TaxTMI 
TaxTMI 
2016 (6) TMI 418
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....ion 147 r.w.s. 150 of the Act on 10.06.2011. According to the Ld. counsel, the notice issued on 10.06.2011 was beyond the period of limitation for completing the assessment under Section 149 of the Act. Referring to the order of this Tribunal dated 31.05.2010 in I.T.A. Nos.327 & 328/Mds/2010 , the Ld.counsel submitted that there is no finding or direction by this Tribunal to assess the income. 3. According to the Ld. counsel, in fact, when the appeal came before this Tribunal for the assessment years 2003-04 and 2004-05, this Tribunal found that the transfer took place in the year 2000. Therefore, the capital gain cannot be taxed for the assessment years 2003-04 and 2004-05. There is neither a finding that the capital gain has to be taxed in the assessment year 2001-02 nor any direction to assess the same in the assessment year 2001-02. Therefore, according to the Ld. counsel, the Assessing Officer cannot take the benefit of Section 150(1) of the Act for reopening the completed assessment after expiry of limitation provided in Section 149 of the Act. Referring to Section 150(1) of the Act, the Ld.counsel pointed out that the Assessing Officer may reopen the assessment notwith....
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.... time limit expired at the time of the order which was subject matter of appeal, then provisions of Section 150(1) of the Act is not applicable. In this case, according to the Ld. counsel, the order of the Tribunal was passed on 31.05.2010. The limitation period had already expired, therefore, no order can be passed under Section 150(1) of the Act in the guise of reopening under Section 147 of the Act. The Ld.counsel has also placed his reliance on the judgment of the Apex Court in K.M. Sharma v. ITO (2002) 254 ITR 772. Therefore, according to the Ld. counsel, the Assessing Officer ought not to have reopened the assessment in the guise of giving effect to the order of the Tribunal for the assessment years 2003-04 and 2004- 05. 6. The Ld.counsel further submitted that the CIT(Appeals), referring to the contention of the assessee that there was no specific finding or direction of the Tribunal in the order dated 31.05.2010, observed that there was an inference that the finding of the ITAT is that the capital gain is to be taxed in assessment year 2001-02. According to the Ld. counsel, on the basis of the inference there cannot be any assessment under Section 150(1) of the Act. The ....
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.... effect to the finding or direction contained in the order the higher authority. Therefore, according to the Ld. D.R., when the Assessing Officer passed an order giving effect to the order of the Tribunal for assessment years 2003-04 and 2004-05, it has to be deemed that the order of the assessment was passed giving effect to the finding contained in the order of this Tribunal. Therefore, according to the Ld. D.R., the CIT(Appeals) has rightly confirmed the order of the Assessing Officer. 8. We have considered the rival submissions on either side and perused the relevant material on record. Initially the assessee filed the return of income for assessment year 2001-02 on 25.04.2005 consequent to the notice issued under Section 148 of the Act, disclosing the loss of Rs. 56,758/-. However, the Assessing Officer reopened the assessment under Section 147 of the Act and determined the loss at Rs. 2,442/- by an order dated 30.03.2006 instead of Rs. 56,758/- claimed by the assessee. 9. The assessee filed appeals before this Tribunal against the orders of the lower authority for assessment years 2003-04 and 2004-05 in I.T.A. Nos.327 & 328/Mds/2010. The main contention of the assessee ....
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....Officer can pass an order under Section 150(1) of the Act provided the appellate / revisional order was passed within the period of limitation available for reopening the assessment. In this case, on the date of appellate order, i.e. 31.05.2010, the limitation period had expired. Therefore, the order passed by the Assessing Officer by issuing notice for reopening the assessment on 10.06.2011 is barred by limitation. 11. We have carefully gone through the judgment of the Apex Court in K.M. Sharma (supra). The Apex Court, after considering the provisions of Section 150(2) of the Act, found that sub-section (2) of Section 150 puts embargo on reopening assessments, which have attained finality on expiry of period of limitation. The Apex Court also found that sub-section (2) of Section 150 makes it clear that reassessment permissible under Section 150(1) of the Act would not be available to Department when the period of limitation for such assessment or reassessment has expired at the time it is proposed to be reopened. In this case, the Revenue proposed to reopen the assessment on 10.06.2011 by issuing a notice under Section 148 of the Act, on which date, the period of limitation wa....
