firm is passed. ( 7) Where effect to any order, finding o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ision of the Tribunal. It is submitted on behalf of the assessee that the issue of limitation is required to be considered in the light of the decision of the Hon'ble Supreme Court in SLP(Civil) No. 5740 of 2007 dated 05.04.2007. We, therefore, restrict ourselves to the question of limitation. The relevant dates for this purpose are stated in the list of dates and events by the assessee are reproduced as under :- Date Events 22-03-1999 The AO passed asst order for ay 1996-97 u/s 143(3) 31-01-2000 Hon ble CIT(A) passed order in appeal by dismissing the appeal filed by the appellant and confirming the asst order dt 22.03.1999. 11.12.2000 The Hon ble Tribunal annulled the assessment on the ground of non service of notice u/s 143(2) within prescribed time. Hon ble Tribunal also decided the appeal on merits and restored the matter back to AO for giving opportunity of cross examination to the assessee. 25.02.2001 Date of receipt of ITAT s order by CIT. 03.01.2005 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , the order of the Tribunal was assailed before the Hon'ble High Court, appeal preferred by the Revenue was admitted and finally disposed of vide order dated 19.01.2007. Therefore, in our view the direction of the Tribunal s order dated 11.12.2000 merged with the order of the Hon'ble High Court. Further, in view of the fact that the Tribunal rightly or wrongly subjected the framing of the assessment to the outcome of the appeal so preferred before the Hon'ble High Court against the order of the Tribunal annulling the assessment on the ground of legality of service of notice u/s 143(2) of the Income-tax Act, 1961. Moreover, there is no dispute with regard to the fact that the order of the Tribunal was not challenged by the assessee. Now, at this stage, the assessee cannot be permitted to take a plea against the order passed by the Tribunal in respect of the observation of the Tribunal that the issue regarding service of notice would be subjected to the outcome of appeal preferred against the order of the Tribunal. Under these peculiar facts, we are of the considered view that the case laws relied upon by the Ld. Counsel for the assessee are distinguishable as the facts i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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