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TMI Blog2012 (6) TMI 258X X X X Extracts X X X X X X X X Extracts X X X X ..... e agreement came into force in assessment year 1994-95 and that the receipt was capital in nature. In further appeal, the ITAT held that the receipt pertained to assessment year 1994-95 and not to assessment year 1992-93, but the ITAT did not give any finding on the nature of receipt. Even the Hon'ble Gujarat High Court held that the receipt pertained to assessment year 1994-95. In view of the finding of the appellate authorities that the receipt pertains to assessment year 1994-95, the Assessing Officer issued a notice under section 148 read with section 150 of the Income-tax Act to the assessee on 14-3-2007, as the income chargeable to tax for assessment year 1994-95 had escaped assessment. The assessee made a request before the Assessing Officer to cancel the notice under section 148 of the Income-tax Act, on the ground that there was no finding or direction given by any authority in relation to assessment year 1994-95 using which the provisions of section 150 could be invoked. The assessee also requested for a copy of the reasons recorded by the Assessing Officer. The Assessing Officer thereafter issued notice under section 143(2) of the Income-tax Act and also disposed of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... here was no finding in the order of the Hon'ble Gujarat High Court was rejected. 3. The assessee during the course of appellate proceedings before the learned CIT(A) almost submitted the same arguments as taken during the assessment proceedings and submitted by referring to Para 8 of the CIT(A)'s order dated 24-4-1996 for assessment year 1992-93 that there was no finding regarding the year of taxability of the income arising on transfer of marketing rights and the findings were in respect of non-accrual of income in assessment year 1992-93. It was submitted by referring to Para 8 of the order of the ITAT dated 24-3-2004 that there was no finding regarding the year of taxability of the income arising on transfer of the marketing rights and the findings were in respect of non-accrual of the income in assessment year 1992-93. Similarly, there was no finding in the order of the Hon'ble High Court. It was submitted that there was no finding in any of the appellate orders that the income on sale of marketing rights was taxable in assessment year 1994-95, nor there was any direction for taxing the income on sale of marketing rights in assessment year 1994-95. It was further submitted tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The AR, has relied upon the decision of Court in case of ITO v. Muralidhar Bhagwan Das 52 ITR 355 (SC) to contend that the incidental finding of appellate authority that the income belonged to an year other than the year under appeal is not a finding necessary for disposal an appeal. Thus according to the AR, the finding of the CIT (Appeals) and the Tribunal that income did not accrue in assessment year 1992-93 cannot be construed as a finding to reopen assessment for assessment year 1994-95. However the same is not acceptable in view of Explanation 2 to section 153 of the Act which was inserted to supersede the judgment of the Supreme Court in case of ITO v. Muralidhar Bhagwan Das 52 ITR 335(SC) and NKT Sivalingam Chettiar 66 ITR 586 (SC). Explanations 2 and 3 have enlarged the scope of section 153 of the Act. In the case of the appellant Explanation 2 to section 153 of the Act is which reads as under; Explanation 2.-Where, by an order referred to in clause (ii) of sub section (3), any income is excluded from the total 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 secti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessment year, this has been fictionally treated for the purpose of section 150 as a proceeding in consequent of or to give effect to any finding or direction contained in an order. Where such income excluded from one year has to be included in another year and such proceeding is fictionally treated as one under section 150, then the bar of limitation will not apply in view of the express provisions in section 153(3)." 