TMI Blog2005 (1) TMI 590X X X X Extracts X X X X X X X X Extracts X X X X ..... 143(3) dated 22-6-1998 was barred by limitation and thereby cancelling the same." 2. Briefly the facts are that the assessee company was owner of certain cement factories in Western Pakistan. After separation of India and Pakistan the assessee transferred these factories to Pakistani vendee. During the accounting years 1959-60 to 1961-62 corresponding to assessment years 1961-62 to 1963-64 the assessee company had purchased coke and hard coke in Pakistan to the tune of Rs. 13,52,952 but had made payment only for Rs. 5,11,438 to the Coal Commissioner, Government of Pakistan, Karachi. The balance of Rs. 8,46,529 was being shown as a liability. However, in the books of account pertaining to assessment year 1974-75 the assessee company made adjustment entries with regard to all liabilities and assets pertaining to such factories except adjustment of the aforesaid liability of Rs. 8,46,529. The Ld. CIT(A) in his order in Appeal No. 603/77-78, dated 14-8-1981 has given illustration that the company transferred the general reserve and surplus relating to Pakistani factories to its Profit Loss Account and similarly the debts in Pakistan were also completely written off. In the same o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ection 41(1) of the Act. There was nothing to distinguish between this liability and the other liabilities so as to justify a different treatment. Accordingly the Tribunal upheld the view taken by the Ld. CIT(A) with respect to cessation of liability and setting aside of the order of the ITO for ascertaining the quantum of deduction in earlier years. 4. Likewise in assessment year 1976-77 the Ld. CIT(A) in Appeal No. 398/87-88, dated 5-7-1988 vide para 4.3 has stated that in assessment year 1974-75 the Tribunal while upholding the ITO s conclusion that the liability having been disputed was assessable under section 41(1) of the Act and restored the matter back to the ITO for ascertaining the allowance or deduction in earlier years, observed that the Assessing Officer has so far not been able to make such verification in respect of assessment year 1974-75 and accordingly considered it fit and proper to restore the matter to the ITO s file with a direction to make similar verification for assessment year 1976-77. In case on verification it is found that the liabilities of Rs. 6,41,141 had been allowed in the past then this amount will be subjected to tax under section 41(1) o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o assessment years 1961-62 to 1963-64 or for any earlier year is available with him. The Assessing Officer, therefore, being of the view that the assessee has failed to prove that the deduction has not been claimed in earlier assessment year brought the amount of Rs. 8,46,529 to tax in assessment year 1974-75 accordance with the provisions of section 41(1) of the I.T. Act, 1961. Likewise for assessment year 1976-77 the amount of Rs. 6,41,141 representing cessation of liability in earlier year assessment was also treated as taxable under section 41(1) of the Act. 7. The Ld. CIT(A) after considering the arguments of the assessee in the light of decision of Supreme Court in the case of C.A. Abraham v. ITO [1961] 41 ITR 425 and the decision of the Hon ble Madhya Pradesh High Court in the case of CWT v. Parmanand Bhai Patel [1997] 225 ITR 915 1 recorded a finding that even after the Tribunal s order the effect has been given after more than 10 years and therefore held that the order giving effect to the CIT(A) s order is barred by limitation. On merit it was held that the onus lay upon the Department to find out whether the appellant was allowed any deduction in the earlier ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at his decision may be upheld and the ground of the revenue may be rejected. 11. We have heard the parties with reference to material on record and precedents referred. In both these years the Tribunal has upheld the setting aside by way of direction given by the Ld. CIT(A) to verify as to whether an allowance or deduction was actually availed of by the appellant company in any of the earlier assessments. The Assessing Officer did not give effect to the Tribunal s order even after more than ten years have lapsed. The Ld. CIT(A) after interpreting section 153(2A) and section 153(3) of the Act came to the conclusion that the order of the Assessing Officer is barred by limitation and accordingly cancelled the assessment so made by him. We, therefore, proceed to analysis the relevant provisions in this regard. Under the 1922 Act as well as 1961 Act for assessment upto assessment year 1970-71 there was no time limit prescribed for completion of fresh assessment. Sub-section (2A) however has been inserted w.e.f. 1-4-1971 in relation to assessment year 1971-72 and subsequent years which reads as under: "Section 153(2A) Notwithstanding anything contained in sub-sections (1) (2) i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... epartmental Circular No. 56, F.No. 156(27)/70-PPL, dated 19-3-1971 which elaborates the points as under: "Time limit for completion of assessments set aside in appeal or reopened under the then section 146: Section 153 of the Income-tax Act relating to time limits for completion of assessments and re-assessments has been amended so as to provide a time limit for completion of fresh assessments to be made in cases where ( i ) the original assessment made under section 144 has been cancelled by the Income-tax Officer on an application by the assessee under section 146 or ( ii ) the original