High Court Of Gujarat
Kalyan Ala Barot vs. M.H. Rathod
Section 147, 148, 150, 153(3)
Asst. Year 1984-85
D.A. Mehta & Ms. H.N. Devani, JJ.
Special Civil Appln. No. 10726 of 1996
29th June, 2010
Counsel Appeared :
Ms. Niyati K. Shah, for the Petitioner : Mrs. Mauna M. Bhatt and Manish R. Bhatt, for the Respondent
JUDGMENT
Ms. H.N. Devani, J. :
This petition seeks the following substantive reliefs : (a) that this Hon’ble Court 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 Art. 226 of the Constitution of India calling for the records of the petitioner’s case and after making inquiries and examining the legality thereof be pleased to quash and set aside the notice Annex. C dt. 7th Aug.,1996, issued under s. 148 of the Act; (b) that this Hon’ble Court 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 Art. 226 of the Constitution of India prohibiting the respondent permanently from taking any action pursuant to the notice issued under s. 148 of the Act on 7th Aug., 1996.
2. The petitioner is an agriculturist. The petitioner jointly purchased agricultural land at Mundra with one Shri Kanji Pethabhai, which was purchased by the Gujarat Sheep Development Corporation for a sum of Rs. 5 lakhs. The petitioner filed an application for issue of a certificate under s. 230A of the IT Act, 1961 (the Act) on 17th June, 1983. The AO issued a notice under s. 139(2) on 18th June, 1984 for the asst. yr. 1984-85, however, the petitioner did not respond to the same. Hence, the AO finalized the assessment under s. 144 of the Act on 30th March, 1987 on a total income of Rs. 1,62,000, inter alia, taxing capital gain on sale of the said property. Against the said order, the petitioner approached the CIT, Rajkot, under s. 264 of the Act. Vide order dt. 22nd March, 1992, the CIT directed to reframe the assessment after giving the petitioner an opportunity of being heard. Notices under s. 142(1) came to be issued on 6th Oct., 1992 and 22nd Feb., 1993. The petitioner filed a return on 12th March, 1993 disclosing “nil” income. The assessment was completed on 30th March, 1993 assessing long-term capital gain on sale of the subject land, at Rs. 1,62,000. The petitioner carried the matter in appeal before CIT(A). Before the CIT(A), the main contention raised on behalf of the petitioner was that where a sale deed is properly registered under the provisions of the Registration Act, the transaction takes effect from the date of the original sale deed. The transfer, therefore, stood completed on 8th March, 1983 and hence, capital gain on the said transaction would not be taxable in the asst. yr. 1984-85. The CIT (A) accepted the plea of the petitioner and, vide order dt. 16th Feb., 1996, allowed the appeal holding that the long-term capital gain arising on the sale was liable to be taxed in the asst. yr. 1983-84 and not 1984-85 and accordingly deleted the addition. Liberty was, however, reserved for the AO to bring the long-term capital gain to tax in the asst. yr. 1983-84 as per law.
