High Court Of Karnataka
Spences Hotels (P) Ltd. vs. DCIT
Sections 148, 149, 150(2)
Asst. Year 1976-77
R. Gururajan, J.
Writ Petn. Nos. 9193 & 9194 of 2000
4th June, 2003
Counsel Appeared
K.R. Prasad, for the Petitioner : M.V. Seshachala, for the Respondent
ORDER
R. GURURAJAN, J. :
The petitioner Spences Hotels (P) Ltd., has filed this petition on the following facts : The petitioner, a limited company is assessed with tax by the respondent in terms of the Indian Income-tax Act (for short ‘the Act’) The petitioner was assessed for the asst. yr. 1976-77 under s. 143(3) of the Act vide order dt. 3rd May, 1979. In March 1975, the petitioner entered into an agreement with the Indian Hotels Company Limited under which it along with other shareholders in M/s Fonseca (P) Ltd. agreed to transfer the shares. The issue relates to the liability to tax in respect of the consideration payable under this agreement. Payments were made in instalments over a period of time. The implementation of the agreement was the subject-matter of a dispute and it was finally resolved through arbitration. Arbitration which was concluded in the previous year relevant for the asst. yr. 1980-81. The amount payable to the petitioner in terms of the award was sought to be taxed to capital gains in the asst. yr. 1980-81. The matter reached the Income-tax Tribunal (for short ‘the Tribunal’). The Tribunal passed an order and in the said order, the Tribunal notices the fact that the transaction by way of agreement was within the knowledge of the AO while concluding the assessment for the asst. yr. 1976-77 and inasmuch as the amount arising from the agreement of Rs. 2 lakhs which was received during the calendar year 1975 was offered to tax for the asst. yr. 1976-77.
2. Purporting to act upon the above decision of the Tribunal, the respondent issued a notice dt. 17th Nov., 1998, for the asst. yr. 1976-77 under s. 148 of the Act in terms of Annexure ‘B’. In the notice, it is stated that the Department has reason to believe that the income chargeable to tax for the asst. yr. 1976-77 as escaping tax within the meaning of s. 148 of the Act. On receipt of the notice, the petitioner submitted a detailed reply objecting to the said notice. The petitioner also raised a question of limitation with regard to the issuance of the notice. The petitioner states in the petition that the initiation of escaped assessment proceedings is beyond the period of limitation prescribed in law and any issuance of notice is contrary to the provisions of the Act. Respondents have entered appearance and they have filed a very detailed objection statement. They justify their stand in terms of s. 150 of the IT Act. According to them, a limitation prescribed under s. 149A of the Act is not applicable to the circumstances of the case. The exemption granted in s. 150 of the Act would be applicable to the facts and circumstances of the case. They justify their stand. They have filed statement of objection and additionalstatement of objection. Sri Prasad learned senior counsel took me through the pleadings to contend that notices issued in the case on hand requires to be set aside solely on the ground of limitation. According to the learned counsel, the Tribunal disposed of the appeal on 26th June, 1988, and the same was served on 22nd July, 1988, on the Department. The assessment order that is being re-opened is of asst. yr. 1976-77. A period of 4 years is already over in the year 1991 and therefore according to the learned counsel, no proceedings could be initiated. He states that the limitation under s. 149(1)(a) (iii) for reopening is over on 31st March, 1987. By 31st Oct., 1989, such action had become barred by limitation. He has referred to me the following case laws : (i) CIT vs. G. Viswanathan (1988) 73 CTR (A.P.) 123 : (1988) 172 ITR 401 (A.P.), (ii) Mysore Cements Ltd. vs. ITO (1987) 64 CTR (Kar) 205 : (1987) 167 ITR 370 (Kar), (iii) Ganga Saran & Sons (P) Ltd. vs. ITO & Ors. (1981) 22 CTR (SC) 112 : (1981) 130 ITR 1 (SC), (iv) Praveen Kumari vs. CIT (1999) 155 CTR (P&H) 610 : (1999) 237 ITR 339 (P&H), (v) 258 ITR 182 (sic), (vi) 236 ITR (sic), (vii) 254 ITR (sic), and (viii) 191 ITR 72 (sic). Per contra, the Central Government contends that limitation is available in terms of the proviso to s. 150 of the Act. He says that s. 152 comes to the rescue of the Department. According to him, the present order is passed in the light of the order passed by the Tribunal.