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....roceedings under the Land Acquisition Act could be commenced even though the original assessments for the relevant years in question have attained finality on the expiry of the period of limitation under section 149 of the Act. On a combined reading of sub-section (1) as amended with effect from April 1, 1989, and sub-section (2) of section 150 as it stands, in our view, a fair and just interpretation would be that the authority under the Act has been empowered only to re-open assessments, which have not already been closed and attained finality due to the operation of the bar of limitation under section 149." 12. We have also carefully gone through the judgment of Karnataka High Court in Spences Hotel (P) Ltd. (supra). In the case before Karnataka High Court, it found that Section 150(1) of the Act begins with the words "notwithstanding anything contained in Section 149". Therefore, the notice issued to the assessee, pursuant to the finding of the Tribunal with regard to escaped income for assessment, was found to be valid. Referring to Section 150(2) of the Act, the Karnataka High Court found that placing reliance on Section 150(2) was misplaced. The Karnataka High Court had n....
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....Assessing Officer reopened the assessment by issuing notice under Section 148 for the assessment years 1989-90 to 1994-95. The assessee challenged the notice before the Allahabad High Court on the ground that the assessments cannot be reopened. The Allahabad High Court, by placing judgment of Apex Court in K.M. Sharma (supra), found that the words "or by a court in any proceeding under any other law" were inserted by Direct Tax Laws (Amendment) Act, 1987 with effect from 01.04.1989. The Allahabad High Court found that the notice was issued after 01.04.1989, i.e. after the amended Act came into effect from 01.04.1989 and accordingly, rejected the contention of the assessee. 15. We have also carefully gone through the judgment of Madras High Court in Vellore Electric Corporation (supra). In the case before the Madras High Court, the issue arose for consideration was whether the period of limitation prescribed for reopening the assessment was applicable even for an order passed by the Assessing Officer by invoking the provisions of Section 150 of the Act. The Madras High Court, by placing reliance on the judgment of the Apex Court in K.M. Sharma (supra) found that the plain languag....
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....he said purpose, the records of the proceedings must be before the appropriate authority. It must examine the records of the proceedings. If there is no proceeding before it or if the assessment year in question is also not a matter which would fall for consideration before the higher authority, section 150 of the Act will have no application. 62. In ITO v. Murlidhar Bhagwan Das [1964] 52 ITR 335 (SC), it was held (page 339) : " The proceedings would be in time, if the second proviso to section 34(3) of the Act could be invoked. The question, therefore, is what is the true meaning of the terms of the second proviso to section 34(3) of the Act. It reads : ' Provided further that nothing in this section limiting the time within which any action may be taken, or any order, assessment or reassessment may be made, shall apply to a reassessment made under section 27 or to an assessment or reassessment made on the assessee or any person in consequence of or to give effect to any find ing or direction contained in an order under section 31, section 33, section 33A, section 33B, section 66 or section 66A.' Prima facie this proviso lifts the ban of....
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.... 64. In regard to the question that what would be the meaning of the term " finding" or " direction", it was held (page 345) : " A ' finding', therefore, can be only that which is necessary for the disposal of an appeal in respect of an assessment of a particular year. The Appellate Assistant Commissioner 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 that 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 an appeal in respect of the year of assessment in question. The expression ' direction' cannot be con strued in vacuum, but must be collated to the directions which the Appellate Assistant Commissioner can give under section 31. Under that section he can give directions, inter alia, under section 31(3)(b), (c) or (e) or section 31(4). The expression ' directions' in the proviso could only refer to the directions which the Appellate Assistant Commissioner or ....
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....trate 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. Explanation 2 says that where an appellate, revisional or other order excludes any income from the total income of the assessee for an assessment year, the assessment of such income for another assessment year shall, for the purposes of both section 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 order. Similarly, Explanation 3 says that where by an appellate, revisional or other order any income is excluded from the total income of one person and held to be the income of another person, the assessment of income of such other person shall, both for the purposes of section 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 order, provided, of course, such other person was given an opportunity of being heard before the said order was made. What is, however, clear is that Explanations 2 and 3 do not purport to obliterate or remove the restriction contained in sub- se....
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....tion may be taken ". The word " taken " refers only to initiation of proceedings and not to completion. Similarly, at page 547, the Bench observed: " the effect of section 150 and this sub-section (section 153(3)) read with Explanation 2 is that if any income is deleted from assessment in a higher proceeding on the ground that it is not the income of that year, steps may be taken under section 147 to assess it as the income of another year, without any limitation applying to the issue of notice under section 148 or to the completion of the assessment or reassessment..." With great respect, we think that this observation overlooks the provisions contained in sub-section (2) of section 150. However, inasmuch as the case before us is not one falling under Explanation 2 to section 153, we do not think it necessary to refer the matter to a larger Bench." 19. By respectfully following the judgment of the Apex Court in K.M. Sharma (supra) and the judgment of Madras High Court in Vellore Electric Corporation (supra), this Tribunal is of the considered opinion that the order of the Assessing Officer is barred by limitation, therefore, the same cannot stand in the eyes of law. Accordingly....