In the light of the order made by the CIT(A), the respondent-AO issued notice dt. 7th Aug., 1996 under s. 148 of the Act for reopening the assessment for the asst. yr. 1983-84. It is the case of the petitioner that since the notice was barred by limitation, he did not file any return. The AO issued notice dt. 22nd Nov., 1996 under s. 143(2) of the Act for hearing the case on 29th Nov., 1996. The petitioner prayed for time contending that the notice was illegal. The AO issued another letter dt. 10th Dec., 1996 fixing the hearing on 27th Dec., 1996. At this stage, the petitioner filed the present petition seeking the reliefs noted hereinabove. Assailing the impugned notice, Ms. Niyati Shah, learned advocate for the petitioner, reiterated the facts stated in the petition. It was submitted that having regard to the statutory provisions contained in ss. 147 to 153 of the Act as well as having regard to the decided cases on the issue, it was not open to the AO to initiate assessment or reassessment proceedings for the asst. yr. 198384. Placing reliance upon the decision of the Andhra Pradesh High Court in the case of CIT vs. G. Viswanatham (1988) 73 CTR (AP) 123 : (1988) 172 ITR 401 (AP), it was submitted that s. 147 of the Act provides for assessment and reassessment of income, which has escaped assessment. The reassessment is, however, subject to the provisions contained in ss. 148 to 153. Sec. 149 provides the time-limit for issuance of notice, i.e., for initiation of proceedings under s. 147. Sec. 150 is in the nature of a proviso to s. 149. A reading of sub-s. (1) of s. 150 shows that where the reassessment proceedings are initiated in consequence of or to give effect to any finding or direction contained in an order passed by any authority in any proceeding under the IT Act by way of appeal, reference or revision, the time limits prescribed in s. 149 shall not apply, and that notice under s. 148 can be issued at any time. Sub-s. (2), however, is again in the nature of a proviso to sub-s. (1). It says that the provisions of sub-s. (1) shall not apply where, by virtue of any other provisions limiting the time within which action for assessment, reassessment, or recomputation is barred on the date of the order which is the subject- matter of the appeal, reference or revision in which the finding or direction is contained. Sec. 153 provides the time limits for completion of assessments and reassessments. It was contended that Explns. 2 and 3 to s. 153(3) merely illustrate and clarify the meaning of the words “in consequence of or to give effect to any finding or direction” contained in an appellate, revisional or any other order. Explanations 2 and 3 do not purport to obliterate or remove the restriction contained in sub-s. (2) of s. 150. They no doubt refer to s. 150, but for a limited purpose. Hence, initiation of reassessment proceedings would be bad, even when they are initiated in consequence of or to give effect to any finding or direction contained in the appellate order, if such initiation of reassessment proceedings is barred by any other provisions of the Act on the date of the order which was the subject-matter of appeal. It was submitted that the assumption of jurisdiction by the respondent is void ab initio and contrary to the statutory provisions. It was contended that having regard to the statutory provisions contained in ss. 147 to 153 of the Act and also having regard to the decided cases on the issue, it was not open for the AO to initiate assessment or reassessment proceedings for asst. yr. 1983-84 against the petitioner. Referring to the provisions of s. 150 of the Act, it was submitted that the said provision does not confer any fresh power on the AO to make assessments in respect of escaped incomes without time limit. It only lifts the bar of limitation to give effect to orders that may be made by the appellate, revisional or reviewing the Tribunal within the scope of its jurisdiction. A finding in terms of s. 150 can only be that which is necessary for the disposal of an appeal in respect of an assessment of a particular year. Reliance was placed upon a decision of the Supreme Court in ITO vs. Murlidhar Bhagwan Das (1964) 52 ITR 335 (SC). Next, it was submitted that the observation made by the CIT(A) that the AO will, however, be at liberty to bring the long-term capital gain on this transaction to tax in the asst. yr. 1983-84 cannot be described as a direction. The order of the CIT(A) contains neither a finding nor a direction in consequence of which or to give effect to which the reassessment proceedings could be said to have been taken, hence the provisions of s. 153(3)(ii) would not be attracted. Reliance was placed upon a decision of the Supreme Court in the case of Rajinder Nath vs. CIT (1979) 12 CTR (SC) 201 : (1979) 120 ITR 14 (SC). It was further submitted that while considering an appeal in respect of an assessment year, a direction regarding another assessment year does not fall within the scope of s. 153(3) of the Act. The purpose of s. 153(3) is to lift the bar of limitation to make an effective order of assessment, consequent upon an appellate order. Sec. 153(3) does not create a new power or jurisdiction. In support of the said submission, reliance was placed upon a decision of the Karnataka High Court in the case of M.K. Thakker vs. CIT (1992) 197 ITR 110 (Kar). It was accordingly, submitted that the impugned notice is barred by limitation and is without jurisdiction or authority of law, and as such deserves to be quashed and set aside.
