TMI Blog2013 (11) TMI 812X X X X Extracts X X X X X X X X Extracts X X X X ..... ny order passed by any authority in any proceedings under the Act by way of appeal, reference or revision or by a Court in any proceeding under any other law. The second ingredient is that the reopening must have been done for the purpose of giving effect to any 'direction' contained in the order passed by any authority. Assessment was reopened u/s 147 on 6/11/2009, while as per the provisions of sec. 149, no notice u/s 148 could have been issued to the assessee beyond 31/03/2008. A cursory look at the order of the Ld. CIT(A) for the A. Y. 2005-06 would reveal that no such "finding" or "direction" was contained therein which would justify raising the bar of limitation of making the assessment u/s 147 - No proceedings u/s 147 could have been initiated by the AO u/s 147 to give effect to a finding contained in the appellate order of CIT(A) for the A.Y. 2005-06. Ld. CIT(A) has not given any directions to make the assessment of the purchases or sundry creditors in question as income in the A.Y. 2001-02 - He has merely stated that the AO was free to examine the purchases, albeit within the four corners of law. The four corners of law prohibits the Assessing Officer from conducting ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... T(A) in the impugned order has rightly held that there was no such direction given by ld. CIT(A) in the order passed for assessment year 2005-06 as contemplated under section 150(1) of the Act to initiate re-assessment proceedings against the assessee for assessment year 2001-02. He supported impugned order of ld. CIT(A). 4. On consideration of the facts of the case and the submissions of the ld. representatives of the parties, we find merit in the contention of ld. A.R. In order to appreciate the contention of ld. A.R. we consider it necessary to state the relevant facts which have been stated by the ld. CIT(A) and the findings given by him in para 4.1 to 4.8. 5. The facts are that the original assessment for the assessment year under consideration was made under section 143(3) of the Act. Further, the assessment was made under section 143(3) of the Act for assessment year 2005-06 making addition of Rs.80,84,380/- on the ground that sundry creditors amounting to Rs.80,84,380/- were bogus. During the course of proceedings before the first appellate authority, remand proceedings were sought for and the Assessing Officer found that one of the creditor as on 31.03.05 namely M/s. S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iod of six years from the assessment year, as held by the impugned order that the action of the Assessing Officer to reopen the assessment under section 148 is not justified and is without jurisdiction. The ld. CIT(A) has also stated that there is no such direction given by the ld. CIT(A) vide order dated 28.08.09 while deciding the appeal for assessment year 2005-06 for reopening the assessment. We consider it prudent to state paragraphs 4.1 to 4.9 of the order of the ld. CIT(A) which read as under: "4.1 I have considered the facts of the case and the submissions made by the assessee. The main challenge of the assessee in Ground No. (1) is that the AO could not have issued the notice u/s 148 as it was time- barred since the said notice was issued beyond six years and could not have been said to have been issued for the purpose of making an assessment or reassessment in consequence of or to give effect to any 'finding' or 'direction' contained in the order passed by the Ld. CIT(A) in the appellate proceedings for the A.Y. 2005-06. Undisputably, the notice u/s 148 has been issued beyond the period of six years, which is not normally permitted under the Act in view of the provision ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2-03 and 2003-04 were assessed in a summary manner u/s 143(1) of the Act." 4.2 It would also be useful to reproduce the provisions of sec. 150 in order to examine the issue since it is this section which has been invoked by the AO for issuing the notice u/s 148 beyond the limitation period. "150 (1) Notwithstanding anything contained in sec. 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 have been made at the time the order which was the subject-matter at the appeal, reference or revision, as the case may be, was made be reason of any other provision limiting the time within which any action for a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rafulla Kumar Mallick (103 ITR 418) has held, while deciding in the context of Explanation 2 to sec. 153 that it is but natural that in order to invoke the fiction of Explanation 2, the higher authority must give a proper and definite finding that the impugned amount is of the income character, but it does not belong to the year under appeal and is, therefore, deleted. In Rajinder Nath (supra), the Hon'ble Supreme Court has held as follows :- "The expressions ''finding'' and "direction" are limited in meaning. A finding given in an appeal, revision or reference arising out of an assessment must be a finding necessary for the disposal of the particular case, that is to say, in respect of the particular assessee and in relation to the particular assessment year. To be a necessary finding, it must be directly involved in the disposal of the case. It is