4.6 The above view has been also held in the case of ACIT v. Rajendra Kumar [2008] 24 SOT 262 (Delhi) wherein it was held that Tribunal had specifically given direction that amount of capital gain would be taxable during assessment year 1980-81, hence notice of reassessment issued by Assessing Officer was not barred by time inasmuch as it was saved by provisions of section 150(1) of the Income-tax Act. 4.7 In view of above facts and the case laws, I hold that there is nothing wrong in the interpretation of Assessing Officer on the observations of appellate authorities and the action of reopening of assessment under section 147 by invoking provisions of section 150(1) is held to be justified and no interference whatsoever is called for. The ground No. 2 is therefo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d taxable income under the Act. 5. The learned Counsel for the assessee reiterated the submissions made before the authorities below and submitted that the learned CIT(A) in the assessment year 1992-93 held that the income is neither accrued nor received by the assessee in this accounting year. The learned Counsel for the assessee, therefore, submitted that there is no finding or direction issued by the learned CIT(A) for making any addition in the assessment year under appeal i.e., 1994-95. He has further submitted that the learned CIT(A) similarly considered the issue whether the amount in question is a capital or revenue receipt and in Paras 14 and 18 of the assessment order held that the receipt in question is not a revenue receipt but a capital receipt. He has submitted that the Assessing Officer in the reasons recorded under section 147 of the Income-tax Act (PB-13) though has reproduced Para 8 of the order of the learned CIT(A) but did not refer to these findings of the learned CIT(A) in Paras 14 and 18 in the reasons for reopening of the assessment. He has submitted that the Assessing Officer in the assessment order specifically noted that the learned CIT(A) in the assessm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt year which was the subject-matter of appeal or revision in which the finding or direction was given, and the reassessment proceedings taken by the Income-tax Officer, which according to the Tribunal fell under section 34(1)(b), were accordingly barred by limitation." (2) In the case of Spences Hotels (P.) Ltd. v. Dy. CIT [2003] 263 ITR 263/130 Taxman 741 (Kar.) wherein it has been held as under: "Held accordingly, that since the payments received by the assessee in the year 1975 were taxed in the assessment year 1976-77 and the facts relating to the agreement were within the knowledge of the Assessing Officer in that assessment year, the four year period in terms of section 147 ended on March 31, 1981, i.e., four years from March 31, 1977, and the period of limitation under section 149(1)(a)(iii) for reopening the assessment expired on March 31, 1987, and, therefore, the notice of reassessment dated November 17, 1998 was barred by limitation." (3) In the case of CIT v. Vaikundom Rubber Co. Ltd. [2001] 249 ITR 19/114 Taxman 378 (Ker.) in which it was held as under: "Reassessment - Limitation - Exclusion from limitation - Effect of section 150(2) - No exclusion where reassessm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ant assessment year) : Provided that where an assessment under sub-section (3) of section 143 or this section has been made for the relevant assessment year, no action shall be taken under this section after the expiry of four years from the end of the relevant assessment year, unless any income chargeable to tax has escaped assessment for such assessment year by reason of the failure on the part of the assessee to make a return under section 139 or in response to a notice issued under sub-section (1) of section 142 or section 148 or to disclose fully and truly all material facts necessary for his assessment, for that assessment year: [Provided further that the Assessing Officer may assess or reassess such income, other than the income involving matters which are the subject-matters of any appeal, reference or revision, which is chargeable to tax and has escaped assessment.] Explanation 1.-Production before the Assessing Officer of account books or other evidence from which material evidence could with due diligence have been discovered by the Assessing Officer will not necessarily amount to disclosure within the meaning of the foregoing proviso. Explanation 2.-For the purposes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under section 148 is to be served is a person treated as the agent of a non-resident under section 163 and the assessment, reassessment or recomputation to be made in pursuance of the notice is to be made on him as the agent of such non-resident, the notice shall not be issued after the expiry of a period of two years from the end of the relevant assessment year." 7.2 Section 150 of the Income-tax Act reads as under: '150. Provision for cases where assessment is in pursuance of an order on appeal, etc.