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TMI Blog2019 (12) TMI 989X X X X Extracts X X X X X X X X Extracts X X X X ..... on the ground that the Assessment Officer (AO) did not have the jurisdiction to issue the impugned notice beyond six years from the end of relevant AY - 2009-10 i.e. the maximum time limit provided for issuance of notice under Section 148 of the Act. 3. Before delving into the merits of the case, we may note that the Petitioner has not addressed any arguments with respect to the merits of case, i.e. the assumption of jurisdiction by the AO under section 147/148 of the Act. This has been specifically averred in the note of arguments filed in the Court. Revenue, also asserts that there is no pleading or ground in the petition questioning the validity of reopening viz Section 147/148 of the Act. Thus, we are not venturing into the contest- whether, or not, the impugned notice fulfils the requirement of Section 147. Consequently, we have confined and restricted our scrutiny only to the issue of limitation, in the context of applicability of Section 150 of the Act. Since the scope of challenge has been curtailed, the judgments relied upon by the Petitioner and the Revenue, dealing with the scope of notice under Section 147 have not been dealt with in the present case. Brief Facts: 4. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der to give effect to, the finding or direction contained in the order dated 16.07.2019, passed by the ITAT. Case of Petitioner: 8. Mr. M.S. Syali, learned Senior counsel for the Petitioner, contends that as per Section 149, notice under Section 147 could have been issued within a maximum period of 6 years from the end of the relevant assessment year. The period of six year in the present case i.e. for AY 2009-10 ended on 31.03.2016. Invocation of Section 150 of the Act, on the premise of giving effect to finding/direction contained in the order passed by the ITAT, w.r.t. AY 2008-09, is not valid and does not justify the extension of limitation of six years to re-open an assessment. He contends, it is trite law that the principle of res judicata is not applicable to income tax proceedings, and assessment for each year is a distinct and independent proceeding. The finding recorded in one assessment year is not required to be mandatorily followed in subsequent years, and the AO is duty bound to consider new facts placed on record by the assessee. Further, he contends that in its order dated 16.07.2019, the ITAT has not given any finding or direction with respect to the AY 2009-10. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssing Officer has reason to believe that any income chargeable to tax has escaped assessment for any assessment year, he may, subject to the provisions of sections 148 to 153, assess or reassess such income and also any other income chargeable to tax which has escaped assessment and which comes to his notice subsequently in the course of the proceedings under this section, or recompute the loss or the depreciation allowance or any other allowance, as the case may be, for the assessment year concerned (hereafter in this section and in sections 148 to 153 referred to as the relevant assessment year) : *** *** *** Explanation 2.-For the purposes of this section, the following shall also be deemed to be cases where income chargeable to tax has escaped assessment, namely :- (a) where no return of income has been furnished by the assessee although his total income or the total income of any other person in respect of which he is assessable under this Act during the previous year exceeded the maximum amount which is not chargeable to income-tax; (b) where a return of income has been fur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed 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 re-computation as is referred to in that sub-section relates to an assessment year in respect of which an assessment, reassessment or re-computation could not have been made at the time the order which was the subject-matter of the appeal, reference or revision, as the case may be, was made by reason of any other provision limiting the time within which any action for assessment, reassessment or re-computation may be taken. 153. (1) No order of assessment shall be made under section 143 or section 144 at any time after the expiry of twenty-one months from the end of the assessment year in which the income was first assessable: *** *** *** Explanation 2.-For the purposes of this section, where, by an order referred to in clause (i) of sub-section (6),- (a) any income is excluded from the total income of the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Assessing Officer (AO) disallowed the deduction claim u/s 80IC on the profits of Selaqui unit being the unit not eligible as the same was made by splitting its earlier manufacturing unit. The aggrieved assessee filed appeal before the Ld. CIT (A) who decided the matter in favour of the assessee vide his order dated 05-10-2011. The scrutiny proceeding for AY 2009-10 was under progress when the order of CIT (A) was pronounced. The assessee has claimed deduction of Rs. 2536835 being the profit from its industrial unit at Selaqui u/s 80IC during the AY 2009-10. Though the department filed the appeal before the ITAT against the decision of CIT (A) for AY 2008-09 before the then AO, in relation to the proceedings for AY 2009-10, the assessee pressed to follow order of CIT (A) in respect of allowability of deduction u/s 80IC for AY 2008-09 and also submitted that the decision of the Tribunal would be binding as on that date. The relevant portion of the submission made by the assessee vide letter dated 22.12.2011 is reproduced as under: "At the very outset, we would like to bring on record that the directions given by the Additional Commissioner of Income Tax, Range-23, New Delhi (co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tions of the ITAT is AY 2008-09 is also binding for the AY 2009-10. The case is not covered under the first proviso to Section 147 of the Income Tax Act. Considering the factual matrix, statutory provisions and legal principles, the undersigned has reason to believe that there has been an escapement of income to the tune of Rs. 2536835/- chargeable to tax for the assessment year 2009-10 and hence it is a fit case for initiation of proceedings in terms of section 147 of the I.T. Act, 1961. Accordingly, necessary approval u/s 151 of the I.T. Act, 1961 is solicited for issuance of notice u/s 148 of the I.T. for Asstt. Year 2009-10." 