Bombay High Court
Wavy Construction Llp vs Asst. Commissioner Of Income Tax Circle … on 20 December, 2024
Author: G. S. Kulkarni
Bench: G. S. Kulkarni
Digitally 2024:BHC-OS:21214-DB signed by PRAJAKTA PRAJAKTA SAGAR VARTAK SAGAR VARTAK Date: 2024.12.20 22:22:30 wp 4372-22.odt +0530 Prajakta Vartak IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION WRIT PETITION NO. 4372 OF 2022 Wavy Construction LLP ) having its office at Level 6, Ceejay House ) Dr. Annie Besant Road, Worli, ) Mumbai - 400 018. ) ..Petitioner Versus 1. Asst. Commissioner of Income-tax, ) Circle-22(1) ) Room No. 322, Piramal Chambers, ) Lal Baug, Parel, Mumbai - 400 012. ) 2. Principal Commissioner of Income Tax-20) Room No. 418, 4th Floor, Piramal Chambers ) Lal Baug, Parel, Mumbai - 400 012. ) 3. Assistant Commissioner of Income-tax ) having his office at National Faceless ) Assessment Centre, Delhi. ) 4. Union of India ) through Ministry of Finance, North Block, ) New Delhi - 110 001. ) ..Respondents __________ Mr. J. D. Mistri, Senior Advocate with Mr. B. V. Jhaveri and Ms. Bhargavi Raval for Petitioner. Mr. Akhileshwar Sharma for Respondents. __________ CORAM: G. S. KULKARNI & ADVAIT M. SETHNA, JJ.
RESERVED ON: 26 NOVEMBER 2024.
PRONOUNCED ON: 20 DECEMBER 2024.
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Judgment (per G. S. Kulkarni, J.):
1. Rule, returnable forthwith. Respondents waive service. By consent
of the parties, heard finally.
2. This petition under Article 226 of the Constitution of India
challenges an order dated 14 October 2021 passed by the Assessing Officer
whereby the petitioner’s objections against the reopening of assessment
under Section 147 of the Income Tax Act, 1961 (for short, the “IT Act”)
has been rejected and the consequent assessment order dated 30 September
2022 passed by the Assessing Officer under Sections 143(3) read with
Sections 147, 260 and 144B of the IT Act. Assessment Year relevant to the
impugned orders is A.Y. 2012-13.
3. The necessary facts as the petition would set out, need to be noted:-
The petitioner is a limited liability partnership firm, which was
initially incorporated as a Private Limited Company on 27 November 1995
and thereafter converted into a limited liability partnership (LLP) on 30
March 2011. It is regularly filing its income tax returns since its
incorporation.
4. For the assessment year 2012-13, the petitioner filed its return of
income on 29 September 2012. On 03 October 2013, an intimation was
issued to the petitioner under Section 143(1) of the IT Act. After a long
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wp 4372-22.odtperiod of time that is on 12 November 2018, a notice under Section 133(6)
was issued by the DDIT (I & CI), Unit-2(2) calling for details like share of
the petitioner in the sale proceeds, from the sale of land, computation of
capital gains, etc. The petitioner, by its letter dated 27 November 2018,
replied to the said notice in which it furnished all the details which were
called for. On 07 December 2018, the petitioner filed further details as also
requested that a personal hearing be granted to it by the DDIT. Again
notices under Section 133(6) were issued to the petitioner by the Income
Tax Officer (I & CI), Unit-2(1) on 20 November 2018 and 19 December
2018 to which replies were filed by the petitioner on 14 December 2018
and 28 December 2018, respectively. On 17 January 2019, a further notice
was issued to the petitioner by the said Income Tax Officer under Section
133(6).
5. It is on the aforesaid backdrop, on 29 March 2019, a notice was
issued to the petitioner under Section 148 of the IT Act, informing the
petitioner that there was reason to believe that income chargeable to tax for
the assessment year in question (2012-13) had escaped assessment within
the meaning of Section 147 of the IT Act, and for such reason, it was
proposed to assess/re-assess the income/loss for the said assessment year.
Accordingly, the petitioner was called upon to deliver within 30 days from
the receipt of such notice, a return in the prescribed form, for the said
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assessment year. The assessing officer by a communication dated 23 April
2019 furnished reasons to the petitioner for reopening of the case inter alia
recording that the income chargeable to tax of Rs. 4,13,05,930/- had
escaped assessment within the meaning of section 147 of the IT Act which
was in relation to transaction of sale of property undertaken by Shri. Daayas
Lovaji Frezar and Shri. Sanjay B. Jadhav on 16 August 2011, to the tune of
Rs. 9,00,00,000/-.
6. The petitioner objected to the reasons by its letter dated 06 May
2019 dealing the same on merits, thereby contending that the reasons to
believe were vague; they had no nexus to the conclusion arrived at by the
assessing officer, hence, they were bad in law. The assessing officer
considered such objections, and by an order dated 25 November 2019
rejected the objections raised by the petitioner. Thereafter an assessment
order dated 19 May 2021 was passed by the Assessing Officer.
7. In the aforesaid circumstances, the petitioner approached this Court
by filing Writ Petition No. 3368 of 2019 challenging the notice issued
under Section 148 and the said order dated 25 November 2019 rejecting /
disposing of the objections raised by the petitioner. On such writ petition,
an ad-interim order came to be passed by the Division Bench on 13
December 2019 whereby stay was granted to the impugned notice and
further proceedings. The stay order was continued till the Division Bench
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heard the parties on 21 September 2021 when it passed the following order
disposing of the writ petition in terms of paragraph 3 with the concurrence
of learned counsel.
“1. Mr. Walve states that an affidavit of one Biju Thomas,
Assistant Commissioner of Income Tax sworn on September 17,
2021 has been filed in compliance with the order dated September
14, 2021. We have considered the affidavit and we accept the
explanation given therein.
2. The assessment order dated May 19, 2021 is hereby quashed
and set aside. Naturally, consequential notices, if any, are also
quashed and set aside.
3. Keeping open the rights and contentions of the parties, we
pass the following order with the concurrence of the counsel.
(A) The impugned order dated November 25, 2019 (Exhibit ‘P’
to the petition) disposing the objection raised against reopening of
assessment under Section 147 of the Income Tax Act, 1961 (the
‘Act’) is quashed and set aside.
(B) The matter is remanded to the concerned authority to
reconsider the objection dated May 6, 2019 and pass further orders.
Should petitioner wish to file any further submissions in response to
the letter dated April 23, 2019 giving reasons for reopening
assessment for AY 2012-13, petitioner may do so within two weeks
from today. No extension will be granted.
(C) Should petitioner seek any clarification regarding the figures
which are mentioned in the reasons for reopening, the concerned
authority shall provide the same within two weeks of receiving the
communication from petitioner.
(D) The concerned authority may further dispose of the
objection to the reopening of assessment after giving a personal
hearing to the petitioner as per Rules prescribed.
4. We clarify that we have not made any observations on the
merits of the case.
5. Mr. Walve states that in case of reopening upto the stage of
disposal of objection, it remains with the jurisdictional Assessing
Officer, and once it is disposed by the jurisdictional Assessing
Officer, the matter goes to Faceless Scheme for further assessment.
Statement accepted.
6. Writ Petition disposed.”
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(emphasis supplied)
8. Thus, according to the petitioner, as a consequence of the aforesaid
order passed by this Court, the proceedings stood remanded to the
Assessing Officer to reconsider the objections dated 06 May 2019 raised by
the petitioner and pass further orders. It is the petitioner’s case that as
permitted by paragraph 3(B) of the aforesaid order passed by the Division
Bench, the petitioner on 30 September 2021 filed further objections, in
response to the reasons as provided to the petitioner for reopening of the
assessment, by Assessing Officer’s letter dated 23 April 2019.
9. The Assessing Officer thereafter addressed a letter dated 08 October
2021 to the petitioner enclosing a communication addressed by the Income
Tax Officer (I & CI) to the Principal Commissioner of Income Tax dated
06 March 2019, in regard to the information on the said transaction namely
the transaction of sale of property as undertaken by Shri. Darayas Lovaji
Frezar and Shri. Sanjay B. Jadhav on 16 August 2011 which was in the tune
of Rs. 9,00,00,000/-. Thus, enclosing the said letter dated 06 March 2019,
the petitioner was informed that following the principles of natural justice,
the petitioner shall make submissions/reply on such information on the
transactions as received by the Assessing Officer.
