TaxTMI 
TaxTMI 
2018 (5) TMI 237
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....That the learned CIT (A) erred in not annulling/quashing the fresh assessment order dated 12.07.2007 passed in pursuance to the order of the Hon'ble M.P. High Court as the said assessment order is barred by limitation u/s 153(2A) of the Income Tax Act, 1961. That on the facts and in the circumstances of the case, the said assessment order being illegal and bad in law, it is therefore, prayed that the same may very kindly be now annulled/quashed. That the learned CIT(A) also erred in overlooking the fact that in the absence of any stay granted by any court as envisaged under clause (ii) of Explanation 1 to section 153, the period of limitation had to be reckoned from the date of the ITAT order of 11.12.2000. That on the facts and in the circumstances of the case the period of limitation having expired, the assessment order thus barred by limitation is illegal, without jurisdiction and bad in law and hence deserves to be annulled/quashed. 3. Without prejudice to the above, assuming though not admitting, even if the period of limitation is reckoned from the judgment of the Hon'ble M.P. High Court dated 03.01.2005, the impugned assessment order dated 12.07.2007 is barred by ....
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....t that the original assessment order had reached finality post ITAT setting it aside and in absence of any challenge to the contrary. That on the facts and in the circumstances of the case the interest charged u/s 220(2) is not only contrary to the provisions of section 220(2) but also to CBDT Circular No.334 of 03.04.1982 and it is prayed that interest u/s 220(2), if any, be charged in accordance with law. 3. Briefly stated, the facts of the case are that this is a second round of litigation. In the earlier ground , the matter travelled up to the stage of Hon'ble Supreme Court. The facts given rise to the present appeal are that in earlier round of litigation, the Tribunal had quashed the assessment on the ground of non-service of the notice u/s 143(2). Aggrieved by this, the Revenue had preferred an appeal to Hon'ble Jurisdictional High Court in I.T.A.No. 22 of 2001. Hon'ble Jurisdictional High Court passed the order in I.T.A. No. 22 of 2001 on 03.01.2005. For the sake of convenience, the relevant contents of the judgement of the Hon'ble High Court is reproduced as under :- "16. Learned counsel also placed reliance on several authorities. Such as 113 ITR 22, A....
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....unal in the impugned order and final assessment orders be passed." 4. It is pertinent to note that the Revenue further approached to Hon'ble High Court of Madhya Pradesh by way of Miscellaneous Petition No. 654/2005. Hon'ble High Court was pleased to further grant period of six months for completion of assessment. The assessee had approached the Hon'ble Supreme Court by way of Special Leave Petition No. 5740/2007 dated 05.04.2007. 5. Subsequently, the AO framed the assessment order u/s 143(3) read with Section 260A of the Income-tax Act, 1961, vide order dated 12.07.2007. Aggrieved thereby the AO made addition in respect of travelling expenses, disallowances u/s 35D and disallowance of depreciation. Aggrieved by this order, the assessee preferred appeal before the Ld. CIT(A). The assessee apart from challenging the additions on merit, also challenged the assessment order on the ground of limitation. The Ld. CIT(A) partly allowed the appeal. However, in respect of issue of limitation, the Ld. CIT(A) declined to consider it on the ground that the assessment was completed on the direction of the Hon'ble Jurisdictional High Court. 6. Now the assessee is in appeal be....
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....appellant raised additional grounds regarding validity of assessment made by AO on the ground of non service of the mandatory notice required to be issued u/s 143(2) of the Act within the statutory period. The said appeal was decided by the ITAT vide its order dated 11/12/2000 passed in ITA no 81/IND/2000. The ITAT annulled the entire assessment on the ground that no notice u/s 143(2) was validly served upon the appellant within the statutory period of limitation. Simultaneously, without prejudice to the annulment of assessment, the ITAT also decided the appeal on merits regarding genuineness of claim of depreciation and ultimately setting aside the order passed by CIT(A) , who had confirmed the assessment and the disallowance, restored the matter back to the file of AO with a direction to afford an opportunity of cross examination to the appellant and also to afford an opportunity of hearing against the evidence collected by department behind the back of the appellant. It is further interesting to note that although the I.T.A.T. simultaneously decided the appeal on merits and set aside the assessment, remanding the matter back to AO for fresh assessment, by observations in Para 37....
