TMI Blog2014 (6) TMI 441X X X X Extracts X X X X X X X X Extracts X X X X ..... e added, as a result of these findings or directions, "was given an opportunity of being heard before the said order (i.e. appellate order) was passed”. The opportunity of hearing to the assessee in whose hands income of the assessee in appeal is to be added, it is condition precedent for giving any finding adverse to such assessee vis-à-vis the time limits for completion of his assessment, reassessment or recomputations are concerned - unambiguous scheme of Explanation 3 to Section 153(3) - an appellate authority does not do so, the affected assessee cannot be put to any disadvantage as far as the statutory time limits for completion of assessments, reassessment or re-computations - An opportunity to be so given should be a specific opportunity and the affected assessee is required to be put to notice on that issue - A general hearing given to the representative of the trusts in question cannot, in our humble understanding, be equated with such specific opportunity to the affected assessee and the affected assessee being put to notice about the conclusions adversely affecting him. Unless the assessee was given a specific opportunity of being heard, before the appellate order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ave to begin by taking note of some undisputed material facts. The assessee before us is a trustee in Gurunank Devji Trust, Guru Govind Singhji Trust and Guru Teg Bahadurji Trust. While adjudicating appeals in the cases of these trusts, learned CIT(A) held that these trusts were not valid trusts since they did not come into existence in accordance with Section 6 of Indian Trusts Act and, therefore, its income should be taxed in hands of all the trustees who were shown to be managing affairs of the trusts . In pursuance of the directions so given by the CIT(A) vide order dated 31st October 2005, the Assessing Officer passed the following order on 4th December 2006 : In order to the valuable directions of the learned CIT(A)- I, Agra, vide his appeal order no. 428,430,427,429 and 431/CIT(A)/ ITO 2(1) Agra/2005-06 dated 3rd October 2005, for the assessment order narrated hereinabove, the income shown in the hands of the trusts, has to be considered in the hands of the trustees in the equal proportion . Since the aforesaid assessee is a trustee in the trusts, i.e. Gurunanakdevji Trust, Guru Govind Singhji Trust and Guru Teg Bahadurji Trust, 37 Saket Colony, Agra, whic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e heard learned representatives on this issue, including related aspect of the scope of section 153(3), at considerable length, and we propose to deal with this aspect of the matter first. Let us, therefore, begun by trying to appreciate the scheme of things so far as assessments as a result of findings or directions in the appellate orders are concerned. 6. Section 153 of the Income Tax Act, 1961, provides as follows: Time-limit for completion of assessments and reassessments. [(1) No order of assessment shall be made under section 143 or section 144 at any time after the expiry of- (a) two years from the end of the assessment year in which the income was first assessable; or (b) one year from the end of the financial year in which a return or a revised return relating to the assessment year commencing on the 1st day of April, 1988, or any earlier assessment year, is filed under sub-section (4) or sub-section (5) of section 139, whichever is later :] [Provided that in case the assessment year in which the income was first assessable is the assessment year commencing [on the 1st day of April, 2004 or any subsequent assessment year], the provisions of clause (a) shall ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... one year , the words nine months had been substituted :] [Provided also that where the notice under section 148 was served on or after the 1st day of April, 2006 [but before the 1st day of April, 2010] and during the course of the proceedings for the assessment or reassessment or recomputation of total income, a reference under sub-section (1) of section 92CA- (i) was made before the 1st day of June, 2007 but an order under sub-section (3) of that section has not been made before such date; or (ii) is made on or after the 1st day of June, 2007, the provisions of this sub-section shall, notwithstanding anything contained in the second proviso, have effect as if for the words one year , the words twenty-one months had been substituted.] [Provided also that where the notice under section 148 was served on or after the 1st day of April, 2010 and during the course of the proceeding for the assessment or reassessment or recomputation of total income, a reference under sub-section (1) of section 92CA is made, the provisions of this sub-section shall, notwithstanding anything contained in the second proviso, have effect as if for the words one year , the words two years had been s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Commissioner or Commissioner or, as the case may be, the order under section 263 or section 264 is passed by the Commissioner on or after the 1st day of April, 2010, and during the course of the proceeding for the fresh assessment of total income, a reference under sub-section (1) of section 92CA is made, the provisions of this sub-section