10. It is the petitioner’s case that on 14 October 2021, respondent no.1
rejected the objections of the petitioner. Also, the petitioner was not
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furnished with a copy of the approval under Section 151 of the IT Act,
although it was specifically sought by the petitioner. Thereafter the
assessment proceedings were transferred to the National Faceless
Assessment Centre, Delhi as per the intimation dated 08 September 2022.
The petitioner contends that a show cause notice dated 12 September 2022
was issued to the petitioner by posting such notice on the Income Tax
portal. Also a notice under Section 142(1) of the IT Act dated 12
September 2022 was lodged on the portal. The petitioner contends that it
was not aware about the issuance of the show cause notice as also the notice
under Section 142(1) both dated 12 September 2022, hence, the same
remained to be responded by the petitioner.
11. On 20 September 2022, a communication was addressed by
respondent no.3/Assistant Commissioner of Income-tax, National Faceless
Assessment Centre (for short, “NFAC”) to the petitioner enclosing
therewith a show cause notice dated 20 September 2022 inter alia
recording that the variations, which were intended to be made, prejudicial
to the interest of the petitioner, were primarily in regard to the information
stated to be received in respect of transaction of sale of property by Shri.
Daayas Lovaji Frezar and Shri. Sanjay Jadhav on 16 August 2011 to the
tune of Rs. 9,00,00,000/- and more particularly, as seen from a copy of
Index-II, which was obtained in relation to the said transaction from the
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office of the Sub-Registrar, Maval, Pune. The reason was recorded that the
petitioner although was issued a notice, the same was not replied. The
following reasons which were set out:-
“2. The following variation(s) prejudicial to your interest are
proposed to be made in your case:-
In your case, order u/s. 147 was passed on 19.05.2021. Against this
order, you preferred appeal before Hon’ble High Court. Then, High
Court passed order on 24.09.2021. In view of order of High Court,
you filed fresh objections on 30.09.2021 for issuance of notice
u/s.148 and reasons recorded thereof u/s.148(2) of the Act. The
JAO disposed off the objection raised by you vide order dated
14.10.2021. As per para 5 of High Court order, the matter goes to
Faceless Scheme for further assessment.
Thereafter, notice u/s.142(1) dated 12.09.2022 issued. Reminder
letter dated 15.09.2022 issued. Further, notice u/s.142(1) issued on
17.09.2022 and 20.09.2022. In addition, personal hearing via V.C.
dated 13.09.2022, 17.09.2022 and 20.09.2022 were conducted.
However, you have not replied till date. In your case following
reasons were raised:
1. Subsequently, an information received from the Income
Tax Officer (Intelligence & Criminal Investigation), Unit-
2(1), Mumbal vide letter No.ITO(I&CI)
Unit-2(1)/Actionable Case/ 2018-19 dated 06.03.2019 that
there had been sale of property/ land amounting to Rs.
9,00,00,000/- and the such sale transaction has been done
by the assessee M/s Wavy Construction LLP (formerly
known as Wavy Construction Pvt Ltd) during the F.Y. 2011-
12 relevant to A.Y. 2012-13.
From the information it is learnt that the transaction of sale
of property done by Shri. Daayas Lovaji Frezar and Shri. Sanjay B.
Jadhav on 16.08.2011 to the tune of Rs. 9,00,00,000/-. During
verifying the transaction, it is found that both persons filed reply
stating that they had holder of Power of Attorney only.
Copy of Index-II of transaction amount of Rs.9 Crore was
obtained from the Sub-Registrar, Maval, Pune. The SRO had
provided another Index-II of another transaction amount of Rs.
108,25,00,000/- which was also registered on 16.08.2011. On
perusal of Index-II, it is found that Shri. Darayas Lovaji Frezar
acted as Power of Attorney holders in respect of sellers namely
Noshir D Talati, Rashna Talatia nd M/s Zenriba Estate &
Investment P. Ltd. Whereas Shri. Sanjay B. Jadhav acted as POA
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holder for Wavy Construction LLP. On perusal of Index- II, it is
found that Mis Wavy Construction LLP was one of the seller.
It is further learnt that the entire sale transaction had taken place in
three stages as detailed below
Description of Area in Sq. Date of Total sale value Amount
Property Mt. conveyance in Rs. received
Plot A 17615.93 10.08.2011 9,00,00,000 8,75,00,000
Plot B 214879.95 10.08.2011 108,25,00,000 107,00,00,000
N.A. Land 12 8330 10.08.2011 3,25,00,000 3,25,00,000
Mtrs Internal
Road of Plot A
While calculating the LTCG the assessee has taken into
consideration expenses viz. cost of acquisition of and improvement,
professional fees, supervisory charges etc. to curtail the amount of
receipts of the assessee. In view of the above facts, the assessee had
incurred aforesaid expenses to the tune of Rs.4,13,05,930/- escaped
assessment.
1. In view of the above facts, I have reason to believe that
income chargeable to tax of Rs. 4,13,05,930/- has escaped
assessment within the meaning of section 147 of the I.T Act, 1961
for the failure on the part of the assessee to disclose fully and truly
all material facts necessary for assessment for the previous year
relevant to A.Y. 2012-13.
2. Considering the above mentioned facts, and circumstances
of the case, I have reason to believe that an amount of Rs.
4,13,05,930/-has escaped assessment in the hands of the assessee for
A. Y. 2012-13. The Income has escaped assessment on account of
failure on the assessee’s part to disclose the correct nature of
income. So, the case of the assessee for A.Y. 2012-13 is being re-
opened u/s 147 of the Income-tax Act, 1961 to bring to tax the
income escaping assessment.
3. In this case a return of income was filed for the year under
consideration. Since, 4 years from the end of the relevant year has
expired in this case, the requirements to initiate proceeding u/s 147
of the Act are reason to believe that income for the year under
consideration has escaped assessment because of failure on the part
of the assessee to disclose fully and truly all material facts necessary
for its assessment for the assessment year under consideration. It is
pertinent to mention here that reasons to believe that income has
escaped assessment for the year under consideration have been
recorded above.
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4. In this case more than four year have been lapsed from the
end of assessment year under consideration, hence necessary
approval to initiate proceedings u/s 147 of the I.T. Act and to issue
notice u/s 148 is needed from Principal Commissioner of Income-
21, Mumbai as per the provisions of section 151……”
Since, you have not furnished any submission or reply, you
are requested to show cause why the amount of Rs. 4,13,05,930/-
should not be added to the total income for A.Y.2012- 13.”
(emphasis supplied)
12. The petitioner was accordingly called upon to show cause as to why
the proposed variation should not be made and the assessment should not
be completed accordingly. On 21 September 2022, the petitioner through
its Chartered Accountant replied to the show cause notice inter alia
recording that the notices/letters as issued by the respondents and the
reassessment proceedings were time barred, bad in law, void ab initio and
illegal. In this context, the petitioner contended that the notice under
Section 148 was issued on 29 March 2019 for assessment year 2012-13. It
was stated that as per provisions contained in Section 153(2), the last date
for passing the assessment order in cases of notice being issued under
Section 148 before 01 April 2019, was 31 December 2019 i.e. 9 months
from the end of the financial year in which notice under Section 148 was
served. It was stated that for such reason, in the assessee’s case, the last date
for passing the assessment order was 31 December 2019. The petitioner
pointed out that Writ Petition No. 3368 of 2019 was filed by the petitioner
on which this Court had granted ad-interim stay on 13 December 2019
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which was continued till the writ petition was disposed of i.e. on 21
September 2021. It was thus contended that the assessment proceedings
had remained stayed by this Court from 13 December 2019 till 21
September 2021. Considering such fact, it was contended by the petitioner
that as per Explanation 1 to Section 153 of the IT Act, in computing the
period of limitation, the period during which the assessment proceeding
was stayed by an order or injunction of any Court was required to be
excluded. The petitioner hence contended that even taking into
consideration such excluded period, the last date of passing the order as per
the provisions of Section 153 of the Act which was 31 December 2019
stood extended by the period for which stay granted by the High Court was
operating, which was for a period of 21 months and 9 days and accordingly,
the last date for passing the assessment order had stood extended till 09
October 2021. It was contended that, accordingly, as the writ petition was
disposed of by the High Court on 21 September 2021, the assessing officer
had only 18 days to pass the order. However, applying the provisions of
Section 153 of the IT Act, where immediately after the exclusion of the said
period, the period of limitation available to the assessing officer for making
an order of reassessment was less than 60 days and such remaining period
was to be extended to 60 days, which was deemed to be extended.
