AI Drafter 
TaxTMI 
TaxTMI 
TaxTMI 
2015 (10) TMI 2018
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....to the remand order of the Hon'ble Income-tax Appellate Tribunal dated 10.01.2009 for fresh adjudication of issues involved in the appeal of Department in ITA No. 217/Luc/05 and the appeal of assessee in ITA No. 169/Luc/05 restored to the file of A.O., is erroneous in so far as it is prejudicial to the interests of revenue" u/s 263 of the Act. 2. BECAUSE the Id. Commissioner of Income-tax has erred in law and on facts in invoking jurisdiction u/s 263 on the ground that the Tribunal, in the remand order dated 30.01.2009 received by him in March, 2009, had not set aside the impugned assessment order, therefore, period of limitation u/s 153 (2A) assumed by the A.O. was not applicable to the order dated 8.8.2013 in consequence to such remand order, but it was in the nature of a direction within the purview section 153 (3) (ii) of the Act for which there is no limitation except the Instruction of CBDT No. 1914 dated 2.12.1993 to give appeal effect within 2 weeks of receipt of the appellate order. 3. BECAUSE the Id. Commissioner of Income-tax has erred in law and on facts in invoking jurisdiction under section 263 to set aside the refund order dated 08.08.2013 u/s 2....
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....allow the appeal and cancel the order of the Id. C.I.T. u/s 263 of the Act since the refund order passed by A.O. u/s 240 in consequence to the order of Tribunal cannot be revised u/s 263 of the Act as it is neither erroneous since being in accordance with law nor prejudicial to the interest of revenue since being revenue neutral due to eligibility of the appellant to exemption of its income u/s 11 of the Act. 3. The facts in brief relating to the controversy involved in these appeals borne out from the record are that during the assessment year 2001-02, the original assessment was framed by the Assessing Officer denying benefit of exemption under section 11 of the Act, as registration under section 12A of the Act was not available with the assessee. Later on, the matter was travelled to the Tribunal through an appeal filed by the assessee as well as the Revenue and during the course of hearing, the Tribunal has noted that now registration under section 12A of the Act has been granted to the assessee. The Tribunal accordingly remanded the matter back to the Assessing Officer to adjudicate the issue raised through grounds No.4, 5 and 6 relating to the claim of exemption under sect....
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....cer is required to pass an order within a time frame for the purpose of limitation, but whenever the Assessing Officer is required to act in accordance with the directions of the appellate forum, the provisions of section 153(3)(ii) of the Act would apply. 7. In the instant case, the Tribunal has not set aside the order of the Assessing Officer and the Tribunal has rather directed the Assessing Officer to examine the claim of exemption under section 11 of the Act in the light of the fact that registration under section 12A of the Act is granted with retrospective effect. Therefore, the provisions of section 153(3)(ii) of the Act would apply and not the provisions of section 153(2A) of the Act. The relevant observations of the ld. Commissioner of Income-tax in I.T.A. No. 824/LKW/2014 are extracted hereunder for the sake of reference:- "4.1 The main contention of the assessee is that no order of fresh assessment was made by the A.O. in pursuance of the directions of Hon'ble ITAT dated 30.01.2009 within the time limit as prescribed under section 153(2A) of the I.T. Act and, therefore, the same attained finality. This submission of the assessee is not found acceptable i....
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.... "(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 Section 250, 254, 260, 262, 263, or 264 for in an order of any court in a proceeding otherwise than by way of appeal or reference under this Act)". A bare reading of the above provisions makes it clear that where the Hon'ble ITAT has given any finding or directions for recomputation or making reassessment and has not cancelled or set-aside an assessment, then provisions of section 153(3)(ii) of the Act will be applicable and such an order giving effect to the directions of Hon'ble ITAT u/s 254 of the Act can be passed any time as per provisions of section 153(3)(ii) of the Act. The limitation of re-assessment or order u/s 254 was, therefore, governed as per the provisions of section 153(3)(ii) of the Act. The A.O. passed an order u/s 254 of the I.T. Act on 08.08.2013 and the order so passed was not hit by any statutory limitation. However, the A.O. failed to recompute the income of the assessee in accordance with the directions of Hon'ble ITAT. It is this lapse, on the part ....