After hearing the counsel, I have carefully perused the material on record. It is unnecessary for me to refer to the other facts in the light of the counsels confining their arguments only to the limitations. The relevant sections are s. 149, s. 147, s. 148, s. 143(3), s. 151 and s. 152. Sec. 143 provides for assessment and sub-cl. (iii) provides for an order in writing in the matter of assessment. Sec. 145 provides for method of accounting. Sec. 146 deals with reopening of assessment at the instance of the assessee in respect of escaped assessment. Sec. 147 is income escaping assessment. Sec. 148 provides for issue of notice where income has escaped assessment. Sec. 149 provides for a time-limit for notice. Sec. 150 deals with provision for cases where assessment is in pursuance of an order of an appeal. A combined reading of all these provisions would show that before making the assessment, reassessment or repetition under s. 147, a notice is required to be furnished. Sec. 149 provides for time-limit for notice. Sec. 150, as I mentioned earlier is a provision for cases where assessment is in pursuance of an order of an appeal. The said provision reads as under : “150. Provision for cases where assessment is in pursuance of an order on appeal, etc.—(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 or by a Court in any proceeding under any other law. (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.”
11. In the case on hand, notices are admittedly issued under s. 148 of the IT Act. It is with regard to the escape assessment in terms of s. 144 of the IT Act. The assessment year is referable to 1976-77. Admitted facts reveal that assessment under s. 143 was passed on 5th Aug., 1983. Notice under s. 148 was issued on 23rd March, 1984. Return was filed on 29th May, 1984. Assessment order was passed under s. 143(3) of the Act r/w s. 147(b) of the Act bringing to tax as per the order of the arbitrator dt. 30th Jan., 1985. Appeal was partly allowed on 18th Oct., 1985. Matter was remanded. Assessee preferred further appeal to the Tribunal which remanded the matter on 23rd Sept., 1988. The AO passed an order under s. 143(3) on 31st Oct., 1989. Appeal filed by the assessee against the order dt. 31st Oct., 1989, was partly allowed in terms of an order dt. 12th March, 1990. The Tribunal disposed of the appeal on 26th June, 1998, and the Tribunal has noticed that the transfer of the intangible rights belonging to the assessee did take place in asst. yr. 1976-77 and not in the asst. yr. 1980-81. The Tribunal allowed the appeal filed by the Department and the cross-appeal filed by the assessee stood dismissed. Admitted facts reveal that the assessments are being reopened in terms of the appellate order on 17th Nov., 1998, in terms of s. 148. As I mentioned earlier, notice is under s. 148 in the matter of escape assessment under s. 147. It is subject to s. 149. Sec. 149 provides for 4 years in terms of s. 149(1)(a)(i). Sec. 149 (1)(a)(ii) provides not more than 7 years if 4 years have elapsed from the end of the relevant assessment year. In the case on hand, the admitted facts reveal of payments in the year 1975 and the taxing of such amount took place in the asst. yr. 1976-77 proceedings, therefore, 4 years period in terms of s. 147 r/w s. 148 ends on 31st March, 1981, that is 4 years from 31st March, 1977. Sri Prasad, learned counsel is therefore right in his submission that the period of limitation is already over in the case on hand and therefore, the notices are barred by time in terms of the statutory provisions. However, the defence put forth by the respondent is sub-s. (2) of s. 150 of the Act. Sec. 150 provides for a notice being issued under s. 148 notwithstanding anything contained in s. 147. Subs. (2) makes it very clear that the proviso to s. 148 shall not apply in any case where any such assessment, reassessment or recomputation as is referred to in that subsection relates to an assessment year in respect of which reassessment could not have been made at the time the year which was the subject-matter of an appeal was made by raising of any other provisions limiting the time within which any action by the assessment may be taken. A reading of s. 150 would show that a notice is permissible in consequences of or to give effect to any finding contained in an order passed by any authority in any proceedings under this Act by way of an appeal. Therefore, what is required to be noticed by the authorities is as to whether limitation is available or not in respect of escaped assessment order. In this connection, it is necessary to notice the case laws submitted by the counsel. .
14. In somewhat identical circumstances, a Division Bench of the Andhra Pradesh High Court in the case of CIT vs. G. Viswanathan (supra) has considered this very issue. In the said judgment, the Court notices ss. 147, 149 and
150 provisions. After noticing, the Andhra Pradesh High Court ruled that the expression “the order which was the subject-matter of the appeal, reference or revision, as the case may be was understood as referring to original order of assessment”. The Andhra Pradesh High Court, after noticing the judgment of various other High Courts ruled as under : “Sec. 147 of the IT Act, 1961, 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 issue 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 provision limiting the time within which action for assessment, reassessment or recomputation may be taken, such assessment, reassessment, or recomputation is barred on the date of the order which is the subjectmatter of the appeal, reference or revision in which the finding or direction is contained. Sec. 153 provides the time-limits of completion of assessments and reassessments. Explns. 2 and 3 to s. 153 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. Explns. 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 assessment 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 provision of the Act on the date of the order which was the subject-matter of appeal.”