Accordingly, the assessment order ought to have been passed on or before
20 November 2021. It was stated that all the notices / letters which were
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issued after 20 November 2021 (which was the last date for completion of
the assessment proceedings), were time barred and had no validity in law.
The petitioner also replied on merits to the reasons furnished in reopening
the petitioner’s assessment. The petitioner also requested the Assessing
Officer to grant a personal hearing to the petitioner and drop the
proceedings.
13. It is on the above backdrop, a show cause notice dated 24 September
2022 came to be issued to the petitioner as to why the proposed variation
should not be made for the reasons as set out in the said notice. Such
notice was replied by the petitioner on 26 September 2022 inter alia
recording that the petitioner had already submitted voluminous
information along with its reply dated 26 September 2022. The petitioner
reiterated that the entire re-assessment proceedings were time barred,
despite which the show cause notice dated 27 September 2022 was issued
to the petitioner by the NFAC.
14. Within two days of the petitioner submitting its reply to the show
cause notice dated 27 September 2022, i.e. on 28 September 2022, an
assessment order was passed under Section 143(3) read with Sections 147,
260 and 144B of the IT Act making addition of Rs.4,69,02,981/- to the
total income of the petitioner.
15. It is on the aforesaid facts, the present petition is filed praying for the
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following substantive reliefs:-
“(a) that this Hon’ble Court may be pleased to issue a writ of
certiorari or a writ in the nature of certiorari or any other
appropriate writ, order or direction under Article 226 of the
Constitution of India calling for the records of the case leading to
the passing order of the Respondent No.1 dated 14 October, 2021
rejecting the objections of the Petitioner (Ex. ‘J’) and the assessment
order u/s. 143(3) r. w. sections 147, 260 and 144B of the Act dated
30″ September, 2022 for A.Y. 2012-13. (Ex. ‘Q’) and after going
through the same and examining the question of legality thereof to
quash, cancel and set aside the order of the Respondent No.1 dated
14” October, 2021 rejecting the objections of the Petitioner (Ex. ‘J’)
and the assessment order u/s. 143(3) r. w. sections 147, 260 and
144B of the Act dated 30% September, 2022 for A.Y. 2012-13 (Ex.
‘Q’).
(b) that this Hon’ble Court may be pleased to issue a writ of
mandamus or a writ in the nature of mandamus or any other
appropriate writ, order or direction under Article 226 of the
Constitution of India ordering and directing the Respondent No.1
to withdraw and cancel the alleged order dated 14 th October, 2021
rejecting the objections of the Petitioner (Ex. ‘J’), withdraw and
cancel notices issued from 8′” September, 2022 to 27th September,
2022 and the assessment order u/s. 143(3) r. w. sections 147, 260
and 144B of the Act dated 30th September, 2022 for A.Y. 2012-13
by Respondent No.3 (Ex. ‘Q’).
(c) that this Hon’ble Court may be pleased to issue a writ of
prohibition or a writ in the nature of prohibition or any other
appropriate writ, order or direction under Article 226 of the
Constitution of India ordering and directing the Respondent No.1
& 3, not to proceed with or in pursuance of or in furtherance of the
alleged order dated 14 October, 2021 (Ex.’J’) rejecting the objections
of the Petitioner and the notices issued by the Respondent No.3
from 8″ September, 2022 to 27th September, 2022 and the
assessment order u/s. 143(3) r. w. sections 147, 260 and 144B of the
Act dated 30th September, 2022 for A.Y. 2012-13 by the Respondent
No.3 (Ex. ‘Q’).”
16. Reply affidavit is filed on behalf of the Revenue of Shri Jaibhim T.
Narnaware, Deputy Commissioner of Income Tax, Circle-22(1), Mumbai,
who has described himself as Jurisdictional Assessing Officer (“JAO”)
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which inter alia denying the petitioner’s case contends that the writ petition
ought to be not entertained and the same be dismissed.
Submissions on behalf of the Petitioner
17. Mr. Mistri, learned senior counsel for the petitioner, in assailing the
legality of the impugned assessment order passed under Section 147 read
with Sections 260 and 144B of the IT Act, would raise a question, as to
whether such order of assessment, reassessment or recomputation could at
all be passed, after the expiry of nine months from the end of the financial
year in which notice under Section 148 was served. The impugned notices
and orders are also challenged on the other grounds, suffice it to observe
that the primary contention as urged by Mr. Mistri as on the limitation as
prescribed under Section 153(2) of the IT Act along with Explanation 1(ii)
below the proviso to Section 153(9) of the Act. Mr. Mistri submits that the
impugned notices issued by respondent no.3 from 8 September 2022 till
27 September 2022 for the reassessment proceedings being initiated and
thereafter in passing the impugned assessment order under Section 143(3)
read with Sections 147, 260 and 144B of the IT Act on 30 September 2022
are bad in law and without jurisdiction, as the same had been issued after
the expiry of the limitation period prescribed in Section 153(2) of the IT
Act along with Explanation 1 below proviso to Section 153(9) of the IT
Act.
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18. In supporting such contention, it is submitted that as per Section
153(2), the Assessing Officer was required to pass such order within nine
months from the end of the financial year in which the notice under
Section 148 was served. The submission is that the notice under Section
148 was issued on 29 March 2019. The financial year ended on 31 March
2019, and the nine months period from 01 April 2019 ended on 31
December 2019. This would have been the normal position. However,
Writ Petition No. 3368 of 2019 was filed by the petitioner in this Court
challenging the notice under Section 148 of the IT Act, in which this Court
had granted interim stay on 13 December 2019, which continued until the
petition was disposed of on 21 September 2021. Such period during which
the stay operated would be required to be excluded. It is hence submitted
that consequently the reassessment proceedings having remained stayed
from 13 December 2019 till 21 September 2021, such period would be
required to be excluded in computing the period of limitation. Mr. Mistri
submits that as per Explanation 1 (ii) below the proviso to Section 153(9)
of the IT Act provides that in computing the period of limitation, the
period during which the assessment proceedings were stayed by an order or
injunction of any Court shall be excluded. It is thus submitted that
respondent no.1 was left with only 18 days to pass the reassessment order,
i.e. from 13 December 2019 to 31 December 2019 being the period from
the date the stay was granted to the period the limitation would expire
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under the normal course.
19. It is submitted that as per the second proviso to Section 153(9) of the
IT Act, immediately after the exclusion of the said period, the period
available to the Assessing Officer for making an order of reassessment is less
than sixty days, as such remaining period would stand extended to sixty
days from the date the stay was vacated and the said period of limitation
shall be deemed to be extended accordingly. It is, therefore, submitted that
respondent no.1 had sixty days available from 21 September 2021 to pass
the reassessment order i.e. on or before 20 November 2021, whereas, the
Income Tax Officer, NFAC passed the impugned order under Section
143(3) read with Sections 147 and 144B on 30 September 2022 which is
after a period of almost ten months from the limitation having expired,
hence, the assessment order is ex-facie barred by limitation. Mr. Mistri in
supporting such contention, submits that the consequence was that the
High Court in its order dated 21 September 2021 had neither given any
direction nor recorded any finding, as referred to in sub-section (6) of
Section 153, in as much as, the High Court held that: (i) the order passed
under Section 143(3) read with Section 147 on 19 May 2021 was in
violation of the ad-interim relief granted by the High Court on the writ
petition of the petitioner and therefore, the said order was quashed and set
aside and consequently all notices issued pursuant thereto were quashed
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and set aside; (ii) the High Court quashed the order disposing of the
objections dated 25 November 2019 and held that the petitioner can file
any further objections in addition to its letter dated 06 May 2019 objecting
to the notice under Section 148 of the IT Act. (iii) the High Court asked
the Assessing Officer to dispose of the objections of the petitioner after
giving a personal hearing to the petitioner.
20. It is hence submitted that the High Court has neither given
directions nor recorded any findings and on the contrary, the High Court
observed -“We clarify that we have not made any observations on merits of
the case.” Supporting such contentions on the proceedings being barred by
limitation under the provisions of Section 153, Mr. Mistri has placed
reliance on the decisions of the Supreme Court in Income-tax Officer vs.
Murlidhar Bhagwan Das1, Rajinder Nath v. Commissioner of Income-Tax,
Delhi2 and on the decision of the Division Bench of Karnataka High Court
in Principal Commissioner of Income-Tax & Anr. vs. Tally India Pvt. Ltd. 3.