2. The reason of re-opening for A.Y. 2009-10 u/s 147 of the Income Tax Act, 1961 provided above is for your information." 12. On a perusal of the reasons for reopening, it emerges that, during the course of assessment for AY 2009-10, Petitioner has claimed deduction from its gross income under Section 80-IC of the Act, being the profit from manufacturing and production at its new industrial unit at Selaqui in Uttarakhand. Petitioner claimed that the entire manufacturing of assessee upto AY 2007-08, was done from its industrial unit at Kala Amb, Hi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld have been added to sub-section (1) thereof. The words relied upon are "section limiting the time", "any person", "in consequence of or to give effect to any finding or direction." A "finding", can be only that which is necessary for the disposal of an appeal in respect of an assessment of a particular year. The AAC may hold, on the evidence, that the income shown by the assessee is not the income for the relevant year and thereby exclude that income from the assessment of the year under appeal. The finding in that context is that that income does not belong to the relevant year. He 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 year of assessment in question. The expression "direction" cannot be construed in vacuum, but must be collated to the directions which the AAC can give under section 31 of 1922 Act. Under that section he can give directions, inter alia, under section 31(3)(b), (c) or (e ) or section 31(4) of 1922 Act. The expression "direction" in the proviso could only refer to the directions which the AAC or other Tribunals can issue under the powers conferred on him or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 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 treaed as A's income. A finding respecting B is intimately involved as a step in the process of reaching the ultimate finding respecting A. If, however, the finding as to A's liability can be directly arrived at without necessitating a finding in respect of B, then finding made in respect, of B is an incidental finding only. It is not a finding necessary for the disposal of the case pertaining to A. The same principles seem to apply when the question is whether the income under enquiry is taxable in the assessment year under consideration or any o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ead to considerable hardship and uncertainty. It is precisely for this reason that even while recognizing such powers, in special requirements of the statute, certain safeguards are provided by the statute which are zealously guarded by the courts. Interpreting such statutory provisions courts upon courts have held that an assessment previously framed cannot be reopened on a mere change of opinion. It is stated that power to reopening cannot be equated with review." (emphasis supplied) 16. On this issue, Revenue has relied upon the decision of this Court in Commissioner of Income Tax v. P.P. Engineering Works, (2014) 369 ITR 433 (Delhi), where the Court had the occasion to interpret Section 150 and 153. In the said decision, this Court also considered the judgment of the Supreme Court in Murlidhar Bhagwan Das (supra), and taking note of the legislative history including purpose behind enactment of Sub-Section (2) to Section 150, and explanations 2 and 3 to Section 153 of the Act, observed as under:- "4. Aggrieved, appellant-Revenue preferred an appeal before the Tribunal relying upon Section 153 of the Act. It is noticeable that the Commissioner of Income Tax (Appeals) did not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... her person shall, for the purposes of Section 150 as also Section 153, be deemed to be one made in consequence of or to give effect to any finding or direction contained in the said order..." 8. In Rural Electrification Corporation Ltd. (supra), Explanation (3) to Section 153 was applicable and in this case, Explanation 2 to Section 153 would be applicable, and the ratio and reasoning given in Rural Electrification Corpn. Ltd. (supra) would apply with equal force. Explanation 2 to Section 153 applies when income is found to be relating to some other year and Explanation 3 applies when income is found to be income of some other person. Otherwise, the two explanations are identical and serve the same purpose. 9. Similar view has been taken by Gujarat High Court in Kalyan Ala Barot v. M.H. Rathod (2010) 328 ITR 521, wherein effect of the two explanations read with sub-section (2) to Section 150 were considered and it was held:- "13. On a plain reading of sub-section (3) of section 153 of the Act, it is apparent that the same lifts the bar of limitation laid down under subsection (1) and subsection (2) thereof in respect of the classes of assessments, reassessments or recomputati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sight of Explanation 2 below section 153 which provides that where, by an order referred to in clause (ii) of sub-section (3), where 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 section 153, be deemed to be one made in consequence of or to give effect to any finding or direction contained in the said order. 