7. Opposing the petition, Mr. M.R. Bhatt, learned senior advocate appearing for the respondent, submitted that as income chargeable to tax has escaped taxation, the notice has been issued under s. 148 r/w s. 150 of the IT Act which is well within the jurisdiction of the assessing authority. Inviting attention to the provisions of s. 150 of the Act, it was submitted that sub-s. (1) of s. 150 overrides the time-limit for issuance of notice prescribed under s. 149. Insofar as completion of assessment is concerned the limitation is provided under s. 153 of the Act. However, sub-s. (3) of s. 153 exempts certain assessments, reassessments and recomputations from the purview of limitation. Inviting attention to cl. (ii) of s. 153(3) as well as Expln. 2 thereto, it was submitted that in the light of the aforesaid statutory provisions, reassessment and recomputation proceedings, in the instant case, have been initiated within time and within the jurisdictional limits. Dealing with the contention that the CIT(A) has neither recorded nor given any direction as contemplated under sub-cl. (ii) of s. 153(3), it was submitted that the CIT(A) has recorded a finding of fact that the long-term capital gain arising on the sale was liable to be taxed in the asst. yr. 1983-84. Hence, it cannot be said that the CIT(A) has not recorded any finding. Referring to the decisions on which the learned advocate for the petitioner had placed reliance, it was submitted that none of the said decisions would come to the aid of the petitioner in the facts and circumstances of the present case.
8. The facts are not in dispute. It is an accepted position that pursuant to the order dt. 16th Feb., 1996 made by the CIT(A) for the asst. yr. 1984-85, the AO has issued notice under s. 148 of the Act for reopening assessment for the asst. yr. 1983-84 in respect of income that had escaped assessment. The principal contention of the petitioner that the said notice is barred by limitation is required to be examined in the light of the provisions of Chapter XIV of the Act, which makes provision for the “procedure of assessment”. Under the scheme of the IT Act, 1961, s. 147 defines the power and jurisdiction for making an assessment or a reassessment of escaped income. It categorises the different contingencies and circumstances where an assessment or a reassessment may be made. s. 148 provides for initiation of reassessment proceedings. Sec. 149 prescribes the time-limit within which a reassessment notice may be issued by the AO on the assessee concerned. Sec. 150 which provides for issuance of notice under s. 148 at any time for the purpose of making an assessment or reassessment or recomputation in consequence of or to give effect to any finding or direction contained in an order passed by any authority in any proceeding under the Act by way of appeal, reference or revision, is by way of exception to the rules of limitation laid down in s. 149. If a case falls within the circumstances mentioned in s. 150, the time limits stipulated under s. 149 do not have application. Sec. 153 of the Act provides for the time-limit for completion of assessments and reassessments. Sub-s. (1) of s. 153 prescribes the time-limit for making an order of assessment under s. 143 and s.
144 of the Act, and sub-s. (2) thereof prescribes the time-limit for making an order of assessment, reassessment or recomputation under s. 147. Sub-s. (3) of s. 153 which is by way of an exception to sub-ss. (1) and (2) of s. 153 provides for the classes of assessments, reassessments and recomputations which may, subject to the provisions of sub-s. (2A) be completed at any time. Such classes are enumerated under cls. (i) to (iii) thereunder. Clause (ii) thereof which is relevant for the present purpose, provides for assessment, reassessment or recomputation in consequence of or to give effect to any finding or direction contained in an order, under ss. 250, 254, 260, 262, 263 or 264 or in an order of any Court in a proceeding otherwise than by way of appeal or reference under the Act.
In the facts of the present case, it is the case of Revenue that notice under s. 148 has been issued for the purpose of making a reassessment to give effect to the finding contained in the order dt. 16th Feb., 1996 passed by the CIT(A). Hence, in view of the provisions of s. 150 r/w s. 153(3) of the Act and Expln. 2 thereto, the notice has been issued within the period of limitation. The question that, therefore, arises for consideration is as to whether the impugned notice satisfies the requirements of s. 150 r/w s. 153(3) of the Act. Sec. 150, as was in force at the relevant time, reads thus : “(1) Notwithstanding anything contained in s. 149, the notice under s. 148 may be issued at any time for the purpose of making an assessment or reassessment or recomputation in consequence of or to give effect to any finding or direction contained in an order passed by any authority in any proceeding under this Act by way of appeal, reference or revision. (2) The provisions of sub-s. (1) shall not apply in any case where any such assessment, reassessment or recomputation as is referred to in that sub-section relates to an assessment year in respect of which an assessment, reassessment or recomputation could not have been made at the time the order which was the subject-matter of the appeal, reference or revision, as the case may be, was made by reason of any other provision limiting the time within which any action for assessment, reassessment or recomputation may be taken.”