-(1) Notwithstanding 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 or direction contained in an order passed by any authority in any proceeding under this Act by way of appeal, reference or revision [or by a Court in any proceeding under any other law]. (2) The provisions of sub-section (1) shall not apply 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 ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reement with Vadilal Enterprise Ltd. was to expire on 31-12-1992 but it was further extended for a period of 3 months i.e., up to 31-3-1993. The agreement with Neumatic Marketing Co., therefore, never came into operation in this account year. No income accrued to the assessee for sale of rights in this year. I also find that the agreement was renewed with Neumatic Marketing Pvt. Ltd. which came into operation from 1-4-1993 and which, in fact, took over the business from Vadilal Enterprise Ltd. No money was received by the assessee in this year from Neumatic Marketing Co., a firm. I, therefore, agree with the Learned authorized representative that the income has neither accrued nor received by the assessee in this accounting year. The entries made in the books are not correct and the deduction for Rs. 80 lakhs should be allowed to the assessee as wrongly shown in the return." 4. The order of the CIT(A) was challenged by the Department before ITAT. The ITAT, Ahmedabad Bench decided the appeal of the department in ITA No. 2928/Ahd./1996, dated 24-3-2004, wherein the finding of the learned CIT(A) as above was confirmed. 5. The Department appealed against the said order of the Tribuna ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nder the capital asset which is intangible in nature. 18. In view of the above discussion, I find that the above transfer of territorial rights, is not covered as a capital asset under section 2(14) of the Act. If the concern asset does not fall in this definition on the date of transfer, no capital gain can be levied. Such a finding has been given by the Gujarat High Court in the case of Mrs. Mamta Narrottamdas (162 ITR 365) and the Gujarat High Court in the case of Jitendra Ramniklal (162 ITR 371). In view of these judgments, I hold that the transaction under consideration, is not covered as business income or a capital asset and not chargeable to income-tax. The Assessing Officer is directed to allow the deduction of Rs. 80 lakhs as claimed by the assessee." The learned CIT(A) after giving this finding that the receipt is not revenue in nature and is capital receipt also considered whether it is taxable as capital gain and ultimately held that even no capital gain arises on such a transaction and ultimately in Para 18 of the appellate order held that the transactions under consideration is not covered as business income it being capital asset and not chargeable to income-tax. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Considering the above facts, it is clear that the revenue did not take any steps before the Tribunal for making amendment in the order with regard to whether the receipt in question is revenue receipt or capital receipt. The essential principle as to the rule of finality of an assessment is that the Assessing Officer cannot change his mood and try to reopen the closed state of affairs. Rule of finality is rule of prudence. The Hon'ble Supreme Court in the case of CIT v. Rao Thakur Narayan Singh [1965] 56 ITR 234 held as under: "From a reassessment for the assessment year 1942-43, made in July, 1945, bringing to tax certain forest income and interest income, the assessee preferred an appeal to the Appellate Tribunal objecting to the Income-tax Officer's jurisdiction to initiate reassessment proceeding in respect of the forest income on the ground that he had knowledge of such income when the original assessment was made. The Appellate Tribunal upheld his contention but by mistake set aside the entire reassessment order and restored the original assessment order. No steps were taken under section 35 to rectify the mistake; nor was any reference to the High Court sought against the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... order to cover the case under section 150(1) of the Income-tax Act. However, he has failed to note that section 153 of the Income-tax Act is meant for time-limit for completion of assessments and reassessments, but the provisions of section 149 of the Income-tax Act are meant for time-limit for issuing the notice under section 148 of the Income-tax Act. Both these provisions operate in different field i.e., for initiation of reassessment proceedings under section 148 of the Income-tax Act and time limit for completion of assessments and reassessments. We may note here that despite the learned CIT(A) has given a specific finding that the receipt in question is capital receipt, reliance on Explanation (2) to section 153 is misplaced and such finding has reached finality, the Assessing Officer cleverly did not reproduce such findings of the learned CIT(A) in Paras 14 and 18 (supra) in the reasons recorded under section 147 of the Income-tax Act. These facts would show that initiation of reassessment proceedings have been done on non-existing reasons otherwise there was no reason for the Assessing Officer to note that income chargeable to tax has escaped assessment. It is settled law ..... X X X X Extracts X X X X X X X X Extracts X X X X
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