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....rder and allowing the Assessing Officer to make a fresh assessment then limitation prescribed under Section 153(2A) would apply and where the assessment or reassessment recomputation is to be made in pursuance of finding or direction made in the Appellate/Revisional order then provisions of Section 153(3)(ii) would apply and such assessment, reassessment or recomputation could be made at any time. The distinction between section 153(3) and 153(2A) is that provisions of section 153(3) are to operate only in a situation where assessment, reassessment, or re-computation is necessary to give effect to any finding or direction contained in an appellate order. The extended period is available only in a case where the Assessing Officer acts upon "finding or direction of an appellate authority". Section 153(2A) applies to the situation where the assessment order is set aside or cancelled" by a superior authority. 4.5 The assessee's submissions have been carefully considered with reference to the relevant provisions of law. A perusal of clause (ii) of sub-section (3) of section 153 reveals that where the re-assessment is made in consequence of or to give effect to any finding o....
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....20 ITR 14, 18-19) that 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 for making an assessment order u/s 143 or section 144 or section 147. In the case; of Rajinder Nath Vs. CIT (supra), it was held by the Hon'ble Supreme Court that a direction by a statutory authority is in the nature of an order requiring positive compliance, but when it is left to the option and discretion of an Assessing Officer whether or not to take action, it cannot be described as a direction. In the case of Khalsa Provisions Vs. CIT (1982) 135 ITR 817 (Del.) & M/s Basu Distributors Pvt. Ltd Vs Income Tax Officer 292 ITR 29 (Delhi HC), it was held that in a case where the Appellant Asstt. Commissioner/ITAT set-aside the assessment and intended the income Tax Officer to do a fresh assessment on the lines indicated in the order, there was a clear direction to that effect. In view of above, it is held that the purpose of section 153(3) is to lift the bar of limitation to make an effective order of assessment. In the instant case, there was a clear finding as well as a direction given by the Hon'ble ....
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....f computation of income by the Assessing Officer. Therefore, the Assessing Officer while passing the order u/s 254 of the Act on 08.08.2013, should have computed the income of the assessee in accordance with the provisions of section 11 of the I.T. Act and should have given effect to the findings & directions of Hon'ble ITAT as given it its order dated 31.01.2009. 7. The assessee has raised further objection that the Commissioner cannot initiate proceedings u/s 263 of the Act with a view to starting fishing and roving inquiries in the matters or orders which had already concluded. That apart, the show-cause notice dated 23.7.2014 is against the well-accepted policy of law that there must be a point of finality in all legal proceedings. The assessee has upon the judgments in the cases of viz. Sirpur Paper Mills Ltd. Vs Income Officer 114 ITR 404 and Parashuram Pottery Works Co. Ltd Vs Income Tax 106 ITR 1. 7.1 The objection of the assessee is not tenable. The case laws cited by the in its support are entirely distinguishable on facts and law. The Hon'ble ITAT vide order dated 31.01.2009 had given certain findings and directions to the Assessing Officer to r....
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....titute for the power of the Assessing Officer to make assessment, the same can certainly be exercised when order of the Assessing Officer is found to be erroneous and prejudicial to the interest of the revenue. Whether or not order is erroneous has to be decided from cases to case. Interpretation of section 263 has been subject matter of consideration in various decisions. In Malabar Industrial Co. ltd. vs. CIT (2000) 243 ITR 83, it was observed: "There can be no doubt that the provision cannot be invoked to correct each and every type of mistake or error committed by the Assessing Officer. It is only when an order is erroneous that the section will be attracted. An incorrect assumption of facts or an incorrect application of law will satisfy the requirement of the order being erroneous. In the same category fall orders passed without applying the principles of natural justice or without application of mind...". The Division Bench of the High court of Madras in Venkatakrishna Rice Co. vs. CIT (1987) 163 ITR 129 (Mad) have interpreted "prejudicial to the interests of the Revenue". The Hon'ble High Court held: "In this context, (it must) be regarded as involving a conception of a....