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....y upholding the validity of assessment made by AO on 22/03/99 (copy of High Court's order dated 03/01/05 at Page 66 to 76 of Paper Book compilation - 1 ) Hon'ble High court had specifically observed in Para 19 of its order that - "since no other question is either raised by the appellant except that of notice , we need not to go into any other question. We thus allow the appeal in part and set aside the finding of Tribunal in so far as it relates to service of notice is concerned. We hold that service of notice being proper, the assessment made by AD on 22-03-1999 by Deputy Commissioner Income Tax Circle4-1 Indore is legal & valid, All other findings recorded by the Tribunal are upheld being not under challenge" Since the other part of the ITAT , s order was not under challenge, the same was upheld by the High Court, Hon'ble High Court directed that enquiries as per the direction of ITAT is completed within a period of six month from the date of its order and final order of assessment be passed , The said direction was issued by the High Court without noticing the statutory provision contained in section 153(2A) and without noticing the fact that in absence of any s....
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....Copy of SLP at Page 79 to 88 and copy of Supreme Court order at Page 89 to 90 of the Paper Book compilation - 1). The observations of Hon'ble Supreme Court in this respect are as under --- "We do not wish to express any opinion on this point at this stage. however, we make it clear that in the event of passing of assessment order being challenged by the assessee in appeal before the Commissioner of Income Tax (Appeals), it would be open to the assessee herein to take all the relevant grounds including the point which has been raised in the present special leave petition, namely, that the department was not entitled to extended period of limitation". H) The appellant further submits that fresh assessment proceedings were started by AO on the basis of extension granted by the Hon'ble High Court. The appellant specifically raised objection regarding bar of limitation vide its letters dated 05/04/07, 25/06107 and 27/05/07 ( Copies of objection at Page 244 to 249 of Paper Book compilation - 1) . The AO passed fresh assessment order on 12/07/07 and maintained the original order of assessment (Fresh assessment order dated 12/07/07 at Page No 91 to 157 of Paper Book compilatio....
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....s respect the appellant submits that in the context of legal position that the IT AT had no power to restrain the AO from completing the fresh assessment j for giving effect to its directions, the limitation for purpose of fresh assessment required to be made u/s 153(2A) would be reckoned from the date of ITAT's order dated 11112/2000 . For the sake of convenience the said provision of section 153(2A) is reproduced herein below ----------------------------------------- Section 153(2A) --- "[(2A) Notwithstanding anything contained in sub-sections (1) and (2), in relation to the assessment year commencing on the 1st day of April, 1971, and any subsequent assessment year, an order of fresh assessment u/s 146 or in pursuance of an order, under section 250 or section 254 or section 263 or section 264. setting aside or cancelling an assessment, may be made at any time before the expiry of two years from the end of the financial year in which the order under section 146 cancelling the assessment is passed by the assessing officer or the order under section 250 or section 254is received by the Chief Commissioner or Commissioner or, as the case may be, the order under section 263or ....
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....eld that ----- "Now, it would be seen that neither sub-section (2A) nor any other provision in the Act expressly qualifies or abridges the power of the Tribunal to pass all necessary orders u/s 254(1). However, it is obvious that the provisions contained in sub s. (2A) shall have to be an additional factor which the Tribunal has to take into consideration while passing an order of stay or other orders pending the appeal before it. In other words, while granting stay or any other interlocutory order, the tribunal shall have to keep in mind the period of limitation prescribed in section J53(2A) and pass orders in the light of the same. " It has been specifically observed by the Hon'ble High Court that since the ITAT is not a court, clause (ii) of Explanation 1 may not help the department to exclude the period during which stay granted by Tribunal is in operation . In view of this decision even if it is assumed that ITAT could pass the restraint order, it cannot have the effect of excluding the period of limitation prescribed by section 153(2A). In view of this authoritative legal position, despite the restraint order passed by ITAT the limitation for purpose of section 153(2....