15. The Andhra Pradesh High Court also in the last paragraph has ruled as under : “Now, coming to the facts of the case before us, the finding in consequence of which under s. 148 has been given, was recorded by the Tribunal at the stage of the second appeal. In this case, it is relevant to notice that the assessee did not file a return within the prescribed period. It was filed only on 5th Feb., 1971. Inasmuch as this return was invalid in the eye of law; a notice under s. 148 was issued by the ITO on 1st March, 1971, and the assessment was completed on 29th March, 1972. Against the said order of assessment, the assessee filed an appeal, which was disposed of by the AAC on 6th Oct., 1972. The judgment of the Tribunal in the second appeal is dt. 9th Sept., 1974. Now, according to sub-s. (2) of s. 150, the 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 provision of the Act on the date of the order which was the subject-matter of appeal. In this case, the second appeal in which the finding was recorded arose from the order of the AAC dt. 6th Oct., 1972. The question is, whether on that date the initiation of reassessment proceedings is barred by any provision of law ? According to s. 149(1)(b), reassessment proceedings cannot be initiated after the expiry of four years from the end of the relevant assessment year. The relevant assessment year in this case is 1966-67. Four years therefrom would expire on 31st March, 1971. Thus, the impugned initiation of proceedings under s. 147 by a notice issued on a date subsequent to 9th Sept., 1974, would be clearly barred. Even if we construe the expression ‘the order which was the subject-matter of the appeal, reference or revision, as the case may be’ occurring in sub-s. (2) of s. 150 as referring to the original order of assessment, as has been understood by the Calcutta High Court in ITO vs. Eastern Coal Co. Ltd. (1975) 101 ITR 477 (Cal), even then the result would not be different, because the order of assessment in this case was made on 29th March, 1972, which too is beyond 31st March, 1971.”
16. The said judgment is squarely applicable to the facts of this case. I must also notice another judgment of the Punjab High Court in Parveen Kumari’s case (supra). In that case also, the Division Bench noticed the scope of ss. 147, 149 and 151. After noticing, the Punjab High Court has ruled as under : ” “149. Time-limit for notice—(1) No notice under s. 148 shall be issued…, (b) in cases falling under cl. (b) of s. 147, at any time after the expiry of four years from the end of the relevant assessment year. In the light of the aforesaid provision specifying the period of limitation as four years from the end of the relevant assessment year, the case of the assessee for the purposes of issuance of notice for reassessment for the asst. yr. 1977-78 is found to be barred by limitation. The period of four years from the end of the asst. yr. 1977-78 expired on 31st March, 1982. The assessment for the asst. yr. 1978-79, which was the subject-matter of appeal before the Tribunal, was made in the case of Nand Kishore on 23rd March, 1989…. Thus, the subject-matter of appeal before the Tribunal was the order of the CIT, dt. 27th Dec., 1989 …. the AO had no jurisdiction to issue a notice under s. 148 for the asst. yr. 1977-78 in as much as the period of four years had already expired on 31st March, 1982.” These two judgments support the contentions of the petitioner. However, I must notice the technical objections raised by the Revenue. According to them what is challenged in this case is a notice and that notice can be as well be considered by the authorities. Learned counsel says that Writ Court is not to interfere in such matters. He relies on a judgment of the Supreme Court in 1994 (Suppl.) 1 SCC 635. It is no doubt true that in the said case, the Supreme Court dismissed the appeal filed by an assessee in the matter of reassessment. A careful reading of the said judgment would show that in the said case, the submission of the learned counsel for the petitioner was with regard to the limitation based on certain facts which required to be determined at the first instance by the AO. In the case on hand, the facts are undisputed. It is purely a legal question. Therefore, the said judgment cannot be pressed into service to hold against my interference in the case on hand. The Revenue relies on another judgment of this Court in Mysore Cements Ltd.’s case (supra). That also stands totally on a different footing. That was not a case as in the present case. That was a case in which the Court rejected on the ground of a finding of facts. In the case on hand, I have not gone into those questions of fact and this case is also argued only on the question of limitation on the admitted facts.
I must notice the latest judgment of the Supreme Court in K.M. Sharma vs. ITO (2002) 174 CTR (SC) 210 :(2002) 254 ITR 772 (SC). The Supreme Court has ruled that the provisions of a fiscal statute, more particularly one regulating the period of limitation, must receive a strict construction. The law of limitation is intended to give certainty and finality to legal proceedings and to avoid exposure to risk of litigation of litigants for an indefinite period of future unforeseen events. Proceedings which had attained finality under existing law due to bar of limitation cannot be held to be open for revival unless the amended provision is clearly given retrospective operation so as to allow upsetting of proceedings which had already concluded and attained finality. A time bar assessment cannot be reopened in the absence of any specific power available to the Revenue in the matter of reassessment. As observed by the apex Court, finality has to be at one stage or the other. Finality has been given in terms of the statute to the proceedings of the asst. yr. 1977-78 in this case. In these circumstances, these petitions are allowed. The impugned notices are set aside. A direction is issued to the respondent not to proceed further in the given circumstances by way of reopening of the assessment proceedings for the year 1976-77 pertaining to the petitioner. No other point is argued before me. Ordered accordingly. No costs.
[Citation : 263 ITR 263]
