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2014 (6) TMI 441
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....these trusts were not valid trusts since they did not come into existence in accordance with Section 6 of Indian Trusts Act" and, therefore, "its income should be taxed in hands of all the trustees who were shown to be managing affairs of the trusts". In pursuance of the directions so given by the CIT(A) vide order dated 31st October 2005, the Assessing Officer passed the following order on 4th December 2006 : "In order to the valuable directions of the learned CIT(A)- I, Agra, vide his appeal order no. 428,430,427,429 and 431/CIT(A)/ ITO 2(1) Agra/2005-06 dated 3rd October 2005, for the assessment order narrated hereinabove, "the income shown in the hands of the trusts, has to be considered in the hands of the trustees in the equal proportion". Since the aforesaid assessee is a trustee in the trusts, i.e. Gurunanakdevji Trust, Guru Govind Singhji Trust and Guru Teg Bahadurji Trust, 37 Saket Colony, Agra, which have been decided by the CIT(A) vide his aforesaid appellate orders. Hence, after taking into account equal proportionate shares from the trusts, as narrated below, income so arrived in the share of this trustee is added in his inc....
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....rying to appreciate the scheme of things so far as assessments as a result of 'findings or directions' in the appellate orders are concerned. 6. Section 153 of the Income Tax Act, 1961, provides as follows: Time-limit for completion of assessments and reassessments. [(1) No order of assessment shall be made under section 143 or section 144 at any time after the expiry of- (a) two years from the end of the assessment year in which the income was first assessable; or (b) one year from the end of the financial year in which a return or a revised return relating to the assessment year commencing on the 1st day of April, 1988, or any earlier assessment year, is filed under sub-section (4) or sub-section (5) of section 139, whichever is later :] [Provided that in case the assessment year in which the income was first assessable is the assessment year commencing [on the 1st day of April, 2004 or any subsequent assessment year], the provisions of clause (a) shall have effect as if for the words "two years", the words "twenty-one months" had been substituted :] [Provided further that in case the assessment year in which the income was first assessable is the assessm....
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....] and during the course of the proceedings for the assessment or reassessment or recomputation of total income, a reference under sub-section (1) of section 92CA- (i) was made before the 1st day of June, 2007 but an order under sub-section (3) of that section has not been made before such date; or (ii) is made on or after the 1st day of June, 2007, the provisions of this sub-section shall, notwithstanding anything contained in the second proviso, have effect as if for the words "one year", the words "twenty-one months" had been substituted.] [Provided also that where the notice under section 148 was served on or after the 1st day of April, 2010 and during the course of the proceeding for the assessment or reassessment or recomputation of total income, a reference under sub-section (1) of section 92CA is made, the provisions of this sub-section shall, notwithstanding anything contained in the second proviso, have effect as if for the words "one year", the words "two years" had been substituted.] [(2A) Notwithstanding anything contained [in sub-sections (1), (1A), (1B) and (2)], in relation to the assessment year commencing on the 1st day of April, 1971, and any subsequent assessment....
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....ing for the fresh assessment of total income, a reference under sub-section (1) of section 92CA is made, the provisions of this sub-section shall, notwithstanding anything contained in the second proviso, have effect as if for the words "one year", the words "two years" had been substituted.] (3) The provisions of [sub-sections (1), (1A), (1B) and (2)] shall not apply to the following classes of assessments, reassessments and recomputations which may, [subject to the provisions of sub-section (2A)] be completed at any time- [(i) * * * *] (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 sections 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 section 147. [(4) Notwithstanding anything contained in the foregoing provisions of this section, sub-section (2) of section 153A and sub-section (1) of section 153B, the order of ass....
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....eriod commencing from the date on which an application is made before the Authority for Advance Rulings under sub-section (1) of section 245Q and ending with the date on which the order rejecting the application is received by the Commissioner under sub-section (3) of section 245R, or (vii) the period commencing from the date on which an application is made before the Authority 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 Commissioner under sub-section (7) of [section 245R, or]] [(viii) 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 Commissioner or a period of one year, whichever is less,] or; [(ix) 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 Commissioner under sub-section (1) of section 144BA and ending on the date on which a directi....
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....s time limits set out under section 153, for completing the assessments, reassessments and recomputations, are concerned, is that these time limits do not apply in the cases "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 sections 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". These are the cases in which such assessments, reassessments and recomputations can be done at any time, subject only to the condition that these assessments, reassessments and recomputations can be done within the end of one year from the end of the financial year in which the said order, as a consequence of, or to give effect to findings or directions contained therein, is received by the Chief Commissioner or Commissioner concerned or. In the case of the order under section 263 or section 264, the order is passed. There are, however, three important riders to this legal position. One of these riders, set out in Explanation 3 to Section 153(3)- as set out above, provides that, "any inc....
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....mit for completion of assessment under section 153(3) is quite another thing. That relaxation under section 153(3), as evident from Explanation 3 to Section 153(3), can only come into play when the person in whose hands income is to be added, as a result of these findings or directions, "was given an opportunity of being heard before the said order (i.e. appellate order) was passed". 9. When our understanding of the legal position, as set out above, was put to the learned Departmental Representative, he submitted that an opportunity of hearing having been granted to the representatives of the trusts in question, as was admittedly given by the learned CIT(A) and in view of the position that no trusts existed in the eyes of the law, is required to be treated as hearing to the representatives of the trustees. On the basis of this reasoning, according to the learned Departmental Representative, conditions set out in Explanation 3 to Section 153(3) were satisfied and the order passed by the Assessing Officer, as a result of the findings in the course of the appellate proceedings of the trusts, is a legally valid order passed within the time limit set out in Section 153(2A). Learned D....
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.... the appellate order in the cases of Gurunanakdevji Trust, Guru Govind Singhji Trust and Guru Teg Bahadurji Trust was passed or unless the impugned order was passed within the time limits set out under section 153(1) or (2), the impugned order cannot be said to be sustainable in law. The time limit under section 153(1) and (2) are clearly not satisfied on the facts of this case since it is not a case of serving the notice under section 148, the assessment year before us is 2002-03, a valid return was duly filed and processed, and yet the impugned order was passed on 4th December 2006 (i.e. well after two years from the end of the relevant assessment year). The scheme of the Income Tax Act fiercely guards the rule of finality to income tax proceedings, whether in assessment, reassessment, revisions, rectifications or any other proceedings, and once the time limit for that course of action is over, the finality thereto cannot be disturbed except under the specific provisions of the Act. The only thing which can help the cause of the revenue is thus a specific notice of hearing having been given to the assessee before us, as mandated by Explanation 3 to Section 153(3). It is only when....