TMI Blog1987 (11) TMI 52X X X X Extracts X X X X X X X X Extracts X X X X ..... uashed ? " The assessee, as the karta of a joint family, was a partner in firm, M/s. Gotturi Veeranna Sons. Disputes arose between the partners which led to the institution of a civil suit. Under the decree passed in the suit, the assessee was held entitled to a sum of Rs. 1,10,949 with interest at 6% per annum from the date of the decree. This decree was made in the accounting year relevant to the assessment year 1966-67. The break-up of the said amount is: (i) Rs. 48,949-Capital; (ii) Rs. 62,000-Interest at the rate of 12% from 5-8-1954 to 25-2-1965. The assessee claimed that the said amount of interest should be spread over and divided between the relevant years. On that basis, he returned an amount of Rs. 5,138 for the said assessment year. The Income-tax Officer, however, did not agree. He adopted a different procedure altogether. He found that during the accounting year relevant to the said assessment year, the assessee has realised a sum of Rs. 48,929. He divided the said amount into principal and interest in the same proportion as they represented in the total decretal amount. On that basis, he allocated a sum of Rs. 27,342 towards interest and included the same i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... evident that what the Tribunal decided is a necessary finding for the purpose of the effective disposal of the appeal before it. To our mind, therefore, the case clearly comes within the purview of section 150(1). " On the second question, it found that the reassessment proceedings in this case are barred by sub-section (2) of section 150. Accordingly, it allowed the appeal and set aside the reassessment proceedings. Thereupon, both the Revenue and the assessee asked for referring a question each, which has been done by the Tribunal. For the sake of convenience, we shall dispose of the question referred at the instance of the assessee, first. We agree with the Tribunal that the finding recorded in the order of the Tribunal dated September 9, 1974, was necessary for a proper and effective disposal of the appeal before it. The main question urged before it by the assessee was that the interest amount of Rs. 62,000 cannot be included in the income of the year in which the decree was passed, i.e., in the year of accrual, but that it must be spread over and divided between all the years for which it has been awarded. This contention was dealt with by the Tribunal and was rejected hol ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y in any case where any such assessment, reassessment or recomputation as is referred to in that sub-section relates to an assessment year in respect of which an 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. A reading of sub-section(1) of section 150 shows that where the reassessment proceedings are initiated " in consequence of or to give effect to any finding or direction contained in an order passed by any authority in any proceeding under this Act by way of appeal, reference or revision ", the time limits prescribed in section 149 shall not apply and that notice under section 148 can be issued at any time. Subsection (2), however, is again in the nature of a proviso to sub-section (1). It says that the provisions of sub-section (1) shall not apply where, by virtue of any other provision limiting the time within which action for assessment, reassessment or recomputation may be taken, such assessment, reasses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al income of the assessee for an assessment year, then, an assessment of such income for another assessment year shall, for the purposes of section 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.-Where, by an order referred to in clause (ii) of subsection (3), any income is excluded from the total income of one person and held to be the income of another person, then, an assessment of such income on such other person shall, for the purposes of section 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, provided such other person was given an opportunity of being heard before the said order was passed. A reading of these Explanations clearly shows that they merely 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. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issue of notice under section 148 or as to the completion of the assessment or reassessment prescribed by section 153. The Bench read subsection (2) of section 150 as providing that the provisions of sub-section (1) thereof will not apply to a case of assessment, reassessment or recomputation of income, if it related to an assessment year in respect of which assessment, reassessment, etc., could not have been made at the time when the order, which was the subject-matter of appeal, reference or revision, was made, by reason of the time limits fixed under section 153 for making the assessment, reassessment, etc. (vide paragraph 2 at page 545). It would immediately be seen that sub-section (2) of section 150 does not refer to section 153. It only refers to "any other provision limiting the time within which any action for assessment, reassessment or recomputation 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and, therefore, on that date action could have been taken for reassessment for the assessment year 1958-59. That was the date when the order which was the subject-matter of appeal was passed. In that view of the matter, in our opinion, the provisions of section 150(1) of the Income-tax Act, 1961, would apply on the facts of this case..." It may be mentioned that December 29, 1960, is the date on which the assessment for the assessment year 1956-57 was completed and certain income was included therein. In the second appeal before the Tribunal, it was held by the Tribunal (in the year 1965) that the said income could not have been included in the assessment year 1956-57. It was held that the income must be deemed to have accrued when the sale deed was executed on September 28, 1957, which fell in the accounting year relevant to the assessment year 1958-59. Pursuant to the order of the Tribunal, the Income-tax Officer issued a notice under section 148 on December 7, 1965, proposing to reopen the assessment for the assessment year 1958-59 and to include the said income in the income of that year. This was objected to by the assessee, inter alia, on the ground that the notice was barr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arned judges referred to Explanation 2 in section 153 and held that the bar of limitation does not apply. It cannot, therefore, be said that this decision is a relevant authority on the question before us. On the other hand, a passage from Sampath Iyengar's Commentary on the Law of Income Tax, Vol. IV, at p. 3584, which has been relied upon by the Tribunal in its judgment, lends support to our view. (Of course, the Tribunal took the extract from the Sixth Edition, i.e., from Vol. II). The learned author has expressed the view that sub-section (2) of section 150 is intended to preserve the finality of the orders made in earlier assessment years and that the bar contained therein has to be given effect to. Now, coming to the facts of the case before us, the finding in consequence of which notice under section 148 has been given, was recorded by the Appellate Tribunal at the stage of the second appeal. In this case, it is relevant to notice that the assessee did not file a return within the prescribed period. It was filed only on February 5, 1971. Inasmuch as this return was invalid in the eye of law, a notice under section 148 was issued by the Income-tax Officer on March 1, 1971 ..... 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