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....te properly the issues restored back by the Hon'ble Tribunal with certain directions in accordance with law after providing fair and reasonable opportunity to the assessee." 8. Similar order was passed by the ld. Commissioner of Income-tax for assessment year 2005-06 also. 9. Having set aside the order of the Assessing Officer, the ld. Commissioner of Income-tax directed the Assessing Officer to make a fresh assessment considering the computation of income as per provisions of section 11 of the Act and adjudicate properly the issue restored back by the Tribunal with certain directions, in accordance with law after providing fair and reasonable opportunity to the assessee. 10. Aggrieved, the assessee has preferred these appeals against the respective orders of the ld. Commissioner of Income-tax. The main contention raised by the ld. counsel for the assessee is that the Assessing Officer was required to pass a consequential order pursuant to the directions of the Tribunal within the period prescribed as per provisions of section 153(2A) of the Act and since the Assessing Officer has not passed an order within the specified period, the order passed by the Assessing Office....
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.... an assessment, is to be passed and as per sub-section (2A), the time limit is prescribed and the Assessing Officer is required to pass an assessment order at any time before the expiry of one year from the end of the financial year in which the order passed under section 250 or section 254 is received by the Principal Chief Commissioner or Principal Commissioner or Chief Commissioner or Commissioner, etc. But wherever 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, 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, provisions of sub-section (3) (ii)of section 153 of the act would apply and no time limit is prescribed for completing the assessment, reassessment or recomputation, pursuant to the directions. 14. In the instant case, the Tribunal has not set aside the assessment order. The Tribunal has directed the Assessing Officer to re-adjudicate the issue of claim of exemption under section 11 of the Act in the light of registration under section 12A of the Act gra....
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....anted under section 12A of the Act, but the Assessing Officer instead of acting as per the directions of the Tribunal, has computed the quantum of refund. Therefore, there is no iota of doubt in our mind to hold that the Assessing Officer has not acted in accordance with the directions of the Tribunal and has computed the quantum of refund. Therefore, the order of the Assessing Officer is erroneous and prejudicial to the interest of the Revenue, because while granting exemption under section 11 of the Act, the Assessing Officer is required to examine the fulfillment of requisite conditions prescribed under section 13 of the Act. 17. But in this case, the sole dispute is with regard to the validity of the order passed under section 254 of the Act. According to the assessee, this order of the Assessing Officer is barred by limitation and has no legal sanctity, therefore, no cognizance of the same can be taken for initiating action under section 263 of the Act in view of the provisions of section 153(2A) of the Act, which prescribes time limit for passing an order consequent to the directions of the appellate forum; whereas the Revenue's stand is that the order is to be passed by t....
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.... (1A) No order of assessment shall be made under section 115WE or section 115WF at any time after the expiry of 5twenty-one months from the end of the assessment year in which the fringe benefits were first assessable. (1B) No order of assessment or reassessment shall be made under section 115WG after the expiry of 5nine months from the end of the financial year in which the notice under section 115WH was served. (2) No order or assessment, reassessment or recomputation shall be made under section 147 after the expiry of 1one years from the end of the financial year in which the notice under section 148 was served: Provided that where the notice under section 148 was served on or before the 1st day of April, 1999, but before the 1st day of April, 2000, such assessment, reassessment or recomputation may be made at any time up to the 31st day of March, 2002. Provided further that where the notice under section 148 was served on or after the 1st day of April, 2005, the provisions of this sub-section shall have effect as if for the words "one year", the words "nine months" had been substituted. Provided also that where the notice under sect....
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.... 1st day of April, 2006, and during the course of the proceedings for the fresh assessment 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 section 92CA has not been made before such date ; or(ii) is made on or after the 1st day of June, 2007, Provided also that where the order under section 254 is received by the Chief Commissioner or Commissioner or, as the case may be the order under section 263 or section 264 is passed by the Commissioner on or after the 1st day of April, 2010, and during the course of the proceeding 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 4(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-- (ii) where the assessm....