21. It is next submitted that the impugned notice under Section 148 of
the IT Act dated 29 March 2019 records that the notice was issued after
obtaining the necessary satisfaction of the Principal Commissioner of
Income Tax – 21, Mumbai and this fact was reproduced in the copy of the
reasons recorded and furnished to the petitioner on 23 April 2019. In such
1 52 ITR 335 SC
2 120 ITR 14, SC
3 435 ITR 137 Kar.
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context, Mr. Mistri submits that the petitioner had requested for a copy of
the approval under Section 151 of the IT Act being furnished to it, as also
the same was demanded by the petitioner in its letters dated 21 September
2022 and 26 September 2022 however, the same is not furnished to the
petitioner till date. It is therefore submitted that the petitioner is justified
in raising the ground in the petition that respondent no.1 had issued notice
under Section 148 of the IT Act without obtaining the approval of
respondent no.2, and hence, the notice issued under Section 148 void ab
initio. It is submitted that such statement as made by the petitioner is not
controverted by the respondents. In the aforesaid circumstances, it is
submitted that the petition deserves to be allowed.
Submissions on behalf of the Revenue
22. On the other hand, Mr. Sharma, learned counsel for the Revenue in
opposing the petition, has primarily relied on the reply affidavit which has
been filed. Mr. Sharma would contend that the order dated 21 September
2021 passed by this Court sufficiently constitutes a direction to deal with
the fresh objections and in pursuance of such order passed by the Court, the
Revenue was entitled to pass an order during the extended period of twelve
months as provided under sub-section (6) of Section 153 of the Act from
the end of the month in which the order was passed by this Court, hence,
the period would stand extended from 01 October 2021 upto 30
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September 2022. According to Mr. Sharma, the impugned assessment
order being passed on 30 September 2022, was within the prescribed
limitation. It is, therefore, Mr. Sharma’s contention that by virtue of the
order dated 21 September 2021 passed by this Court, necessarily the
extended period under sub-section (6) of Section 153 was available, as also
clear from the tenor of the orders passed by this Court. It is his submission
that there cannot be any other reading of the High Court’s order. In
supporting such contention, Mr. Sharma has also referred to the
observations of the Supreme Court in Rajinder Nath v. Commissioner of
Income-Tax, Delhi (supra) as according to Mr. Sharma, it would not be a
correct understanding/reading of the High Court’s order that it has simply
set aside the assessment order dated 19 May 2021, as it provides for a
further action to be undertaken as per the directions as contained in
paragraph 3(A) to 3(D) which, according to Mr. Sharma, were necessarily
required to be adhered by the Revenue in passing fresh orders. Hence, the
original period of limitation was no more available and it is the extended
period of limitation as provided by sub-section (6) of Section 153 which
was available for a fresh order to be passed. It is, therefore, Mr. Sharma’s
submission that the petitioner is not correct in its submission relying on the
decision to support its contentions that the extended period of limitation
was not available to pass the impugned assessment order dated 30
September 2022. He accordingly submits that the Writ Petition be
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dismissed.
23. We have heard Mr. Mistri, learned senior counsel for the petitioner
and Mr. Sharma, learned counsel for the respondents. With their
assistance, we have perused the record.
Reasons and conclusion
24. In the facts and circumstances of the case, the short question which
arises for consideration is whether the impugned assessment order dated 30
September 2022 would be required to be held to be bad in law and without
jurisdiction, on the ground that the same was passed after the expiry of the
period of limitation as prescribed under Section 153 of the IT Act and
more particularly read with the proviso below Explanation 1 fallowing
under sub-section (9) of Section 153.
25. Having noted the factual matrix in detail, to answer the issue at the
outset it would be imperative to note the provisions of Section 153 which
read thus:-
“153. Time limit for completion of assessment, reassessment and
recomputation.
(1) No order of assessment shall be made under section 143 or
section 144 at any time after the expiry of twenty-one months
from the end of the assessment year in which the income was first
assessable:
Provided that in respect of an order of assessment relating
to the assessment year commencing on the 1st day of April, 2018,
the provisions of this sub-section shall have effect, as if for the
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been substituted:
Provided further that in respect of an order of assessment
relating to the assessment year commencing on–
(i ) the 1st day of April, 2019, the provisions of this sub-
section shall have effect, as if for the words “twenty-one months”,
the words “twelve months” had been substituted;
(ii) the 1st day of April, 2020, the provisions of this sub-
section shall have effect, as if for the words “twenty-one months”,
the words “eighteen months” had been substituted:]
Provided also that in respect of an order of assessment
relating to the assessment year commencing on 33[***] the 1st day
of April, 2021, the provisions of this sub-section shall have effect,
as if for the words “twenty-one months”, the words “nine months”
had been substituted:
Provided also that in respect of an order of assessment
relating to the assessment year commencing on or after the 1st day
of April, 2022, the provisions of this sub-section shall have effect,
as if for the words “twenty-one months”, the words “twelve
months” had been substituted.][(1A) Notwithstanding anything contained in sub-section
(1), where a return under sub-section (8A) of section 139 is
furnished, an order of assessment under section 143 or section 144
may be made at any time before the expiry of [twelve] months
from the end of the financial year in which such return was
furnished.][(1B) Notwithstanding anything in sub-section (1), where
a return is furnished in consequence of an order under clause ( b)
of sub-section (2) of section 119, an order of assessment under
section 143 or section 144 may be made at any time before the
expiry of twelve months from the end of the financial year in
which such return was furnished.](2) No order of assessment, reassessment or recomputation
shall be made under section 147 after the expiry of nine months
from the end of the financial year in which the notice under
section 148 was served:
Provided that where the notice under section 148 is served
on or after the 1st day of April, 2019, the provisions of this sub-
section shall have effect, as if for the words “nine months”, the
words “twelve months” had been substituted.
(3) Notwithstanding anything contained in sub-sections (1),
(1A) and (2), an order of fresh assessment [or fresh order under
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section 92CA, as the case may be,] in pursuance of an order under
[section 250 or] section 254 or section 263 or section 264, setting
aside or cancelling an assessment, [or an order under section
92CA, as the case may be], may be made at any time before the
expiry of nine months from the end of the financial year in which
the order under [section 250 or] section 254 is received by the
Principal Chief Commissioner or Chief Commissioner or Principal
Commissioner or Commissioner or, as the case may be, the order
under section 263 or section 264 is passed by the [Principal Chief
Commissioner or Chief Commissioner or Principal Commissioner
or Commissioner, as the case may be] :
Provided that where the order under [section 250 or]
section 254 is received by the Principal Chief Commissioner or
Chief Commissioner or Principal Commissioner or Commissioner
or, as the case may be, the order under section 263 or section 264
is passed by the [Principal Chief Commissioner or Chief
Commissioner or Principal Commissioner or Commissioner, as the
case may be,] on or after the 1st day of April, 2019, the provisions
of this sub-section shall have effect, as if for the words “nine
months”, the words “twelve months” had been substituted.
(3A) Notwithstanding anything contained in sub-sections (1),
(1A), (2) and (3), where an assessment or reassessment is pending
on the date of initiation of search under section 132 or making of
requisition under section 132A, the period available for
completion of assessment or reassessment, as the case may be,
under the said sub-sections shall,–
(a ) in a case where such search is initiated under
section 132 or such requisition is made under section 132A;
(b) in the case of an assessee, to whom any money,
bullion, jewellery or other valuable article or thing seized or
requisitioned belongs to;
(c ) in the case of an assessee, to whom any books of
account or documents seized or requisitioned pertains or pertain
to, or any information contained therein, relates to, be extended by
twelve months.]
(4) Notwithstanding anything contained in 43[sub-sections
(1), (1A), (2), (3) and (3A)], where a reference under sub-section
(1) of section 92CA is made during the course of the proceeding
for the assessment or reassessment, the period available for
completion of assessment or reassessment, as the case may be,
under the said 43[sub-sections (1), (1A), (2), (3) and (3A)], shall
be extended by twelve months.