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....ision of Tribunal is correct when it stated that the effect of holding that the assessment was barred by time is that all further proceedings pursuant to the said decision would be infructuous. The ITO gets jurisdiction to pass an assessment order if it is within limitation. If the assessment is barred by time, then any decision on merits would be of no consequence, and for the same reason, the decision, on merits, by the appellate authorities would also be of no consequence and would have to be ignored." CIT Vs Smt Kamala Devi 217 ITR 330 (All) . "In clear' terms it is held that an order of fresh assessment passed by the ITO in pursuance of the order passed u/s 263 setting aside or cancelling the earlier assessment order has to be passed within the period of two years prescribed therein." In the alternative, assuming without admitting that the ITAT's restraint order is valid, the restraint on fresh assessment would come to an end immediately from the date of High Court Judgment delivered on 03/01/2005 and the directions of the ITAT setting aside the assessment would become operative from that date. In that situation , the limitation for fresh assessment will have t....
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....to compel him to pass an order in violation of statutory provision. The ITO has no power to make reassessment beyond the period prescribed in sub section (2) , unless the case fell under any other sub sections U/s 153 or other provisions extending the period of limitation . In the instant case in absence of any statutory provisions empowering the High Court to extend the statutory limitation prescribed u/s l53(2A) , the extension order cannot be read as overriding the statutory limitation and the assessment would be valid only if it is within the statutory limitation . e) A useful reference may also be made to the decision of Andhra Pradesh High Court in the case of Satyam Computers Services Limited Vs Additional CIT reported in (2013) 356 ITR 17 , where their Lordships' , following the decision of Apex court in the case of Hope Textiles Limited Vs Union of India (Supra ) , referring to the extraordinary jurisdiction under Article 226 regarding issue of prerogative Writs have held that ----- "A perusal of article 226 would show that though it empowers the High Court to issue certain prerogative Writs or directions or other orders, the Article nowhere says that the court has....
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....section 153 and to the object for insertion of sub section (2A) in section 153 it must be held that where fresh assessment is being made for a particular assessment year , in pursuance of a finding or direction incorporated in an order u/s 250 , 254,263 or 264, passed in proceedings relating to another assessment year then the fresh assessment would be deemed to have been made for the purpose of section 150 and 153, in consequence of or to give effect to any finding or direction setting aside or cancelling the assessment for that particular year." f) Bhatia Motors Vs CIT reported in 288 ITR 31 (MP) ---where fresh assessment proceedings has not been stayed by an order or injunction of any court, a fresh assessment order pursuant to an appellate order u/s 250 cancelling an assessment has to be passed before expiry of two years from the end of the financial year in which order u/s 250 is received. The AO could not have waited till the tribunal decided the appeal unless the Tribunal had passed an order of stay staying the fresh assessment pursuant to the order of CIT (A) annulling the assessment and directing fresh assessment after notice u/s 142(1) of the Act. g) Instruments and ....
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....ibunal vide order dated 11.12.2000 annulled the assessment on the ground of substituted service of notice u/s 143(2) within prescribed time. Hon'ble Tribunal also decided the appeal on merits and restored the matter back to AO for giving opportunity of cross examination to the assessee, but barred AO from making any further assessment unless, the order passed by it is reversed on the legal grounds. The relevant or portion of the order of IT AT is report as under :-. "Since the assessment order has been annulled on the legal ground, the AD is refrained from doing fresh assessment as per our directions given while deciding original ground nos. 1 to 3 until and unless our order on the legal grounds is reversed. " 4. The department preferred an appeal u/s 260A against the order dated 11.12.2000 on inter alia the question of annulment of assessment on following substantial Question of Law. "(1) Whether on the facts and in the circumstances of the case, the ITAT was justified in entertaining the challenge to the assuming of the jurisdiction by A. 0. in view of the provisions of Section 143 of the Income Tax Act, 1961 on the ground of validity of service of notice when such a p....
