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DCIT, Circle-48, Kolkata Versus Sanjay Jaiswal and Vica-Versa and Sanjay Jaiswal Versus JCIT, Range-48, Kolkata

2016 (5) TMI 324 - ITAT KOLKATA

Validity of assessment u/s 153 - Time limit for completion of assessments and reassessments - whether the assessment is barred by limitation of time in terms of section 153(2A) and is a nullity? - Held that:- We find from the findings given by the tribunal in its order dated 28.9.2007 it had not given any direction or finding to the Learned AO to give effect to its order , but instead had set aside the entire assessment to make it afresh by following due process of law for the purpose of examina .....

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he assessment in the case ought to have been made. There was no finding or direction given thereon. The tribunal remitted the assessment for determining afresh the issues raised by the Learned AO in the assessment appealed against. Since there were no other additions or issues in dispute except the two additions ( i.e addition on account of gross profit and bogus purchases) made in the earlier assessment, the order asking for deciding the issues afresh and recomputing the total income repeating .....

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iding the issues involved in the additions made therein, it implies indisputably a mandate for fresh determination of the total income. When the order of the Tribunal nullifies the total income assessed or determined in the original order of an assessment, it definitely means the setting aside of the original order and a fresh assessment determining the total income. In effect, the tribunalís order annihilates the earlier assessment as the total income determined by it no more subsists.

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sessee: Shri Gopal Ram Sharma, Advocate, ld.AR ORDER SHRI.M.BALAGANESH, AM These appeals and cross objection of the assessee as well as the revenue arise out of the common order of the Learned CIT(A) in Appeal No. 18/CIT(A)- XXX/Circle-48/2009-10 dated 28.5.2010 for the Asst Year 2004-05 against the order of assessment framed by the Learned AO u/s 143(3) / 254 of the Income Tax Act, 1961 (hereinafter referred to as the Act ). 2. At the outset, the cross objection of the assessee is taken as it r .....

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of the case should have held that the assessment is barred by limitation of time in terms of section 153(2A) and is a nullity. 2.2. The brief facts of this issue is that the original assessment was completed u/s 143(3) of the Act determining total income of ₹ 47,94,060/-. On first appeal, the assessee was granted partial relief. Both assessee as well as the revenue preferred further appeal before this tribunal and the tribunal vide its order dated 28.9.2007 had restored the two additions .....

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s plea was also taken by the Learned AR before the assessing officer itself vide his letter dated 18.2.2009. However, the Learned AO did not consider this preliminary objection of the assessee and proceeded to make the same old additions (i) on account of gross profit amounting to ₹ 1,19,177/- and (ii) on account of bogus purchases amounting to ₹ 42,81,239/-. The assessee contested the fresh assessment before the Learned CITA both on limitation as well as on merits. The preliminary o .....

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also stated that no fresh assessment was made u/s 143/144 of the Act but the order was passed u/s 254 of the Act by giving effect to the ITAT s order. It was further mentioned by the Learned AO that time limit u/s 153(2A) of the Act will not apply to a situation where specific directions were given by the Tribunal and assessment itself was not set aside. He stated that the present case of the assessee is covered by the provisions of section 153(3) of the Act where no limitation of time is provid .....

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essee. The Learned AR argued reiterated the submissions made by him before the lower authorities. 2.4. In response to this, the Learned DR argued that the Tribunal in its first order had not used the set aside or cancelled and hence the same would not fall u/s 153(2A) of the Act. He argued that it is only restoring back to the file of the Learned AO for verification of comparable cases and sundry creditors. He placed reliance on the decision of the Hon ble Apex Court in the case of Rajasthan R.S .....

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ibunal order in ITA No. 1567/Kol/2007 (assessee appeal) and ITA No. 1430/Kol/2007 (revenue appeal) for Asst Year 2004-05 dated 28.9.2007 to understand the clear language and understanding of the issue :- 6. We have given our careful consideration to the rival submissions made before us and have perused the orders of tax authorities. We have also considered the paper book filed by the ld. Counsel for the assessee. The assessee has disputed the order of authorities below in estimating the gross pr .....

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he assessee -has prayed for one more opportunity to enable the assessee to explain his case in case of both the grounds raised by him. The Revenue has also stated that the ground raised by it should be restored back to the file of A.O. as the same relates to the connected ground no. 2 of assessee's appeal. We, therefore, after considering the facts and circumstances of the case find that since the comparable cases while estimating the gross profit was not confronted to the assessee and the a .....