(5) Where effect to an order under section 250 or section 254
or section 260 or section 262 or section 263 or section 264 is to
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be given by the Assessing Officer 44[or the Transfer Pricing
Officer, as the case may be,] wholly or partly, otherwise than by
making a fresh assessment or reassessment 44[or fresh order under
section 92CA, as the case may be], such effect shall be given
within a period of three months from the end of the month in
which order under section 250 or section 254 or section 260 or
section 262 is received by the Principal Chief Commissioner or
Chief Commissioner or Principal Commissioner or Commissioner,
as the case may be, the order under section 263 or section 264 is
passed by the 45[Principal Chief Commissioner or Chief
Commissioner or Principal Commissioner or Commissioner, as the
case may be] :
Provided that where it is not possible for the Assessing
Officer 44[or the Transfer Pricing Officer, as the case may be,] to
give effect to such order within the aforesaid period, for reasons
beyond his control, the Principal Commissioner or Commissioner
on receipt of such request in writing from the Assessing Officer
46[or the Transfer Pricing Officer, as the case may be], if satisfied,
may allow an additional period of six months to give effect to the
order:
Provided further that where an order under section 250 or
section 254 or section 260 or section 262 or section 263 or
section 264 requires verification of any issue by way of submission
of any document by the assessee or any other person or where an
opportunity of being heard is to be provided to the assessee, the
order giving effect to the said order under section 250 or section
254 or section 260 or section 262 or section 263 or section 264
shall be made within the time specified in sub-section (3).
[(5A) Where the Transfer Pricing Officer gives effect to an order
or direction under section 263 by an order under section 92CA
and forwards such order to the Assessing Officer, the Assessing
Officer shall proceed to modify the order of assessment or
reassessment or recomputation, in conformity with such order of
the Transfer Pricing Officer, within two months from the end of
the month in which such order of the Transfer Pricing Officer is
received by him.]
(6) Nothing contained in sub-sections (1) (1A) and (2) shall
apply to the following classes of assessments, reassessments and
recomputation which may, subject to the provisions of 48[sub-
sections (3), (5) and (5A), 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 under section 250, section 254, section 260,
section 262, section 263, or section 264 or in an order of any
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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
49[Principal Chief Commissioner or Chief Commissioner or]
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 under section 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 or direction referred to
in sub-section (5) or sub-section (6) is to be given by the Assessing
Officer, within the time specified in the said sub-sections, and such
order has been received or passed, as the case may be, by the
income-tax authority specified therein before the 1st day of June,
2016, the Assessing Officer shall give effect to such order, finding
or direction, or assess, reassess or recompute the income of the
assessee, on or before the 31st day of March, 2017.
(8) Notwithstanding anything contained in the foregoing
provisions of this section, sub-section (2) of section 153A or sub-
section (1) of section 153B 50[or section 158BE], the order of
assessment or reassessment, relating to any assessment year, which
stands revived under sub-section (2) of section 153A 50[or sub-
section (5) of section 158BA], shall be made within a period of
one year from the end of the month of such revival or within the
period specified in this section or sub-section (1) of section 153B
50[or section 158BE], whichever is later.
(9) The provisions of this section as they stood immediately
before the commencement of the Finance Act, 2016, shall apply to
and in relation to any order of assessment, reassessment or
recomputation made before the 1st day of June, 2016:
Provided that where a notice under sub-section (1) of
section 142 or sub-section (2) of section 143 or section 148 has
been issued prior to the 1st day of June, 2016 and the assessment
or reassessment has not been completed by such date due to
exclusion of time referred to in Explanation 1, such assessment or
reassessment shall be completed in accordance with the provisions
of this section as it stood immediately before its substitution by the
Finance Act, 2016 (28 of 2016).
Explanation 1.–For the purposes of this section, in computing
the period of limitation–
(i) the time taken in reopening the whole or any part
of the proceeding or in giving an opportunity to the assessee to be
re-heard under the proviso to section 129; or
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(ii) the period during which the assessment proceeding
is stayed by an order or injunction of any court; or
(iii) the period commencing from the date on which the Assessing
Officer intimates the Central Government or the prescribed
authority, the contravention of the provisions of clause ( 21) or
clause (22B) or clause (23A) or clause (23B) 51[, under clause (i)
of the first proviso]to sub-section (3) of section 143 and ending
with the date on which the copy of the order withdrawing the
approval or rescinding the notification, as the case may be, under
those clauses is received by the Assessing Officer; or
(iv) the period commencing from the date on which the
Assessing Officer directs the assessee to get his accounts audited
52[or inventory valued] under sub-section (2A) of section 142 and
—
(a ) ending with the last date on which the assessee is
required to furnish a report of such audit 52[or inventory
valuation] under that sub-section; or
(b) where such direction is challenged before a court,
ending with the date on which the order setting aside such
direction is received by the Principal Commissioner or
Commissioner; or
(v ) the period commencing from the date on which the
Assessing Officer makes a reference to the Valuation Officer under
sub-section (1) of section 142A and ending with the date on which
the report of the Valuation Officer is received by the Assessing
Officer; or
(vi) the period (not exceeding sixty days) commencing
from the date on which the Assessing Officer received the
declaration under sub-section (1) of section 158A and ending with
the date on which the order under sub-section (3) of that section is
made by him; or
(vii) in a case where an application made before the
Income-tax Settlement Commission is rejected by it or is not
allowed to be proceeded with by it, the period commencing from
the date on which an application is made before the Settlement
Commission under section 245C and ending with the date on
which the order under sub-section (1) of section 245D is received
by the Principal Commissioner or Commissioner under sub-
section (2) of that section; or
(viii) the period commencing from the date on which an
application is made before the Authority for Advance Rulings or
before the Board for Advance Rulings under sub-section (1) of
section 245Q and ending with the date on which the order
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rejecting the application is received by the Principal Commissioner
or Commissioner under sub-section (3) of section 245R; or
(ix) the period commencing from the date on which an
application is made before the Authority for Advance Rulings or
before the Board 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 Principal Commissioner
or Commissioner under sub-section (7) of section 245R; or
(x) 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 Principal
Commissioner or Commissioner or a period of one year,
whichever is less; or
(xi) 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 Principal Commissioner
or Commissioner under sub-section (1) of section 144BA and
ending on the date on which a direction under sub-section (3) or
sub-section (6) or an order under sub-section (5) of the said
section is received by the [Assessing Officer; or
(xii) the period (not exceeding one hundred and eighty
days) commencing from the date on which a search is initiated
under section 132 or a requisition is made under section 132A and
ending on the date on which the books of account or other
documents, or any money, bullion, jewellery or other valuable
article or thing seized under section 132 or requisitioned under
section 132A, as the case may be, are handed over to the Assessing
Officer having jurisdiction over the assessee,–
(a ) in whose case such search is initiated under section
132 or such requisition is made under section 132A; or
(b) to whom any money, bullion, jewellery or other
valuable article or thing seized or requisitioned belongs to; or
(c ) to whom any books of account or documents seized
or requisitioned pertains or pertain to, or any information
contained therein, relates to; or]
[(xiii) the period commencing from the date on which the
Assessing Officer makes a reference to the Principal Commissioner
or Commissioner under the second proviso to sub-section (3) of
section 143 and ending with the date on which the copy of the
order under clause (ii) or clause (iii) of the fifteenth proviso to
clause (23C) of section 10 or clause (ii) or clause (iii) of sub-
section (4) of section 12AB, as the case may be, is received by the
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Assessing Officer,] shall be excluded:
Provided that where immediately after the exclusion of the
aforesaid period, the period of limitation referred to in sub-
sections (1), (1A), (2), (3) and sub-section (8) available to the
Assessing Officer for making an order of assessment, reassessment
or recomputation, as the case may be, is less than sixty days, such
remaining period shall be extended to sixty days and the aforesaid
period of limitation shall be deemed to be extended accordingly:
Provided further that where the period available to the
Transfer Pricing Officer is extended to sixty days in accordance
with the proviso to sub-section (3A) of section 92CA and the
period of limitation available to the Assessing Officer for making
an order of assessment, reassessment or recomputation, as the case
may be, is less than sixty days, such remaining period shall be
extended to sixty days and the aforesaid period of limitation shall
be deemed to be extended accordingly:
Provided also that where a proceeding before the
Settlement Commission abates under section 245HA, the period
of limitation available under this section to the Assessing Officer
for making an order of assessment, reassessment or recomputation,
as the case may be, shall, after the exclusion of the period under
sub-section (4) of section 245HA, be not less than one year; and
where such period of limitation is less than one year, it shall be
deemed to have been extended to one year; and for the purposes
of determining the period of limitation under sections 149, 154,
155 and 158BE and for the purposes of payment of interest under
section 244A, this proviso shall also apply accordingly:
Provided also that where the assessee exercises the option
to withdraw the application under sub-section (1) of section
245M, the period of limitation available under this section to the
Assessing Officer for making an order of assessment, reassessment
or recomputation, as the case may be, shall, after the exclusion of
the period under sub-section (5) of the said section, be not less
than one year; and where such period of limitation is less than one
year, it shall be deemed to have been extended to one year:
Provided also that for the purposes of determining the
period of limitation under sections 149, 154 and 155, and for the
purposes of payment of interest under section 244A, the
provisions of the fourth proviso shall apply accordingly:
[Provided also that where after exclusion of the period
referred to in clause (xii), the period of limitation for making an
order of assessment, reassessment or recomputation, as the case
may be, ends before the end of the month, such period shall be
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wp 4372-22.odtExplanation 2.–For the purposes of this section, where, by an
order referred to in clause (i) of sub-section (6),–
(a ) any income is excluded from the total income of
the assessee for an assessment year, then, an assessment of such
income for another assessment year shall, for the purposes of
section 150 and this section, be deemed to be one made in
consequence of or to give effect to any finding or direction
contained in the said order; or
(b) any income is excluded from the total income of
one person and held to be the income of another person, then, an
assessment of such income on such other person shall, for the
purposes of section 150 and this section, be deemed to be one
made in consequence of or to give effect to any finding or
direction contained in the said order, if such other person was
given an opportunity of being heard before the said order was
passed.”