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....dated 11.12.2000 regarding annulment of the assessment order has been reversed. Therefore, limitation provided u/s 153 (2A) does not come into operation. On the contrary, as provided in the Sec. 153(3) of Income Tax Act 1961 (as updated by finance Act of 2007 and not the Act of 2016) there is no time limit for following direction of higher authority/Courts including direction of Hon'ble ITAT and Hon'ble High Court. The sec. 153(3) reads as under: "(3) The provisions of sub-sections (1) [ (IA), (IB)] 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 u/s 250, 254,260, 262, 263 or 264 [or in an order of any court in a proceedings 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. " In ....
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....in pursuance of an order under section 254 or section 263 or section 264, setting aside or cancelling an assessment, may be made at any time before the expiry of nine months from the end of the financial year in which the order under section 254 is received by the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner or, as the case may be, the order under section 263 or section 264 is passed by the Principal Commissioner or Commissioner or Commissioner. (4) Notwithstanding anything contained in sub-sections (1),(2) and (3), where a ref under sub-section (1) of Section 92CA is made during the course of the proceeding for the assessment or reassessment, the period available for completion of assessment or reassessment, as the case may be, under the said sub-sections (1),(2) and (3) shall be extended by twelve months. (5) Where effect to an order under Section 250 or Section 254 or Section 260 or Section 262, or Section 263 or Section 264 is to be given by the AO, wholly or partly, otherwise than by making a fresh assessment or reassessment, such effect shall be given within a period of three months from the end of the month in which order....
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....b-section (2) of section 153A, shall be made within a period of one year from the end of the month of such revival or within the period specified in this Section or subsection (1) of Section 153B, whichever is later. (9) The provisions of this section as they stood immediately before the commencement of the Finance Act, 2016, shall apply to and in relation to any order of assessment, reassessment or recomputaiton may before the 1st day of June, 2016." 11. The contention of the learned Senior Counsel, appearing on behalf of the assessee is that the Tribunal could not have selfrestrained thereby providing the Department limitation beyond the prescribed limit. There is no dispute with regard to the fact that whatever the order has been passed by this Tribunal in the past cannot be looked into at this stage that would tantamount to reviewing of the earlier order. Moreover, there is no application for rectification of mistake has been filed by the assessee till date. If the assessee was aggrieved by the decision of the Tribunal, the assessee ought to have preferred an appeal before the Hon'ble High Court. Admittedly, the appeal was not filed by the assessee but by the Revenue, ....
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....er by A.O. the appellant is at liberty to take all grounds including of limitation before CIT(A). 12.07.2007 The AO passed fresh assessment order in consequence of order dated 11.12.2000 passed by ITAT. 19.03.2012 The CIT(A) passed the order dismissing the appeal filed by the appellant which is impugned by appellant in the present appeal. 12.02.2013 During the pendency of above appeal before CIT(A), apprehending the difficulty, the appellant filed Writ Petition before High Court for deciding the question of limitation. High Court vide its order dated 12.02.2013 observed that the grounds raised by the appellant shall be considered by the ITAT which are open for decision in view of order passed by Supreme court. 12. Now, the question arises whether the limitation for framing reassessment would start from the date when the Tribunal passed order dated 11.12.2000 or from the date when the Hon'ble High Court issued direction to frame assessment de novo after quashing the finding of the Tribunal in respect of the issue of service of notice u/s 143(2) of the Income-tax Act, 1961. It is also relevant to consider whether the time spent in the proceedings before the Hon'ble Hig....