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....at Section 150(2) deals with circumstances in which section 150(1) is not applicable. 6. The Learned Commissioner of Income Tax ought to have seen that the case of the appellant is squarely covered by the decision of the Apex court in CIT Vs Green World Corporation in which the his Lordships have observed that Sec. 150(1) brings within its ambit only such cases where reopening of the proceedings may be necessary to comply with an order of the higher authority and for the said purpose, the records of the proceedings must be before the appropriate authority and that It must examine the records of the proceedings. If there is no proceeding before it or if the assessment year in question is also not a matter which would fall for consideration before the higher authority, s. 150 of the Act will have no application. 7. The learned CIT(A) erred in relying on the decision of B.A.R.Abdul Rahman Sahib Vs ITO (100 ITR 541), Ambaji Traders Vs ITO (105 ITR 273) &t DCIT Vs Spencers Hotel (208 CTR 224) to affirm the order of re-assessment. The learned CIT(A) ought to have seen that the fact of the aforesaid case is distinguishable in so far as the Tribunal has given a specific f....
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....pened to be the tenant of the assessee, it came to the notice of the department that assessee has not filed its return of income for the assessment year 2001- 2002 although it had rental income on lease of Flat No.3A, Doshi Apartments, Old Door No.9(New No.17), Dhandapani Street, T.Nagar, Chennai-600017. Since there was escapement of income notice under section 148 of the Income Tax Act was served on the assessee calling upon the assessee to file its return of income for the A.Y.2001-02. In response to the aforesaid notice the assessee filed its return of income on 25.04.2005 admitting total loss of Rs. 2,442/- which included business loss of Rs. 56,758/-, lease rentals of Rs. 31,500/ and claimed expenses amounting to Rs. 54,316/-. The Assessing Officer vide his orders dated 30.03.2006 completed the assessee's assessment under section 143(3) r.w.s 147 disallowing the expense of Rs. 54,316/ - claimed by the assessee and determined the total income of the assessee at Rs. 2442/-. 3.4 An enquiry was conducted with Mrs. Nirmala Ravindran, one of the Directors of the assessee company by the Investigation Wing of the Income Tax Department. A statement u/s. 131 was recorded from her ....
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.... The AO accepted the submissions of the assessee and the assessment was completed for AY 2001-02 on 30.03.2006. 3.6 A.Ys. 2003-04 and 2004-05: Upon completion of property and as per the joint development agreement the property was handed over to the assessee during the last quarter of 2003. Assessee received 9 flats (17442 sqft). Two flats were used as residence by Mrs. Nirmala Ravindran, one of the Directors of the assessee company, one flat was sold in March 2003 and remaining flats were sold during the Financial Year 2003-04. 3.7 Subsequently, assessee had filed the return of income for the assessment years 2001-02, 2003-04 & 2004-05 in response to the notices u/s 148 and 142(1) on 25.04.2005 respectively. In the returns filed, the assessee admitted LTCG of Rs. 13,70,752/- and Rs. 60,79,708/- for the assessment years 2003-04 and 2004-05 respectively and paid the tax on the Capital Gains as per return of income. The Long Term capital gains were related to the sale of land in a Joint venture. 3.8 The assessee had computed the capital gains and paid taxes as under: S. No. AY Computation of Capital Gains as per assessee's working Date of Payment Amount ....
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....old during the relevant previous year 1,66,15,100 Less: cost of construction of the above sale 9,188 sq.ft 59,16,950 Less: Indexed value of land sold (Note 1 below) 1166.4sfX Rs. 25X447 53,78,943 1,12,95,893 Capital gains on the sale of owned constructions B 53,19,207 Total Capital Gains on which tax is payable A+B 60,79,708 The AO assessed the taxable income as follows: Value as adopted 2,02,98,911 Less: cost of construction of the flats sold 59,16,950 Less: Indexed cost of land sold(5458.06x25x4.63) 6,31,770 65,48,720 Long Term Capital gains at the time of sale of lands to allottee of flats 1,37,50,191 Long Term Capital gains on sale of flats 1,46,12,090 Total Capital Gains (1,146,12,090 + 1,37,50,191) 2,83,62,281 3.11 The assessee filed appeals before the CIT(A). In regard to adoption of Guideline value on transfer of property u/s. 50C, the CIT(A) had upheld the order of the Assessing Officer but regarding adoption of guideline value for determining the Fair Market Value as on 1....