On a plain reading of the provisions of s. 150, it is apparent that under sub-s. (1) thereof, the time-limit stipulated under s. 149 is removed in case notice for reassessment is issued in consequence of or to give effect to any finding or direction contained in any order passed by any authority by way of appeal, reference or revision. Sub-s. (2) thereof makes it clear that the reassessment permissible under sub-s. (1) of s. 150 cannot be made by the Department, where the period of limitation for assessment or reassessment had expired at the time when the order, which was the subject-matter of appeal, etc., for another assessment year had been originally made. Sec. 153 provides for time-limit for completion of assessments and reassessments. Sub-s. (1) thereof provides that no order of assessment shall be made under s. 143 or s. 144 at any time except as specified therein. Sub-s. (2) thereof provides for the period of limitation within which an order of assessment, reassessment or recomputation shall be made under s. 147. Sub-s. (2A) thereof provides that in relation to the asst. yr. 1971-72 and subsequent years, a fresh assessment under s. 146 or in pursuance of an order under ss. 250, 254, 263 or 264, setting aside or cancelling an assessment, may be completed at any time before the expiry of two years from the end of the financial year in which the order under s. 146 was made by the ITO or the order under s. 250 or s. 254 is received by the CIT, or the order under s. 263 or s. 264 is passed by the CIT. Sub-s. (3) of s. 153, as is relevant for the present purpose, reads thus : “(3) The provisions of sub-ss. (1) and (2) shall not apply to the following classes of assessments, reassessments and recomputations which may, subject to the provisions of sub-s. (2A), be completed at any time— (i) where a fresh assessment is made under s. 146; (ii) 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 ss. 250, 254, 260, 262, 263 or 264 or in an order of any Court in a proceeding otherwise than by way of appeal or reference under this Act; (iii) 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 s. 147. . . . Explanation 2.—Where, by an order referred to in cl. (ii) of sub-s. (3), 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 s. 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.”
On a plain reading of sub-s. (3) of s. 153 of the Act, it is apparent that the same lifts the bar of limitation laid down under sub-s. (1) and sub-s. (2) thereof in respect of the classes of assessments, reassessments or recomputations enumerated thereunder. Thus, in the light of the provisions of s. 153(3)(ii) the normal time-limit for completion of assessments or reassessments, as contained in s. 153(1) or s. 153(2), shall have no application where the assessment 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 ss. 250, 254, 260, 262, 263 or 264 or in an order of any Court in a proceeding otherwise than by way of appeal or reference under the Act.
The language employed in Expln. 2 to s. 153 makes it abundantly clear that under the said provision, when an order in appeal, revision or reference is made whereby any income is excluded from the total income of an assessee for an assessment year, then an assessment of such income for another assessment year shall be deemed to be one made in consequence of or to give effect to any finding or direction contained in the said order for the purpose of s. 150 or s. 153. Thus, for the purpose of resorting to the exception provided under sub-s. (3)(ii), it is not necessary that there should be any specific finding or direction contained in the said order with regard to assessment of income for another assessment year in the light of the deeming provision in Expln. 2 below s. 153 of the Act. The very fact that income has been excluded from the total income of the assessee for an assessment year by virtue of an order referred to in cl. (ii) of sub-s. (3) would be sufficient for the purpose of making an assessment of such income in another year and for the purpose of s. 150 and s. 153, the same would be deemed to have been made in consequence of or to give effect to any finding or direction contained in the said order.