(emphasis supplied)
26. Thus, the question as deliberated at the Bar is qua the applicability of
the provisions of sub-sections (2) and (6) of Section 153, and Explanation
1 below sub-section (9) (supra), and as underscored by us. Section 153
provides for “Time limit for completion of assessment, reassessment and
recomputation”. Sub-section (1) thereof provides that no order of
assessment shall be made under section 143 or section 144 at any time after
the expiry of twenty-one months from the end of the assessment year in
which the income was first assessable. Sub-section (2) which is relevant for
the context in hand, provides that no order of assessment, reassessment or
recomputation shall be made under section 147 after the expiry of nine
months from the end of the financial year in which the notice under section
148 was served. The proviso below sub-section is not applicable, as it
applies only in a case where the notice under section 148 is served on or
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after the 1st day of April, 2019, which is not the case. Sub-section (6) is the
debated provision which the Revenue intends to apply when it contends
that the extended period of limitation of 12 months from the end of the
month in which the Court had passed the order (dated 21 September 2021)
would become applicable. Sub-section (6) provides that nothing contained
in sub-sections (1), (1A) and (2) shall apply to the classes of assessments,
reassessments and recomputation which may, subject to the provisions of
sub-sections (3), (5) and (5A), be completed so as to ordain that 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, 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 the 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 Chief Commissioner or
Chief Commissioner or Principal Commissioner or Commissioner, as the
case may be. Explanation 1(ii) to Section 153 which falls below sub-section
(9) provides that for the purposes of this section, in computing the period
of limitation, the period during which the assessment proceeding is stayed
by an order or injunction of any court shall be excluded. Further the
proviso below Explanation 1 ordains that where immediately after the
exclusion of the period as contemplated under the Explanation, the period
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of limitation referred to in sub-sections (1), (1A), (2), (3) and sub-section
(8) available to the Assessing Officer for making an order of assessment,
reassessment or recomputation, as the case may be, is less than sixty days,
such remaining period shall be extended to sixty days and the period of
limitation as provided under the Explanation shall be deemed to be
extended accordingly.
27. As to what would be the effect of these provisions to the notice
issued to the petitioner under Section 148 dated 29 March 2019 and the
consequent order passed in relation thereto on 30 September 2022, after
giving effect to the stay to the Section 147 proceedings, by an interim order
dated 13 December 2019 passed by this Court, till the disposal of this
petition on 21 September 2021, would now be required to be considered.
It is plainly seen that no order of assessment, reassessment or
recomputation as per the provisions of sub-section (2) of Section 153 shall
be made under section 147 after the expiry of nine months from the end of
the financial year in which the notice under section 148 was served.
Applying such provision and assuming that there was no stay order passed
to the notice under Section 148, the period of nine months from the date of
issuance of notice under Section 148 (29 March 2019) was to expire on 31
December 2019 i.e. on a strict application of the limitation as prescribed by
sub-section (2). However, Section 148 notice and the reasons recorded for
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reopening of the assessment, as objected by the petitioner being rejected by
the Assessing Officer vide an order dated 25 November 2019, were
challenged by the petitioner by filing Writ Petition No. 3368 of 2019, on
13 December 2019 on which an interim order was passed by this Court
granting stay to the notice issued under Section 148 i.e. prohibiting the
Assessing Officer to pass a reassessment order under Section 147. Such
order came to be effected on 21 September 2021.
28. The controversy which arises is as to what is the nature of the order
passed by this Court and whether the order passed by this Court would be
required to be construed to fall within the provisions of sub-section (6) of
Section 153, so as to provide the extended period of limitation of twelve
months as clause (i) of sub-section (6) provides or whether the order would
be required to be construed so as to accept a situation falling within the
purview of the first proviso below Explanation 1, namely that only the
extended period of sixty days was available with the Revenue in the present
facts to pass the reassessment order. The aforesaid analysis of the provisions
would lead us to construe as to what is provided by clause (i) of sub-section
(6) as applicable to the facts in hand, namely whether the
assessment/reassessment in question “is being made in consequence of” or
to give effect to any finding or direction as contained in the orders passed
by this Court, being a proceeding otherwise than by way of appeal or
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reference under the Act, for which the limitation would stand extended for
a period of twelve months, from the end of the month in which such order
is received or passed by the Competent Authority.
29. To appreciate the issue, as to what has been the interpretation of this
provision by the Court is required to be seen. The Constitution Bench of
Supreme Court in Income Tax Officer vs. Murlidhar Bhagwan Das (supra)
was considering the facts, where the respondent / assessee was assessed to
income-tax under Section 23(4) of the IT Act for the assessment year
1949-50, on the ground that the notice issued under sub-section (2) and
(4) of Section 22 of the IT Act had not been complied with. On 27
September 1955, the said assessment was cancelled under Section 27 of the
IT Act, but before the said cancellation, it was found that an interest
income of Rs. 88,737/- received by the assessee in discharge of the debts
due from third parties had escaped assessment as the assessee failed to
disclose the same. The Income-tax Officer issued a notice under Section 34
(1) (a) of the IT Act for the assessment year 1949-50 on the ground that
such income had escaped assessment. After the assessment of that year was
set aside under Section 27 of the Act, the Income-tax Officer, ignoring the
notice issued by him under Section 34 (1)(a) of the Act, included that
amount in the fresh assessment made by him. The assessee preferred an
appeal against that order which was disposed of by an order passed by the
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Appellate Assistant Commissioner on 4 December 1957, in which he held
that such income was received by the assessee in the previous accounting
year and, therefore, directed that the sum objected should be deleted from
the assessment for the year ending 1949-50 and included in the assessment
for the year ending 1948-49. Pursuant to the said direction issued by the
Appellate Assistant Commissioner, the Income-tax Officer initiated
proceedings under Section 34(1) of the Act in respect of the assessment
year 1948-49. The notice issued under such section was served on the
respondent on 5 December 1957. The assessee filed a petition under
Article 226 of the Constitution in the High Court of Judicature at
Allahabad praying for quashing of the proceedings, mainly on the ground
that the proceedings were initiated beyond the time prescribed by Section
34 of the Act. The High Court accepted the contention and quashed the
proceedings initiated by the Income-tax Officer. It is assailing such orders
passed by the High Court, the proceedings reached the Supreme Court. In
such context, the Constitution Bench of the Supreme Court examined as to
what is the true meaning of the terms of the second proviso to Section
34(3) of the Act, which is quite similar to the provisions of Clause (i) of
sub-section (6) of Section 153 of the IT Act. The second proviso to Section
34(3) of the IT Act which fell for consideration of the Supreme Court and
as extracted in the report, needs to be noted which reads thus:
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wp 4372-22.odt“Provided further that nothing in this section limiting the time
within which any action may be taken, or any order, assessment or
re- assessment may be made, shall apply to a re-assessment made
under Section 27 or to an assessment or re-assessment 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 31,
Section 33, Section 33A, Section 33B, Section 66 or Section
66A.”