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ct accordingly. 2.5.1. It would be relevant to reproduce the provisions of section 153(2A) and section 153(3) of the Act at this juncture. Section 153 - Time limit for completion of assessments and reassessments (2A) Notwithstanding anything contained in sub-sections (1) [, (1A), (1B)] and (2), in relation to the assessment year commencing on the 1st day of April, 1971, and any subsequent assessment year, an order of fresh assessment in pursuance of an order under section 250 or section 254 or s .....

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issioner: Provided that where the order under section 250 or section 254 is received by the Principal Chief Commissioner or] Chief Commissioner or [Principal Commissioner or] Commissioner or, as the case may be, the order under section 263 or section 264 is passed by the [ Principal Chief Commissioner or] Chief Commissioner or [Principal Commissioner or ] Commissioner, on or after the 1st day of April, 1999 but before the 1st day of April, 2000, such an order of fresh assessment may be made at a .....

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ne year , the words nine months 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, 96[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 section .....

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ceived by the department on or before 12.12.2007 which is evident from the fact that the first notice was issued by the Learned AO commencing the proceedings pursuant to tribunal s order on 12.12.2007. He stated that the notice u/s 142(1) and 143(2) of the Act were issued on the assessee on 12.12.2007 calling for certain details pursuant to the order of Tribunal. Hence it can safely be concluded that the tribunal order had been served before 12.12.2007 and hence the time limit for completion of .....

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urpose, it would be relevant to decide as to whether the tribunal had set aside the old assessment or merely given a finding or direction to the Learned AO to give effect to the order of the tribunal. 2.5.3. We find from the findings given by the tribunal in its order dated 28.9.2007 as reproduced supra, it had not given any direction or finding to the Learned AO to give effect to its order , but instead had set aside the entire assessment to make it afresh by following due process of law for th .....

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pective of historical background of this enactment. It would be seen that the legislature from its experience found that the fresh assessment in the cases of orders of setting aside used to be completely neglected and to be shelved ad infinitum to gather dust for decades. This caused a mounting backlog as there was no limitation of time for completion of such assessment. This necessitated the introduction of limitation to end this potential mischief. If the Learned AO s pleading is taken as corr .....

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sment on those limited scores, may contain guidelines for the fresh assessment to be made. That does not mean that the assessment redone is not a fresh assessment order. Hence the view as canvassed by the Learned AO cannot be tenable in the face of the fact that even nullifying a component or a few components of total income in the assessment order under appeal means nullifying the assessment because any exercise, by the import of section 143(3), for determining the total income of an assessee i .....

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sues in dispute except the two additions ( i.e addition on account of gross profit and bogus purchases) made in the earlier assessment, the order asking for deciding the issues afresh and recomputing the total income repeating the procedure of assessment correctly amounts to a fresh assessment. We hold that the assessment means in the context of the scheme of the Act the determination of the total income to be brought to the charge of tax. The total income is the sole object of the whole exercis .....

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ans the setting aside of the original order and a fresh assessment determining the total income. In effect, the tribunal s order annihilates the earlier assessment as the total income determined by it no more subsists. 2.5.6. The Learned AO by substituting his old order by passing a fresh order on 25.3.2009 had rendered the first order inoperative. The Learned AR argued that the word restore means returning the matter for assessment to the point prior to its completion in the first instance. Set .....

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termine the total income. He again reiterated that may be, the Tribunal while nullifying a decision of the Learned AO may indicate some procedural guidelines or the needful focus of attention in making such fresh assessment but that cannot be equated with the specialized meaning of the words finding or direction occurring in sub-section (3). We are in agreement with the said arguments of the Learned AR and hold that the said words finding or direction in sub-section (3) refers to the situation w .....

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sub-section (2A) and not sub-section (3) of section 153 of the Act. We find that this construction alone matches and harmonizes with the intent behind enacting the limitation u/s 153(2A) of the Act. So if the construction by the Learned AO is taken as correct, then the very purpose of enactment prescribing limitation for completion of assessment u/s 153(2A) of the Act becomes otiose and redundant. By no means, the legislature can be said to have given latitude to the massive piling of such set-a .....