The reasons recorded by the AO for issuing notice under s. 148, read thus : “Reasons for issuing notice under s. 148 in the case of Shri Kalyan Ala Barot, Zarapara-asst. yr. 1983-84. The case is covered by ss. 150(1) and 153(3)(ii) r/w Expln. 2 to s. 153 of the Act. The assessee has claimed before the CIT(A)-II that his income from capital gain is taxable in the asst. yr. 198384. The CIT(A)-II has allowed the plea with findings to that effect.
I have therefore reason to believe that an amount of capital gain of Rs. 1,62,000 arising on account of sale of land has escaped assessment and the same is to be taxed in the asst. yr. 198384. Issued notice under s. 148 on the findings of the CIT(A)-II.”
16. Thus, as per the reasons recorded by the AO, the notice has been issued in the light of the finding of the CIT(A). However, on behalf of the petitioner it has been contended that the order of the CIT(A) does not contain any direction or finding in consequence of which or to give effect to which the reassessment proceedings could be said to have been taken so as to attract the provisions of s. 153(3) of the Act. The CIT(A) in his order dt. 16th Feb., 1996 has held as follows : “It has to be held that the transfer of the property in question took place on 6th March,1983. The long-term capital gain arising on the sale was, therefore, liable to be taxed in the asst. yr. 1983-84 and not in the asst. yr. 1984-85. The addition made by the AO in this regard in the asst. yr. 198485 is therefore, deleted. The AO will, however, be at liberty to bring the long-term capital gain on this transaction to tax in the asst. yr. 1983-84 as per the law keeping in view the time-limit prescribed in Expln. 2 below to s. 153 r/w s. 153(3).”
17. It is not disputed that the order made by the CIT(A) has been made in exercise of appellate jurisdiction. The operative part of the order indicates that the CIT(A) has held that the long-term capital gain arising on the sale was liable to be taxed in the asst. yr. 1983-84 and not in the asst. yr. 1984-85. Consequently, the addition made by the AO for the asst. yr. 1984-85 came to be deleted. Liberty has also been reserved for the AO to bring the long-term capital gain on the transaction to tax in the asst. yr. 1983-84 keeping in view the time-limit prescribed in Expln. 2 below s. 153 r/w s. 153(3). On behalf of the petitioner, it has been contended that reservation of liberty does not amount to a direction as envisaged under ss. 150(1) and 153(3) of the Act. However, the said contention is misconceived in as much as, it is apparent that the CIT(A) has recorded a specific finding that the transfer of the property in question took place on 8th March, 1983 and that the long-term capital gain arising on the sale was, therefore, liable to be taxed in the asst. yr. 1983-84. The CIT(A) has consequently left it open to the AO to bring the capital gain to tax in the asst. yr. 1983-84.
18. Another contention raised on behalf of the petitioner is that a finding in terms of s. 150 of the Act can only be that which is necessary for the disposal of an appeal in respect of an assessment of a particular year. The expressions “finding” as well as “direction” can be only in the context of a finding necessary for giving relief in the assessment of the year under consideration. That an order made in relation to a particular assessment year cannot be made the basis for reopening the concluded assessment of an earlier assessment year. However, the said contention loses sight of Expln. 2 below s. 153 which provides that where, by an order referred to in cl. (ii) of sub- s. (3), where 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 ss. 150 and 153, be deemed to be one made in consequence of or to give effect to any finding or direction contained in the said order.
19. On a combined reading of sub-s. (1) of s. 150 and sub-s. (3) of s. 153, it is apparent that in cases falling under cl. (ii) of sub-s. (3) of s. 153 r/w Expln. 2 thereunder, the provisions of sub-s. (1) of s. 150 would be applicable and the bar of limitation under s. 149 would not be applicable. While ss. 150(1) and 153(3) contemplate issuance of notice under s. 148 and completion of assessment, reassessment and recomputation respectively, in consequence of or to give effect to any finding or direction contained in an order passed by any authority in any proceeding under the Act by way of appeal, reference or revision, Expln. 2 to s. 153(3) contains a deeming provision which provides that where by an order referred to in cl. (ii) of sub-s. (3) any income is excluded from the total income of an assessee for an assessment year, then an assessment of such income for another assessment year shall for the purposes of s. 150 and section 153 be deemed to be one made in consequence of or to give effect to any finding or direction contained in the said order.
