2018 (12) TMI 309 - AT - Income Tax

Tribunal Upholds Assessment Order Timing, Settlement Commission Proceedings

The DCIT, Circle, Mandi Gobindgarh And The ITO, Ward, Sirhind Versus Sh. Gurinderjit Singh And Sh. Kesar Singh

The Tribunal held that the assessment order was not time-barred as the proceedings before the Settlement Commission were pending due to legal challenges. ... Validity of assessment order - period of limitation - CIT(A) annulled the assessment order - Settlement Commission rejected the application on the grounds that the admitted tax and interest on the income disclosed had not been paid - Held that:- Keeping in view the fact that the assessee's case has been duly taken up and an order has been passed by the ITSC against which the assessee has filed writ petition before the Hon'ble High Court of Punjab & Haryana by the virtue of whose orders the assessee has been granted the benefit of being heard by the ITSC in the second round which abated the proceedings and since the Assessing Officer, having received the information regarding the abatement of the cases on 25/04/2016 has completed the proceedings on 22/06/2016 which is well within the time allowed by the Act as the orders have been passed within 60 days from the order of the ITSC under section 245HA(1) r.w.s 245D(2D) of Income Tax Act,1961. Hence, we hold that the order of the Ld. CIT(A) cannot be sustained neither on the factual grounds nor on the legal grounds. As per section 245A the 'case' is admitted to the Settlement Commission when the proceedings are pending before the Assessing Officer and the assessment proceedings gets initiated only by issue of Section 143(2) which is a sine-qua-non for filing of application before the ITAT. Thus at this juncture revisiting the issue of notice under section 143(2) issued in the year 1996 after a period of 12 years would be an infructuous exercise as the settlement application would be accepted only if the assessment proceedings are pending and fact that the application has been allowed by the order of the ITSC under section 245D(1). Since the assessment order passed by the Assessing Officer is as a consequent to the order passed by the ITSC under section 245HA(2) the C.O of the assessee is liable to be dismissed. Issues Involved:1. Whether the assessment order passed by the Assessing Officer was time-barred.2. Whether the notice under section 143(2) was issued within the statutory time.Detailed Analysis:Issue 1: Whether the assessment order passed by the Assessing Officer was time-barred.The Revenue filed appeals and the assessees filed cross objections involving identical issues, leading to a consolidated order for convenience. The primary case examined was Appeal No. 1271/CHD/2017 for A.Y. 1994-95 and Cross Objection No. 66/CHD/2017 for A.Y. 1994-95.The Revenue's grounds of appeal contended that the CIT(A) erred in annulling the assessment order, arguing that the order under section 245HA(1) r.w.s 245D(2) was received on 02/05/2016 and the assessment was completed within 60 days.The assessee's cross objection claimed that no notice under section 143(2) was issued or served within the statutory time, rendering the assessment under section 143(3) invalid.The assessee filed a return on 27/03/1996 and subsequently applied to the Settlement Commission under section 245C(1) on 30/08/1996. The Commission allowed the application to proceed under section 245D(1), requiring the assessee to pay the admitted tax and interest within 35 days, which was not paid.Amendments by the Finance Act, 2007, effective from 01.06.2007, introduced sections 245D(2D) and 245HA, stipulating that if the admitted tax and interest were not paid by 31.07.2007, the application would abate.The assessee challenged the validity of these provisions before the Punjab and Haryana High Court, which disposed of the writ petitions on 21.09.2012, following the Bombay High Court's decision in Star Television News Ltd. v. Union of India.The Settlement Commission passed an ex-parte order under section 245D(4) on 28.02.2014, which the assessee challenged, leading to a High Court order on 24.04.2015 directing the Commission to pass a fresh order after hearing the assessee.The Settlement Commission later passed an order on 25.04.2016 under section 245HA(1) r.w.s 245D(2D), stating that the proceedings had abated due to non-payment of admitted tax and interest. The Principal Commissioner received this intimation on 02.05.2016. The Assessing Officer then issued a notice under section 142(1), to which the assessee responded, claiming the proceedings were time-barred. The Assessing Officer completed the assessment under section 143(3).The CIT(A) held that the assessment order was time-barred as per sections 245D(2D), 245HA(1)(ii) & Explanation (b), and 245HA(4) r.w.s 2nd proviso to section 153(4).The Revenue argued that the assessment was completed within the due time, as the Settlement Commission's order was received on 02/05/2016, and the assessment was completed on 22/06/2016.The assessee contended that the proceedings abated on 31.07.2007, and the assessment should have been completed by 31.07.2008. Since the assessment was completed on 22.06.2016, it was time-barred.The Tribunal examined the provisions and concluded that the assessment order was not time-barred, as the proceedings before the Settlement Commission were pending due to the legal challenge and subsequent High Court orders. The Tribunal held that the assessment order passed by the Assessing Officer was within the time allowed by the Act.Issue 2: Whether the notice under section 143(2) was issued within the statutory time.The assessee argued that no notice under section 143(2) was issued or served within the statutory time, rendering the assessment invalid.The Tribunal noted that as per section 245A, the 'case' is admitted to the Settlement Commission when proceedings are pending before the Assessing Officer, initiated by issuing a notice under section 143(2). Revisiting the issue of notice issuance after 12 years would be infructuous, as the application was accepted by the Settlement Commission, indicating pending assessment proceedings.Since the assessment order was a consequence of the Settlement Commission's order under section 245HA(2), the Tribunal dismissed the assessee's cross objection regarding the notice under section 143(2).Conclusion:The Tribunal allowed the Revenue's appeal, holding that the assessment order was not time-barred, and dismissed the assessee's cross objection regarding the notice under section 143(2).