possible in certain cases that in order to render a finding in respect of A, a finding in respect of B may be called for. For instance, where the facts show that the income can belong either to A or B and to no one else, a finding that it belongs to B or does not belong to B would be determinative of the issue whether it can be taxed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndry creditors in the A.Y. 2005-06. The only finding given by the Ld. CIT(A) in the appellate order was that the credit balances were old and brought forward balances and the Assessing Officer had erred in disallowing the said old and brought forward balances by erroneously claiming that they pertained to the A.Y. 2005-06. His other finding on which he had based his decision was that the relevant purchases were made in the A.Yrs. 2000-01, 2001-02, 2002-03 and 2003-04. It would be important to note that the Ld. CIT(A) has given no finding with respect to the A.Y. 2001-02 that the sundry creditors were required to be added in the A.Y. 2001-02. In fact, no finding has even been given by Ld. CIT(A) that the impugned amount represented by sundry creditors was of the income character but was being deleted because it did not belong to the year in question and that these were of income character and were required to be assessed in the A.Y. 2001-02. Hence, it cannot be said that the Assessing Officer had reopened the assessment for the A.Y.2001-02 for the purpose of giving effect to any finding contained in the order passed by the Ld. CIT(A) since the said order did not contain any finding ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bservations of Ld. CIT(A) in the order for the A.Y. 2005-06 are also similar in nature. Hence, the said observations cannot be construed as "directions" as enshrined in sec. 150(1) of the I.T. Act, 1961. It is clear from the observations of Ld. C1T(A) that these are not in the nature of an order requiring positive compliance. The examination, if any, for reopening is left to the option and discretion of the Assessing Officer whether or not to make the examination. The Ld. CIT(A) has left the examination to the Assessing Officer, if in the opinion of the Assessing Officer, the facts and circumstances so warranted, and, if the law permitted him to do so. Hence, in view of the decision of the Hon'ble Supreme Court in Rajinder Nath (supra), the observations of Ld. CIT(A) cannot be described as "direction." Therefore, the Assessing Officer could not have reopened the assessment of A.Y.2001-02 beyond the limitation period taking the shelter of sec. 150(1) of the I.T. Act, 1961. Another important aspect is that Ld. CIT(A) has himself advised the Assessing Officer to be careful and to act strictly in accordance with the provisions of sec. 148, 147 and other relevant sections of the Act. Fu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 89-90 to A.Y. 1999-2000. In the writ petition filed by the assessee, the Hon'ble Bombay High Court, held as follows :- "Under s.150 of the Act, irrespective of the limitation prescribed u/s 149, reassessment proceedings can be initiated at any time if the initiation of reassessment is in consequence of or to give effect to any finding or direction contained in any order passed by any authority under the Act by way of appeal, reference or revision or by a Court in any proceeding under any other law. While construing similar provisions contained in the 1922, Act, the apex Court in the case of Murlidhar Bhagwan Das (supra) held that the word 'finding' can be only that which is necessary for the disposal of an appeal in respect of an assessment of a particular year. The apex Court further held that the appellate authority 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 assessment year in question. Similarly, the expression 'direction' has been construed by the apex Court to mean a direction which the appellate or revisional authority as the case may be, is empowered to give under the se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d to suggest that income has escaped assessment but the same cannot be brought to tax in the block assessment and accordingly if any directions were given for reopening of the assessments then it would be a totally different matter. However, in the present case, the CIT(A) has given a clear finding that there is no evidence or material on record to sustain the additions and, hence, the CIT(A) could not have given directions to the ITO to initiate reassessment proceedings. Therefore, the contention of the Revenue that the CIT(A) has directed the AO to initiate reassessment proceedings cannot be accepted. As held by the apex Court in the case of Rajinder Nath (supra), the observations of CIT(A) that the ITO is free to look and consider the disallowances, would simply mean, giving an option and discretion to the ITO to take or not to take action as he deems fit and such an observation cannot be said to be a 'direction' given by the CIT(A) as contemplated u/s 150 of the Act." The Hon'ble Bombay High Court held that "the CIT(A) had not given any finding or direction for reopening of the assessments and, therefore, the provisions of sec.150 were not applicable, consequently, the impu ..... X X X X Extracts X X X X X X X X Extracts X X X X
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