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....ich the order under sub-section (3) of that section is made by him, or (v) in a case where an application made before the Income-tax Settlement Commission under section 245C is rejected by it or is not allowed to be proceeded with by it, the period commencing from the date on which such application is made and ending with the date on which the order under sub-section (1) of section 245D is received by the Chief Commissioner or Commissioner under sub-section (2) of that section, or shall be excluded. (vi) 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 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 o....
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....sment in pursuance of an order under section 250, 254 or section 263 or section 264, setting aside or cancelling an assessment. The time limit is before the expiry of one year 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 Principal Commissioner, etc. From a bare reading of this sub-section, it appears that wherever assessment is set aside or cancelled and the Assessing Officer is required to reframe the assessment, provisions of sub-section (2A) would apply. But as per sub-section (3)(ii) of section 153 of the Act subject to provisions of sub-section (2A) of the Act, the assessment, reassessment or recomputation is 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 under section 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 at any time and no time limit is prescribed. Meaning thereby, wherever an order is passed consequent to the findings or the directions of the appellate forum without setting aside or cancelling the assessment,....
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....als) or the appellate authorities. What this means is that the Assessing Officer must comply with the finding or direction given by the appellate authority without necessarily disturbing the assessment order. 22. Again in the case of CIT vs. S. P. Mishra (supra), the Hon'ble jurisdictional High Court has held that section 153 of the Act, provides the limitation during which the reassessment order can be made, if the case is covered by the provisions of sub-section (1) and sub-section (2) . Sub-section (3) of section 153 of the Act excludes the applicability of the period of limitation in the circumstances more precisely indicated in clauses (ii) and (iii) thereof. Having relied upon the judgment of the Hon'ble Apex Court in the case of Rajinder Nath v. CIT, 120 ITR 14, in which the Hon'ble Supreme Court has interpreted the words "in consequence of or to give effect to any finding or direction contained" as incorporated in clause (ii) of sub-section (3) of section 153 of the Act and held that clause (ii) of section 153(3) of the Act is limited in meaning. Their Lordships of the jurisdictional High Court has held that as section 153(3)(ii) of the Act, there must be dis....
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....vision of section 153(3) of the Act is subject to section 153(2A) , and where the assessment or reassessment made to give effect to the finding or direction results in a "fresh assessment", the time limit prescribed under section 153(2A) shall apply even if the finding or direction is made by an order passed under section 260 or 262 of the Act, though both these sections do not find place in section 153(2A) . Fresh assessment would mean a situation where the earlier assessment as a whole is set aside or cancelled. When several additions have been made by the Assessing Officer and the appellate authority sets aside one or some of the issues to the file of the Assessing Officer, that situation would not give rise to a "fresh assessment" and in that case section 153(3)(ii) of the Act would apply." 24. This issue was also examined by the Hon'ble M.P. High Court in the case of Gulabchand Motilal vs. CIT (supra), in which it was held that prior to the insertion of sub-section (2A) in section 153 of the Act by the Taxation Laws (Amendment) Act, 1970, where an assessment was set aside or cancelled under section 146 or on appeal, revision or reference the Income-tax Officer could com....
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....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, 254, 260, 262, 263 or 264 of the Act or in an order of any court in a proceeding otherwise than by way of appeal or reference under this Act, no time limit is prescribed for passing such order by the Assessing Officer. The main distinction in these provisions are that for invoking the provisions of sub-section (2A) of section 153 of the Act, earlier assessment which was subject matter of the appeal before the appellate authorities is either set aside or cancelled by the appellate authorities and the Assessing Officer is required to frame fresh assessment in pursuance to the directions of the appellate authorities. But as per section 153(3)(ii) of the Act earlier assessment which was subject matter of appeal before the appellate authorities was not to be set aside or cancelled, rather appellate authorities issue directions for assessment or reassessment or recomputation of the income of the assessee in terms of the directions without setting aside or cancelling the assessment which is subject matter of appeal before them. Under this sub-section,....