shall, notwithstanding anything contained in the second proviso, have effect as if for the words one year , the words two years had been substituted.] (3) The provisions of [sub-sections (1), (1A), (1B) 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, under sections 250, 254, 260, 262, 263 or 264 [or in an order of any court in a proceeding 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 mad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on which such application is made and ending with the date on which the order under sub-section (1) of section 245D is received by the Commissioner under sub-section (2) of [that section, or] [(vi) the period commencing from the date on which an application is made before the Authority for Advance Rulings under sub-section (1) of section 245Q and ending with the date on which the order rejecting the application is received by the Commissioner under sub-section (3) of section 245R, or (vii) the period commencing from the date on which an application is made before the Authority for Advance Rulings under sub-section (1) of section 245Q and ending with the date on which the advance ruling pronounced by it is received by the Commissioner under sub-section (7) of [section 245R, or]] [(viii) the period commencing from the date on which a reference or first of the references for exchange of information is made by an authority competent under an agreement referred to in section 90 or section 90A and ending with the date on which the information requested is last received by the Commissioner or a period of one year, whichever is less,] or; [(ix) the period commencing from the date on which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der, provided such other person was given an opportunity of being heard before the said order was passed. 7. One common thread, irrespective of many amendments to this Section, so far as time limits set out under section 153, for completing the assessments, reassessments and recomputations, are concerned, is that these time limits do not apply in the cases 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, under sections 250, 254, 260, 262, 263 or 264 or in an order of any court in a proceeding otherwise than by way of appeal or reference under this Act . These are the cases in which such assessments, reassessments and recomputations can be done at any time, subject only to the condition that these assessments, reassessments and recomputations can be done within the end of one year from the end of the financial year in which the said order, as a consequence of, or to give effect to findings or directions contained therein, is received by the Chief Commissioner or Commissioner concerned or. In the case of the order under section 263 or section 264, the or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iation . In other words, the CIT(A), as also this Tribunal, does indeed have the powers to issue such directions. The powers to give such directions is one thing, but relaxation in time limit for completion of assessment under section 153(3) is quite another thing. That relaxation under section 153(3), as evident from Explanation 3 to Section 153(3), can only come into play when the person in whose hands income is to be added, as a result of these findings or directions, was given an opportunity of being heard before the said order (i.e. appellate order) was passed . 9. When our understanding of the legal position, as set out above, was put to the learned Departmental Representative, he submitted that an opportunity of hearing having been granted to the representatives of the trusts in question, as was admittedly given by the learned CIT(A) and in view of the position that no trusts existed in the eyes of the law, is required to be treated as hearing to the representatives of the trustees. On the basis of this reasoning, according to the learned Departmental Representative, conditions set out in Explanation 3 to Section 153(3) were satisfied and the order passed by the Assessin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ese discussions, as also bearing in mind entirety of the case, we are of the considered view that unless this assessee was given a specific opportunity of being heard, before the appellate order in the cases of Gurunanakdevji Trust, Guru Govind Singhji Trust and Guru Teg Bahadurji Trust was passed or unless the impugned order was passed within the time limits set out under section 153(1) or (2), the impugned order cannot be said to be sustainable in law. The time limit under section 153(1) and (2) are clearly not satisfied on the facts of this case since it is not a case of serving the notice under section 148, the assessment year before us is 2002-03, a valid return was duly filed and processed, and yet the impugned order was passed on 4th December 2006 (i.e. well after two years from the end of the relevant assessment year). The scheme of the Income Tax Act fiercely guards the rule of finality to income tax proceedings, whether in assessment, reassessment, revisions, rectifications or any other proceedings, and once the time limit for that course of action is over, the finality thereto cannot be disturbed except under the specific provisions of the Act. The only thing which can h ..... X X X X Extracts X X X X X X X X Extracts X X X X
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