assessment is set aside or cancelled in appeal by the Appellate Assistant Commissioner or the Appellate Tribunal or in revision by the Commissioner. For this purpose a new sub-section (2A) has been inserted in section 153. Under this sub-section, the fresh assessment in the cases mentioned at ( i ) may be made at any time before the expiry of two years from the end of the financial year in which the original assessment was cancelled by the Income-tax Officer under section 146. In the cases mentioned at ( ii ) the fresh assessment may be made at any time before the expiry of two years from the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt supervened and to make fresh assessment themselves within the rest of time available with him. 15. The expression assessment used in section 153 of the Act is referable to the final order of assessment made by the Assessing Officer. In the tax regime the concept is of final assessment and not of part assessment even though the expression assessment is used in the Income-tax Act at different places with different connotation and that so, some times even in the same section, it is used as computation of income , some times "the determination of the amount of tax payable" and some times "the whole procedure laid down in the Act for imposing liability upon the tax payer". Reference may be drawn to the decisions in the cases of C.A. Abraham v. ITO [1961] 41 ITR 425 , 429 (SC), Income-tax Commissioner for City of London v. Gibbs [1942] 10 ITR (Eng. Cas) 121, 124 (HL) and CIT v. Khemchand Ramdas [1938] 6 ITR 414 , 416 (PC). The word assessment is thus used in a number of provisions in a comprehensive sense and it can comprehend the whole procedure for ascertaining and imposing liability upon the tax payer and the machinery for enforcement thereof. This will inter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ences of findings or directions of the orders under section 250 or 254 of the Act. 17. The revenue s reliance on Tribunal decision in the case of Ram Kumar Gupta ( supra ) does not apply to the facts of the case as the assessment year involved in appeal in that case was 1964-65 which was prior to insertion of sub-section (2A) of section 153 of the Act in the statute. Furthermore the case of Smt. Kamla Devi ( supra ) the issue was whether the expression may used in section 153(2A) of the Act would not bind the Assessing Officer to complete assessment within a period of two years. The Hon ble Court negated the plea raised by the revenue and took a view that as per mandate of section 153(2A), the assessment has to be completed within the limitation period of two years. Thus both the case laws cited by revenue are of no help in the present appeal. 18. In the light of findings arrived at and the reasoning, we hold that the fresh assessment made by the Assessing Officer pursuant to directions had become barred by limitation as prescribed under section 153(2A) of the Act. Accordingly, the fresh order of assessment has become invalid and stands annulled. Since the fresh asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (A) has been left with no alternative but to direct again to do what the Tribunal had required him to do. We thus find no mistake in the order of the ld. CIT(A). In our opinion the matter needs verification on that point at the level of the ITO and therefore the impugned order calls for no interference at our level." 24. In pursuance to the aforesaid direction of the appellate authority, the Assessing Officer after seeking necessary clarification, passed a fresh order dated 22-6-1998 for assessment year 1974-75 holding that the assessee failed to produce any documentary evidence or material so as to claim that it has not claimed deduction representing cessation of liability in earlier years. Hence, he brought the amount to Rs. 8,46,520 to tax in assessment year 1974-75 in accordance with the provisions of section 41(1) of the I.T. Act. Thus, he included the said amount in the total income of the assessee as were done in the original assessment. Likewise for assessment year 1996-97 the amount of Rs. 4,61,141 representing cessation of liability in the earlier year was also treated as taxable under section 41(1) of the I.T. Act vide order dated 22-6-1998. 25. On appeal again ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee company in the earlier years or not. If on verification it is ascertained that the Company was granted an allowance or deduction as inferred by the ITO in this years assessment order, disputed addition shall stand confirmed. But if the amount of allowance on deduction in the earlier assessment year or years was less or nil the quantum of addition under section 41(1) shall be suitably modified or reduced to nil, as the case may be. Thus, the directions given by the appellate authority as aforesaid would clearly fall within the purview of section 153(3)( ii ) as these directions, leave no scope for the Assessing Officer, save and except to pass order following the directions of the appellate authority. It may be mentioned that the provision of sub-section (2A) of section 153 envisage a situation where a fresh assessment is to be made after earlier assessment as a whole is set aside or cancelled and not to a situation where specific directions have been given by the appellate authority as in the instant case. Therefore, I am of the view that the order passed by the Assessing Officer in pursuance of the directions given by the appellate authority is not barred by limi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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