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essment was collected by the Learned AO by coercive action. The assessee applied for refund consequent to the cancellation of the assessment to be made afresh. The Learned AO did not allow the refund on the strength of the statutory provision in the proviso to section 240 of the Act. He argued that the Learned AO had thus contradicted himself by saying in the remand report that the present assessment is not a case of assessment being set aside. He argued that by Learned AO s logic, he could not .....

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iewed very strictly and no words can be read into the section. We are also in agreement with the said proposition that the taxing statutes are to be viewed very strictly. But in the instant case, there is no question of inserting of words into the section as argued by the Learned DR. 2.5.10. We hold that it makes no sense in distinguishing the restoration of an order from setting aside an order. Thus the Learned CITA is in error by saying that by restoring an assessment , the Tribunal did not se .....

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r is one setting aside the order for assessment de novo. Thus we find that the Learned AO had self repudiated by stating that the Tribunal had not set aside the order. 2.5.11. We find that the following decisions relied on by the Learned AR are very well placed and which are squarely applicable to the facts of the instant case:- (a) Decision of Hon ble Delhi High Court in the case of CIT vs Bhan Textile P Ltd reported in (2008) 300 ITR 176 (Del), wherein it was held that :- ASSESSMENT - LIMITATI .....

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re opportunity could be given to the assessee to file evidence and held that ground No. 2 of the appeal was treated as allowed. The Assessing officer issued a notice under section 143(2) of the Income Tax Act, 1961 , for making a fresh assessment. The assessee contended tha the notice was barred by limitation under the provisions of section 153(2A) of the Act. Since the assessee did not co-operate with the Assessing Officer, the assessment, as originally framed, was once again made by the Assess .....

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or cancelled since ground No. 2 of the appeal filed by the assessee was allowed, by necessary implication, the assessment order was set aside to the extent it did not give the assessee opportunity to place its evidence. Therefore, section 153(2A) was applicable. (b) Decision of the Hon ble Gujarat High Court in the case of Instruments and Control Co. vs CCIT and Others reported in (2012) 349 ITR 571 (Guj) , wherein it was held that : 25. To our mind, the case on hand would fall under sub-sectio .....

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nsideration after summoning the two witnesses and carrying out such probe as may be necessary. We may record that such commissions paid to the two agencies was the sole dispute between the assessee and the Department. In the original assessment, the Assessing Officer discussed only this issue and made corresponding disallowance. In essence, thus, the Assessing Officer was required to pass a fresh order of assessment which was necessary on account of an order passed by the Tribunal under section .....

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he Tribunal s order, therefore, must be treated as having abated. In that view of the matter, the declaration prayed for by the petitioner must be granted. 26. In the result, the petition is allowed. The assessment proceedings for the assessment year 1988-89 in the case of the present assessee is declared to have abated as having become time-barred. The excess tax paid by the petitioner under the original assessment framed by the Assessing Officer must be refunded with consequential effect. By w .....

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despite the Tribunal s order dated July 5, 1994. 27. In the result, the petiion is allowed and disposed of in the above terms. (c ) Decision of the co-ordinate bench of Agra Tribunal in the case of Pooran Singh vs ACIT reported in (2006) 100 TTJ 1121 (ITAT Agra) dated 30.11.2005 , wherein it was held that :- 12. From the reading of the aforesaid provisions it is clear that the assessment is to be made when it is set aside within 2 years from the end of the financial year in which the order sett .....

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ncome of the assessee. Whether this will tantamount to setting aside the assessment relating to those issues. Whenever an assessment is set aside always generally directions and findings are given by the appellate authority . Therefore we cannot hold that the provisions of s. 153 (2A) will not apply to such cases. In our opinion, it is not essential that the word 'set aside' should be written In e order, where the order has been set aside, the order has been set aside must be borne out o .....

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e in moneylending business, therefore, he directed the AO to give allowance for the same for working out the total investment an a so directed that for this purpose peak credit should be worked out and allowance must be given for the past savings made by the assessee. For working out the interest income, CIT(A) directed that the rate of 24 per cent should be applied and the business expenditure for earning such income should be deducted for working out the net income from interest. Thus directio .....

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ue to the file of the AO to be decided afresh after giving the hearing to the party and following the direction of the CIT(A) . This also implies that the assessment relating to these issues stand set aside and to be decided afresh in accordance with the directions of the CIT(A).) 14. In view of the aforesaid discussion, we are of the view that the setting aside the assessment will include therein even the assessment, which has been set aside on some of the issues because an assessment can be re .....

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