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....vant assessment year and not the year in which the assessment order is passed. Thus no notice under section 148 of the Income Tax Act would have legal sanctity if the same is issued after 31.3.2007 viz the maximum time of 6 years as mentioned in clause (2) to section 149 of the Income-tax Act." 4.2 The CIT(Appeals) observed that the AO had invoked the provisions of sec.150 which reads as: "Provision for case were assessment is in pursuance of an order on appeal, etc.-(1) Nothwithstanding anything contained in section 149, the notice under section 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 under this Act by way of appeal, reference or revision or by a Court in any proceeding under any other law." 4.3 The CIT(Appeals) observed that the provisions of sec.150(1) begins with the words "notwithstanding anything contained in sec.149" and it states that "notice may be issued at any time" to give effect to any finding or direction contained in an order passed by any authority in any proceeding under the Act. The notice issued to the assesse was pursuant to the findin....
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.... is excluded from the total income of the assesses for an assessment year, then, an assessment of such income for another assessment year shall, for the purposes of sec.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. Explanation 3.-....." The CIT(Appeals) further observed that Explanation 2 to sec.153 are applicable not only to sec.153, but also for the purposes of sec.150. Sec.150 cannot be read in isolation but has to be read along with Explanations 2 and 3 to sec.153, which set out the circumstances in which the assessment, reassessment, etc. is deemed to be one made in consequence of or to give effect to an order passed in an appeal, revision etc. Explanations 2 and 3 clearly 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. 4.8 The CIT(Appeals) observed that sub-sec.(3) of sec.153 wipes away the time limit prescribed by the Act in certain situations. The presence of such enabling provision was necessary as a pragmatic measure. For example, the AO may wron....
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....ion contained in any order passed under the Act by way of appeal, reference or revision or by a Court in any proceedings under any other law. Having thus removed the time limits for issuing notice u/s.148 in such cases, sub-sec.(2) of sec.150 hastens to add that where any appeal, reference or revision or an order of a Court in any proceedings under any other law is sought to be made in respect of an assessment year where such an order of 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, then no notice u/s.148 can be issued. The rational behind this provisions is not to confer upon the AO the jurisdiction to reopen an assessment which the Act did not otherwise possess. It says that where the reassessment proceedings would have been barred by time even at the point of time when the order which became subject matter of the appeal, revision etc., was passed, resort cannot be made to sub-sec.(1) of sec.150. 6. An exam....
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.... in the appeal for the assessment years 2003-04 and 2004-05. Such a notice is saved by sub-sec.(1) of sec.150 and the provisions of sub-sec.(2) of sec.150 are not applicable. The contention of the ld. AR is that the provisions of sec.149(1)(b) is applicable, according to which assessment of six years would have been lapsed from the assessment year 2002-03 to the date of service of notice on 10.6.2011. I am unable to accept the contention of the ld. AR because sec.150(2), the time limit within which notice u/s.148 could be issued by the AO has to be reckoned, in the very nature of things, under the provisions of sec.149, as they stood on 28.12.2006. As it clear from the words "assessment year in respect of which on 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 recomputation may be taken. In the very nature of things, such other provision limiting the time for issue of notice u/s.149 has to be reckoned with only on the date on which the assessment order for the assessment years 2003-04 and 2004-05 was ....
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.... "The Tribunal in its order dt. 26th June, 1998 held that the escaped tax shall be assessed for the year 1976-77. That order has become final and the same was within the knowledge of the appellant. On the basis of this finding of the Tribunal in its order regarding escaped income of the assesse, notice under s. 148 was issued on 17th Nov., 1998. The provision of s. 150(1) begins with the words "notwithstanding anything contained in s. 149" and it states that "notice may be issued at any time" to give effect to any finding contained in any order passed by any authority in any proceeding under the Act. The notice issued to the assesse was pursuant to the finding of the Tribunal referred to supra regarding the escaped income for assessment of income-tax. Therefore, the single Judge committed an error in law by quashing the same, as the same is contrary to the finding recorded by the Tribunal with regard to the escaped taxable income derived by the assesse. The legal submission made by the counsel placing reliance upon s. 150(2) in justification of the order of the single Judge is misplaced for the reason that the above provision is not applicable to the case on hand." Thus,....