30. In the context of the facts in hand, the expression “direction” and “in
consequence of” or “to give effect to” are the key words which are common
expressions used in the second proviso to Section 34(3) of the IT Act, as it
stood at the relevant time, and presently as falling under clause (i) of sub-
section (6) of Section 153 of the IT Act. The Supreme Court in
interpreting the said expressions held that the expression “finding” has not
been defined in the IT At. Referring to Order XX Rule 5 of the Code of
Civil Procedure, it was observed that a finding is, therefore, a decision on
an issue framed in a suit and a finding shall be one which by its own force
or in combination with findings on other issues should lead to the decision
of the suit itself. It was observed that this was to say, the finding shall be
one which is necessary for the disposal of the suit. It was held that a
“finding”, therefore, can only be that which is necessary for the disposal of
an appeal in respect of an assessment of a particular year as the Appellate
Assistant Commissioner may hold in the facts, 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. In such situation, the
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finding in that context is that the income does not belong to the relevant
year. It was observed that he may incidentally find that the income belongs
to another year, but it is not a finding necessary for the disposal of an
appeal in respect of the year of assessment in question. Similarly, the
expression “direction” as used in the provision was interpreted when the
Court observed that the expression “direction” cannot be construed in
vacuum, but must be collated to the directions which the Appellate
Assistant Commissioner can give under Section 31. It was observed that 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 conferred on him or them under the respective sections.
It was observed that therefore the expression “finding” and the expression
“direction” can be given full meaning, namely, that the finding is a finding
necessary for giving relief in respect of the assessment of the year in
question and the “direction” is a direction which the appellate or revisional
authority, as the case may be, is empowered to give under the provisions.
The Court also considered the words “in consequence of or to give effect
to” to observe that these words do not create any difficulty, for they have to
be collated with, and cannot enlarge, the scope of the finding or direction
under the proviso. It was observed that if the scope is limited in such
manner, the said words also must be related to the scope of the findings and
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directions. The relevant observations of the Supreme Court are required to
be noted which read thus:-
“Now, let us scrutinize the expressions on which strong reliance is
placed for the contrary conclusion. The words relied upon are
“section limiting the time”, “any person”, “in consequence of or to
give effect to any finding or direction.” Pointing out that before
the amendment the word “sub-section” was in the proviso but it
was replaced by the expression “section”, it is contended that this
particular amendment will be otiose if it is confined to the
assessment year under appeal, for it is said that under no
circumstances the Income-tax Officer would have to initiate
proceedings for the said year pursuant to an order made by an
Appellate Assistant Commissioner. This contention is obviously
untenable. The Appellate Assistant Commissioner or the
Appellate Tribunal may set aside the notice itself for one reason or
other and in that event the Income-tax Officer may have to
initiate the proceedings once again in which case section 34(1)
will Il be attracted. The expression “finding or direction”, the
argument proceeds, is wide enough to take in at any rate a finding
that is necessary to dispose of the appeal or direction which
Appellate Assistant Commissioners have in practice been issuing
in respect of assessments of the years other than those before them
in appeal. What does the expression “finding” in the proviso to
sub-section (3) of section 34 of the Act mean? “Finding” has not
been defined in the Income-tax Act. Order XX, rule 5, of the
Code of Civil Procedure reads:
“In suits in which issues have been framed, the court shall state
its finding or decision, with the reasons therefore, upon each
separate issue, unless the finding upon any one or more of the
issues is sufficient for the decision of the suit.”
Under this Order, a “finding” is, therefore, a decision on an issue
framed in a suit. The second part of the rule shows that such a
finding shall be one which by its own force or in combination
with findings on other issues should lead to the decision of the
suit itself. That is to say, the finding shall be one which is
necessary for the disposal of the suit.
……….
……
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
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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 pecht in question the expendreciof an in of 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 “direction” in the proviso could
only refer to the directions which the Appellate Assistant
Commissioner or other tribunals can issue under the powers
conferred on him or them under the respective sections.
Therefore, the expression “finding” as well as the expression
“direction” can be given full meaning namely, that the finding is
finding necessary for giving relief in respect of the assessment of
the year in question and the direction is a direction which the
appellate or revisional authority, as the case may be, is empowered
to give under the sections mentioned therein. The words “in
consequence of or to give effect to” do not create any difficulty,
for they have to be collated with, and cannot enlarge, the scope of
the finding or direction under the proviso. If the scope is limited
as aforesaid, the said words also must be related to the scope of the
findings and directions.”
(emphasis supplied)
31. In Rajinder Nath vs. Commissioner of Income Tax, Delhi (supra) the
expressions “finding” and “direction” fell for consideration of the Supreme
Court as used in the provisions of Section 153(3)(ii) of the IT Act. The
contention urged before the Court was whether there was any finding or
direction within the meaning of Section 153(3)(ii) of the Act in the order
passed by the Appellate Assistant Commissioner, in consequence of which
or to give effect to which the assessments in question were made. In such
context, the Supreme Court considered as to what could be the meaning
required to be attributed to the expressions “finding” and “direction”. It
was held that the finding given in an appeal, revision or reference arising
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out of an assessment must be a finding necessary for the disposal of the
particular case, that is to say, in respect of the particular assessee and in
relation to the particular assessment year. As regards the expression
“direction” in Section 153(3)(ii) of the IT Act, it was observed that it was
well settled that it must be an express direction necessary for the disposal
of the case before the authority or Court. It must also be a direction which
the authority or Court is empowered to give while deciding the case before
it. It was thus held that the expressions “finding” and “direction” in section
153(3)(ii) of the IT Act must be accordingly confined and more
particularly considering the fact that section 153(3)(ii) was not a provision
enlarging the jurisdiction of the authority or Court and it was a provision
which merely raises the bar of limitation of making an assessment order
under section 143 or section 144 or section 147. The relevant observations
of the Court are required to be noted which read thus:
32. “…. … … … … The only contention is that there is no
“finding” or “direction” within the meaning of section 153(3) (ii)
of the Act in the order of the Appellate Assistant Commissioner in
consequence of which or to give effect to which the impugned
assessments have been made.
33. The expressions “finding” and “direction” are limited in
meaning. A finding given in an appeal, revision or reference
arising out of an assessment must be a finding necessary for the
disposal of the particular case, that is to say, in respect of the
particular assessee and in relation to the particular assessment year.
To be a necessary finding, it must be directly involved in the
disposal of the case. It is possible in certain cases that in order to
render a finding in respect of A, a finding in respect of B may be
called for. For instance, where the facts show that the income can
belong either to A or B and to no one else, a finding that it belongs
to B or does not belong to B would be determinative of the issue
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whether it can be taxed as A’s income. A finding respecting B is
intimately involved as a step in the process of reaching the
ultimate finding respecting A. If, however, the finding as to A’s
liability can be directly arrived at without necessitating a finding in
respect of B, then a finding made in respect of B is an incidental
finding only. It is not a finding necessary for the disposal of the
case pertaining to A. The same principles seem to apply when the
question is whether the income under enquiry is taxable in the
assessment year under consideration or any other assessment year.
As regards the expression “direction” in section 153(3)(ii) of the
Act, it is now well settled that it must be an express direction
necessary for the disposal of the case before the authority or court.
It must also be a direction which the authority or court is
empowered to give while deciding the case before it. The
expressions “finding” and “direction” in section 153(3) (ii) of the
Act must be accordingly confined. Section 153(3)(ii) is not a
provision enlarging the jurisdiction of the authority or court. It is a
provision which merely raises the bar of limitation of making an
assessment order under section 143 or section 144 or section 147:
ITO v. Murlidhar Bhagwan Das [1964]52 ITR 335 (SC) and and
N. K. T. Sivalingam Chettiar v. CIT.[1967]66 ITR 586(SC). The
question formulated by the Tribunal raises the point whether the
Appellate Assistant Commissioner could convert the provisions of
section 147(1) into those of section 153(3)(ii) of the Act. In view
of S. 153(3)(ii) dealing with limitation merely, it is not easy to
appreciate the relevance or validity of the point.”
34. ……….
35. It is also not possible to say that the order of the Appellate
Assistant Commissioner contains a direction that the excess should
be assessed in the hands of the co-owners. What is a “direction” for
the purposes of section 153(3)(ii) of the Act has already been
discussed. In any event, whatever else it may amount to, on its very
terms the observation that the Income Tax Officer “is free to take
action” to assess the excess in the hands of the co-owners cannot be
described as a “direction”. A direction by a statutory authority is in
the nature of an order requiring positive compliance. When it is left
to the option and discretion of the Income Tax Officer whether or
not to take action it cannot, in our opinion, be described as a
direction. Therefore, in our judgment the order of the Appellate
Assistant Commissioner contains neither a finding nor a direction
within the meaning of section 153(3)(ii) of the Income Tax Act in
consequence of which or to give effect to which the impugned
assessment proceedings can be said to have been taken.”