In the circumstances, though notice has been issued under s. 148 of the Act in the light of the findings recorded by the CIT(A), considering the language of Expln. 2 to s. 153, it is apparent that the very fact that income for the year 1984-85 has been excluded from the total income of the assessee for the said year would be sufficient for the AO to make assessment of such income for another assessment year, which for the purposes of ss. 150 and 153 would be deemed to be one made in consequence of or to give effect to any finding or direction contained in the said order, albeit provided such income is otherwise taxable for the said year. If the transaction in question was for any reason, say non-applicability of the taxing provision, not taxable operation of ss. 150 (1), 153(3)(ii) r/w Expln. 2 thereunder would not make the transaction taxable. In the circumstances, even in the absence of any finding or direction specifically stating that the said income may be brought to tax in another assessment year, in the light of the provisions of Expln. 2, it is permissible for the AO to issue notice under s. 148 for assessment of such income for another assessment year.
As regards the contention that a finding in terms of s. 150 can only be that which is necessary for the disposal of an appeal in respect of an assessment of a particular year by reference to the decision of the Supreme Court in ITO vs. Murlidhar Bhagwan Das (1964) 52 ITR 335 (SC), the same is misconceived. In the said decision, the Court in the context of the proviso to s. 34 of the Indian IT Act, 1922 has held that a finding can be only that which is necessary for the disposal of appeal in respect of an assessment of a particular year; that the AAC may hold, on the evidence, that the income shown by the assessee is not the income for the relevant year and thereby exclude that income from the assessment of the year under appeal. The finding in that context is that the 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 appeal in respect of the year of assessment in question. However, Expln. 2 to s. 153 of the Act obviates the said decision of the Supreme Court, in as much as the same specifically provides for a deeming element whereby exclusion of the total income of an assessee for an assessment year by an order referred to in cl. (ii) of sub-s. (3) is for the purposes of s. 150 and s. 153 deemed to have been made in consequence of or to give effect to any finding or direction contained in the said order. In the circumstances, the said decision does not come to the aid of the petitioner.
Insofar as reliance placed upon the decision of the Karnataka High Court in the case of M.K. Thakker vs. CIT (1992) 197 ITR 110 (Kar) is concerned, it is apparent that in the said case, the Court has not considered the provisions of Expln. 2 to s. 153. The decision of the Supreme Court in the case of Rajinder Nath (supra), also does not carry the case of the assessee any further in as much as on a plain reading of the order of the CIT(A), it is apparent that the finding recorded by the CIT(A) is to the effect that the long-term capital gain is liable to be taxed and that the sale in question took place in the asst. yr. 1983-84. Thus, the contention that there is no finding or direction within the meaning of s. 153(3)(ii) of the Act is contrary to the facts of the case.
From the facts noted hereinabove, it is apparent that in consequence of and with a view to give effect to the finding contained in the order made by the CIT(A) in appeal for the asst. yr. 1984-85, the AO has issued notice under s. 148 for assessing the income which was excluded from the total income of the petitioner for the asst. yr. 1984-85, to assess such income for the asst. yr. 1983-84. Thus, the case at hand clearly falls within the ambit of the provisions of s. 150 as well as s. 153(3) (ii) r/w Expln. 2 to s. 153 of the Act and as such there is, no infirmity in the action of the respondent in initiating the reassessment proceedings, the same being in consonance with the provisions of law and within the prescribed time limit.
24. In view of the aforesaid discussion, no infirmity can be found in the action of the AO in issuing notice under s. 148 of the Act for the reasons recorded for the asst. yr. 1983-84. The petition, therefore, fails and is accordingly rejected. Rule is discharged. Interim relief stands vacated.
[Citation : 328 ITR 521]