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....ade by the Tribunal, be considered as finding/direction to assess the income for the assessment year 2001-02 in view of the decision of this Tribunal in Sun Metal Factor (I) (P.) Ltd. v. ACIT (2010) 124 ITD 14, especially when this Bench of the Tribunal in Sriram Capital Ltd. v. DCIT in I.T.A. Nos.512 & 513/Mds/2015 dated 26.06.2015 (the very same Ld. Accountant Member is a party/author) found that the Appellate authority cannot travel beyond the assessment year in appeal and expunge the directions (to refer p.63 & 64 at para 19.3 of the Tribunal order in I.T.A. Nos.512 & 513/Mds/2015 dated 26.06.2015)? (3) In the facts and circumstances of the case, whether the reopening made under Section 147 of the Act and consequent order of assessment are barred by limitation? 2. On the other hand, the learned Accountant Member, formulated the following three questions while referring the matter to the Hon'ble President u/s 255(4) of the Act: (1) Whether, on the facts and circumstances of the case, the notice issued is barred by limitation as provided under sections 149(1)(b), 150(1) and 150(2) of the I.T. Act, 1961, as the same has been issued in consequence to ....
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....nsfer took place in the respective assessment years and hence, it is not assessable to tax on capital gains in assessment years 2003-04 and 2004-05. The ITAT, in its order dated 31.5.2010 (I.T.A.Nos.327 & 328/ Mds/ 2010), while disposing of the appeals for assessment years 2003-04 and 2004-05, observed that the capital gains, arising out of transfer of the property, cannot be taxed in assessment years 2003-04 and 2004-05. Relevant observation of the Tribunal, as extracted in para 4.4 of the order passed by the learned Accountant Member, is extracted below for immediate reference: "Having observed the fact that the transfer of the asset has already taken place in the year 2000, capital gains cannot be taxed in the AY 2003-04 and 2004-05." 7. Based on the observation made by the ITAT, the Assessing Officer sought to invoke the provisions of sec. 148, r.w.s 150 of the Act, for the assessment year 2001-02 and accordingly, issued a notice on 10.6.2011. The case of the assessee that the proceedings for the assessment year 2001-02 are barred by limitation and hence notice issued u/s 148 r.w.s 150 is beyond the period of limitation, was not accepted by the Assessing Of....
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....exceeds Rs. 1 lakh. By applying this formula, the limitation expired on 31.3.2008, whereas the Tribunal passed the order on 31.5.2010 in which event the Assessing Officer cannot make any addition on the basis of a later order of the Tribunal by invoking the provisions of section 150(1) of the Act. 9. He also referred to the judgment of the Apex Court in the case of K.M.Sharma (supra) to highlight that sec. 150(2) of the Act puts an embargo on reopening of assessments which have attained finality on expiry of period of limitation and in the light of the binding judgment of the Apex Court and the facts of this case, the Assessing Officer is not justified in reopening the assessment by issuing notice u/s 148 r.w.s 150 of the Act. He also referred to various judgments of High Courts to highlight that either they are not directly applicable or rendered without taking into consideration the binding judgment of the Apex Court in the case of K.M.Sharma (supra). 10. He also referred to the judgment of the Apex Court in the case of CIT vs Green World Corporation (2009) 314 ITR 81, to emphasise that if no proceedings were pending before the authority before the expiry of limitation peri....
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....the learned Judicial Member, the issue is squarely covered by the unreported judgment of the Hon'ble Madras High Court in the case of M/s Goldmine Investments in Tax Case (Appeal) No.215 of 2008 dated 29.11.2013, wherein on identical circumstances, the Hon'ble Court observed that even if it is treated as a finding or direction, assessment cannot be reopened beyond the period of limitation. He has referred to various other decisions/judgments to submit that even if no time limit is prescribed (as assumed by the learned AM), still a reasonable time frame has to be assumed, as otherwise, the Assessing Officer will get unlimited time to reopen the assessment at his own will which is not permitted in law. In this regard, he relied upon the decision of ITAT, Hyderabad, in the case of S.Sankara Reddy vs. Assessing Officer (2005) 92 ITD 84. 15. In the instant case, the period of limitation expired in 2008 whereas the Tribunal has passed an order, while disposing of the appeals for assessment years 2003-04 and 2004-05, in 2010, by which date no proceedings can be said to have been pending and hence, even if it is assumed that the order of the Tribunal contains a finding or direct....