32. Similar issue had fell for consideration of the Division Bench of the
Karnataka High Court in Principal Commissioner of Income Tax & Anr.
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wp 4372-22.odtVs. Tally India Pvt. Ltd. (supra) wherein the Court, in the context of the
provisions of Section 153(1)(a) and Section 153(3)(ii) of the IT Act, was
considering the contention as urged by the assessee that no direction /
finding has been issued by the High Court in the order dated 7 March
2012 passed in the Writ Petition and when a direction was issued to remit
the matter asking the assessee to appear before the Assessing Officer on a
particular date did not tantamount to either issuing a direction / finding
within the meaning of Section 153(3)(ii) of the IT Act. The Court
applying the decisions of the Supreme Court in Income Tax Officer vs.
Murlidhar Bhagwan Das (supra) and Rajinder Nath vs. Commissioner of
Income Tax, Delhi (supra) observed that these provisions are concerned
only when a finding is given in an appeal, revision or reference are
concerned, arising out of an assessment and it must be a finding necessary
for disposal of a particular case and similarly, a direction must be an
expressed direction necessary for disposal of the case before authority or
Court and must also be a direction which the authority or Court is
empowered to give while deciding a case before it. It was held that it was
evident that the order dated 7 March 2012 passed by the High Court
neither contained any finding nor any direction and accordingly, accepted
the contention as urged on behalf of the assessee and held against the
Revenue. The relevant observations as made by the Court which are
similar to the facts in hand, are required to be noted which read thus:-
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wp 4372-22.odt“7. A bench of this court by an order dated 07.03.2012
disposed of the writ petition viz., W.P.No.45313/2011 in the
following terms:
3. Having regard to the submission made by both the
counsel, there is no option but to accept the writ petition,
set aside the impugned order and remit the matter to the
1st respondent-Assessing Officer.
4. The petitioner shall take these proceedings as notice
to them and shall appear before the 1st respondent on 21st
March 2012. The petitioners are not entitled for any fresh
notice.
8. The Supreme Court in Rajinder Nath v. CIT, [1979] 120
ITR 14 (SC); [1979] taxman 204 (SC) and ITO v Murlidhar
Bhagwan Das [1964] 52 ITR 335 (SC), has held that a finding
given in an appeal, revision or reference arising out of an
assessment must be a finding necessary for disposal of a particular
case. Similarly, a direction must be an expressed direction
necessary for disposal of the case before the authority of court and
must also be a direction which the authority of court is empowered
to give while deciding a case before it. Thus, it is evident that the
order dated March 7, 2012 passed by learned Single Judge of this
court neither contains any finding nor any direction.
9. The proceedings were stayed for a period from December
8, 2011 to March 7, 2012, i.e., for a period of 103 days and if the
period of 103 days is added, and a period of 60 days as prescribed
in the proviso to Section 153(4) is added, the draft order ought to
have been passed by the Assessing Officer upto May 6, 2012,
whereas, in the instant case, the draft order has been passed on July
5, 2012 and therefore, the draft order is barred by limitation and
no fault can be found with the finding of the tribunal.”
33. Adverting to the aforesaid principles of law, the nature of the order
dated 21 September 2021 passed by this Court as extracted by us in
paragraph 7 hereinabove, would be required to be discussed:
(i) The purport of the order can be seen from the contents of
paragraph 3(A) to 3(D). In paragraph 3(A), the order impugned in the
said writ petition dated 25 November 2019 disposing of the objections
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raised against the reopening of the assessment under Section 147 of the IT
Act, is quashed and set aside.
(ii) In paragraph 3(B) of the order, the matter stoold remitted to
the concerned authority to reconsider the objection of the petitioner dated
5 May 2019 and for passing further orders, while permitting the petitioner
to file any “further submissions” in response to the letter dated 23 April
2019 giving reasons for reopening of the assessment for Assessment Year
2012-13, to be complied with within two weeks from the date of the order.
(iii) Paragraph 3(C) provides that if the petitioner seeks any
clarification regarding the figures which are mentioned in the reasons for
reopening, the concerned authority shall provide the same within two
weeks of receiving the communication from the petitioner.
(iv) Finally in paragraph 3(D) of the order, it is observed that the
concerned authority “may” further dispose of the objection to the
reopening of assessment after giving a personal hearing to the petitioner as
per Rules prescribed.
(v) What is significant is paragraph (4) of the order where the
Court clarifies that the Court has not made any observations on the merits
of the case.
34. Thus, applying the principles of law as laid down in the decisions in
Income Tax Officer vs. Murlidhar Bhagwan Das (supra), Rajinder Nath vs.
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Commissioner of Income Tax, Delhi (supra) and Principal Commissioner
of Income Tax & Anr. Vs. Tally India Pvt. Ltd. (supra), it is clear that the
order dated 21 September 2021 passed by the Division Bench (supra) does
not contain any findings necessary for disposal of the writ petition in a
particular manner, so as to govern the issues which would be decided by
the Assessing Officer. We may observe that in the context in hand when
the Revenue seeks to take recourse to sub-section (6)(i) of Section 153 of
the IT Act so as to avail all the benefits of extended period as stipulated by
such provision, necessarily the Court is required to apply the principles as
enunciated in the decisions as noted by us hereinabove, so as to make an
exception from the applicability of sub-sections (1), (1A) and (2) and
subject to the provisions of sub-sections (3), (5) and (5A) can be, only in
the event when such assessment, reassessment and recomputation is being
made qua the assessee “in consequence of or to give effect to any finding
or direction” of any Court, as relevant in the present facts. Thus, the words
“in consequence of or to give effect” would be required to be read in
conjunction. As both these expressions are complementary to each other
namely that such assessment, reassessment or recomputation is required 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 of the nature as specified
in clause (i) of sub-section (6). Thus, the consequence needs to be created
by such order and as a result of a finding or direction as may be contained
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in an order, as the provision envisages. It is but for natural, that any
finding or direction needs to be taken to its logical conclusion and which is
the sequel which would emanate from a finding or direction in the order.
Thus, the intention of the legislature in providing for such expression is
that an order which clause (i) of sub-section (6) talks about, is necessarily
required to be an order which not only guides, but controls the course of
such assessment, reassessment or recomputation, and not otherwise. In
reaching to this conclusion, we are supported by what has been held by the
Supreme Court in Income Tax Officer vs. Murlidhar Bhagwan Das (supra)
when the Supreme Court observed that the words “in consequence of or to
give effect to” do not create any difficulty, for they have to be collated
with, and cannot enlarge, the scope of the finding or direction under the
proviso. It was further observed that if the scope is limited in such event,
the said words also must be related to the scope of the findings and
directions.
35. Thus, considering such consequence which would be brought about
by the provisions of sub-section (6)(i) of Section 153 of the IT Act, we are
not persuaded to accept Mr. Sharma’s contention that this would not be
the case which would fall within the provisions of the first proviso below
Explanation 1 of Section 153. In fact as the order dated 21 September
2021 passed by this Court on the petitioner’s writ petition (supra) do not,
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in any manner, record a finding or issues directions as understood in terms
of clause (i) of sub-section(6) of Section 153. We do not see how the
Revenue can avoid the consequence of the limitation in the present case,
being triggered by the first proviso below Explanation 1. In our opinion,
as rightly contended on behalf of the petitioner, applying the provisions of
clause (ii) below Explanation 1 read with the first proviso below
Explanation 1, certainly the limitation for the Assessing Officer to pass the
Assessment Order had come to an end on 20 November 2021 i.e. sixty
days from 21 September 2021 (orders passed by the High Court) by
applying the extended period as per the first proviso below Explanation 1,
whereas the impugned assessment order has been passed almost ten
months after the limitation expired. Thus, the case of the Revenue in
regard to applicability of the extended period under sub-section (6)(i) of
Section 153 cannot be accepted.
36. Considering the nature of the orders passed by this Court, although
Mr. Sharma, learned Counsel for the Revenue took all the efforts to
persuade us that the orders passed by this Court are required to be
interpreted, so as to have findings or directions and as a consequence of
which re-assessment order would be required to be passed. We are not
persuaded to accept the same in the light of our aforesaid discussion.
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37. For the aforesaid reasons, the petition needs to succeed. It is
accordingly allowed in terms of prayer clause (a).
38. Rule is made absolute in the aforesaid terms. No costs.
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