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TMI Blog2016 (7) TMI 1543X X X X Extracts X X X X X X X X Extracts X X X X ..... r passed by the AO was not valid and was barred by time-limit as prescribed by the provisions of section with 153(2A) of the Act. First ground of appeal, raised by the assessee, is decided in its favour. As we have held that order of the AO was not a valid order, therefore, we are not deciding the merits of the case. As the order of the AO has been held to be an invalid order, therefore, all the three matters (Appeal by the AO, appeal filed by the assessee with regard to the order passed u/s.154 of the Act and the CO filed by the assessee) become infructuous - ITA 3610 & 3611/Mum/2011, ITA 3162/Mum/2011, C.O. No. 148/Mum/2011, Arising out of ITA 3162/Mum/2011 - - - Dated:- 8-7-2016 - S/Shri Joginder Singh, Judicial Member Rajendra, Accountant Member For the Appellant : S/Shri M. Dayasagar, Ganesh Bare-CIT(DR) For the Respondent : Shri A.V. Sonde-AR ORDER Per Bench: Cross-appeals have been filed by the assessee and the Assessing Officer (AO) against the order, dtd. 03. 02. 2011, of the CIT(A)-21, Mumbai. The AO had passed an order u/s. 154 of the Act, rectifying his order passed u/s. 143(3)r. w. s. 254(2)of the Ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the first issue was whether any expenses were incurred for the purpose of earning exempt income, that the second issue was that if such expenses were incurred how much of the ground of appeal was decided by the Tribunal against the assessee, that Tribunal had set aside the issue of quantification of expenses incurred to the file of the AO, that the Tribunal had not disturbed its decision with regard to first limb of the ground, that the Tribunal had held that argument of the assessee could not be accepted that one could earn substantial dividend income without incurring any expenses, that the Tribunal had not disturbed the finding given by it in the original order with regard to earning exempt income without incurring expenditure, that the Tribunal had directed the AO to consider the submission of the assessee with regard to retroactive nature of subsection (2) and (3) of section 14A of the Act, that the argument advanced by the assessee was not correct that the entire order had been set aside by the Tribunal for fresh education, that in the case under consideration the entire assessment was not set aside by the Tribunal, that the provisions of section 153(2A) were not applic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... law, that the FAA enhanced the disallowance u/s. 14A without following the due process of law as laid down in section 251 (2) of the Act, that he did not provide the assessee a reasonable opportunity of hearing before an enhancement, no disallowance u/s. 14A could be made where there was no exempt income, that under the said section no disallowance on strategic investment(including subsidy investment)could be made, that the assessee had sufficient own fund(share capital and reserve some surpluses) covering the investments made and hence disallowance u/s. 14 A was not warranted. He referred to the page number 175-176, 180, 170-172 of the paper book. He also refer to the FIPB approval (pages 1-14 of the paper book) in that regard arguing that investments in the subsidies were made after specific amounts were received as capital by the assessee as per the direction of the FIPB. The Departmental Representative (DR) argued that order passed by the AO was not time-barred, that the Tribunal had given only directions, that the FAA had rightly made disallowance under the head administrative and managerial expenses. With regard to the interest expenditure, he supported the order of the AO. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessment order itself with a direction to the AO to pass a fresh assessment. The FAA, while cancelling the penalties, granted liberty to the AO to initiate fresh proceedings for penalty in the fresh assessment order, if situation so warranted. Though the Tribunal had remanded the proceedings to the AO vide its order 05. 07. 1994, yet for a long time thereafter, the AO did not take any steps in that regard. The assessee approached the CIT in the year 2001 to grant him refund and interest. It made further representations, but the AO did not take any action. The assessee filed a writ petition before the Hon ble High Court for grant of refund. The AO initiated assessment proceedings as per the directions of the Tribunal. The assessee moved an amendment praying for necessary direction to set aside such assessment proceedings as time barred. It produced a communication of 11. 07. 2000, issued by the Assistant Registrar of the Tribunal certifying that the Tribunal's order was served on the assessee on 03. 08. 1994 and also served by hand in the office of the CIT on the same day. The question to be answered by the Court was as to whether the assessment proceedings for the AY. 1988-89 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 263 or section 264, setting aside or cancelling an assessment, may be made at any time before the expiry of two years from the end of the financial year in which the order u/s. 146 cancelling the assessment is passed by the AO or the order u/s. 250 or section 254 is received by the Chief Commissioner or, as the case may be, the order u/s. 263 or section 264 is passed by the Chief Commissioner or Commissioner, as the case may be. As already noted, while introducing sub-section (2A) in section 153 of the Act, the Legislature simultaneously made a small change in sub-section (3) thereof by adding the words, subject to the provisions of subsection (2A) . 20. We may notice that sub-section (2A) uses significantly different language from that used in sub-section (3) of section 153 inasmuch as sub-section (2A) refers to an order of fresh assessment in pursuance of an order, u/s. 250, section 254, section 263 or section 264, setting aside or cancelling an assessment, vis-a-vis clause (ii) of sub-section (3) using the expression assessments, reassessments or recomputation made in consequence of or to give effect to any finding or direction contained in an order u/s. 250, 254, 26 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sment order to the extent that it is covered by ground No. 2 of the appeal filed by the assessee was set aside or cancelled. There was no independent finding or direction which the Assessing Officer was required to comply with on the basis that the core of the assessment order has been sustained by the Commissioner of Income-tax (Appeals). 24. With this background in mind, we may revert back to the facts of the case. The Tribunal on an appeal filed by the assessee upheld the assessee's contention that the commission was disallowed in the case of two agencies, placing reliance on statements recorded behind the back of the assessee without affording the cross-examination of such witnesses. It was on this count that the Tribunal remitted the matter to the file of the AO with a direction to summon those two parties again and allow the assessee an opportunity to cross-examine them so that the true facts may emerge in relation to the payment of commission by the assessee-company to these two agencies. While doing so, the Tribunal also granted liberty to the AO to probe into the matter further by way of an inquiry and investigation into the alleged payment of commission to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssed the order without hearing the parties to the appeal filed by the Department. In fact, both the parties were heard before the Tribunal passed the order. The grievance of the assessee however is that the judgements and decisions referred to in the order of the Tribunal were not put to the ld. Counsel for the assessee at the time of hearing of the appeal. We have already extracted and reproduced the operative part of the Tribunal s order earlier in this Order, which shows that the matter has been restored to the file of the Assessing Officer for a fresh decision. We consider it appropriate to direct the Assessing Officer to consider the submissions of the assessee with regard to retroactive nature of subsection (2) and (3) of section 14 A also and decide upon the issue. The assessee shall be free to make it submission before the Assessing Officer. This course of action will ensure that the Assessing Officer also gets an opportunity to consider them on merits and record his finding thereon. In this view of the matter paragraphs 17 and 18 of the Tribunal s order dated 21/11/2006 are substituted by the following paragraphs: 17. Both the Departmental authorities, namely, t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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