19. On a combined reading of sub-section (1) of section 150 and sub-section (3) of section 153, it is apparent that in cases falling under clause (ii) of sub-section (3) of section 153 read with Explanation 2 thereunder, the provisions of subsection (1) of section 150 would be applicable and the bar of limitation under section 149 would not be applicable. While section 150(1) and section 153(3) contemplate issuance of notice under section 148 and completion of assessment, reassessment and recomputation respectively, in consequence of or to give effect to any finding or direction contained in an order passed by any authority in any proceeding under the Act by way of appeal, reference or revision, Explanation 2 to section 153(3) conta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... make it meaningful and purposeful, (d) an Explanation cannot in any way interfere with or change the enactment or any part thereof but where some gap is left which is relevant for the purpose of the Explanation, in order to suppress the mischief and advance the object of the Act it can help or assist the Court in interpreting the true purport and intendment of the enactment, and (e) it cannot, however, take away a statutory right with which any person under a statute has been clothed or set at naught the working of an Act by becoming an hindrance in the interpretation of the same." 18. Undoubtedly, the situations contemplated by the Explanation do not exist in the present case, however, it is to be borne in mind that Explanation 2 introduces a deeming concept and therefore, the scope of the Section is enlarged. This, however, cannot be construed to mean that Section 150 can be resorted to only for the situations which are covered by virtue of Explanation 2 to Section 153. 19. Before proceeding further, it would be necessary to first understand, the "finding" in question in the present case. The ITAT has, for AY 2008-09, held that the Assessee's Selaqui unit for which deducti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is examined in the light of the fact that no travelling allowance has been debited by the assessee to the P&L account during the year under assessment, it is difficult to believe that any manufacturing activities have been carried out at the Selaqui unit. Because earning the turnover of Rs. 11.11 crores with profit of Rs. 3.13 crores from the assembling / manufacturing unit is humanly not feasible without supervision of senior / junior functionaries of the ,assessee either from Kala Amb unit or from Head Office, Delhi nor any skilled worker has ever visited the Selaqui unit or proyed to be engaged. So, all these facts strengthen the findings returned by the AO' which have been overturned by the CIT (A) on the basis of whims and fancies. Since the assessee has transferred tools and machinery more than 20% of the total machinery employed' at Selaqui unit from Kala Amb unit it is violation of section 80IC (4)(ii) of the Act. 20. The factum of transfer of machinery by Grip Engineers Pvt. Ltd. Balabhgarh and ABB, Faridabad to the Kala Amb unit of the assessee on 23.04.2007 and 28.04.2007 respectively with which the assessee has alleged to have started manufacturing in the mont ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... T (A) for AY 2008-09. The Petitioner in its reply dated 22.12.2011 stated that any order passed by ITAT will be binding as on that date. The relevant portion is recorded in the following words:- "At the very outset, we would like to bring on record that the directions given by the Additional Commissioner of Income Tax, Range-23, New Delhi (Copy of which has not been enclosed with your notice under reply) are prejudicial to the assessee in as much as the same are beyond the scope of the Act and the application under Section 144A dated 30.11.2011 filed by the assessee. However, we assume that this must be in response to our application dated 30.11.2011 to him under Section 144A of the Income Tax Act, 1961 seeking directions to you to follow the order of the Ld. CIT(A) XXIII, New Delhi (Copy of which has been already placed on your record) in the assessee's own case for assessment year 2008-09. That, as such, the CIT(A) order before you till date the same is binding upon you. Your reason given to us for not following the said order being that you will be preferring an appeal to the Tribunal is academic in nature and as and when you do so the decision of the Tribunal would be bin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e decision of the Income-tax Officer given in a particular year does not operate as res judicata to opine : "The lifting of the ban was only to give effect to the orders that may be made by the appellate, revisional or reviewing Tribunal within the scope of its jurisdiction. If the intention was to remove the period of limitation in respect of any assessment against any person, the proviso would not have been added as a proviso to sub-section (3) of section 34, which deals with completion of an assessment, but would have been added to subsection (1) thereof." (emphasis supplied) 24. Further, reference has been made to the decision of Marubeni India v. Commissioner of Income Tax, 328 ITR 306 (Del), to submit that the ITAT could not have given a finding in respect of an AY which is not the subject-matter of the appeal before it. However, Petitioner lost sight of the fact that it is not a finding in respect of AY 2009-10, rather the aforesaid finding has a direct bearing on the assessment for AY 2009-10. While it is true that in terms of Section 254, while dealing with the proceedings arising out of AY 2008-09, ITAT did not have the jurisdiction to adjudicate on the ground not bef ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the power to issue notice under Section 148 in consequence of or giving effect to any finding or direction of the Appellate/Revisional Authority or the Court, is subject to the provision contained in Section 150(2), which provides that directions under Section 150(1) cannot be given by the Appellate/Revisional Authority or the Court if on the date on which the order impugned in the appeal/revision was passed, the re-assessment proceedings had become time barred. In other words, as per section 150(2), the Appellate Authority could give directions for the re-assessment only in respect of an assessment year, which was within the limitation stipulated under Section 148 in respect of which re-assessment proceedings could be initiated on the date of passing of order under appeal. In this regard, it would be profitable to refer to the decision of Praveen Kumari v. CIT (1999) 237 ITR 339 and Sharma (KM) v. ITO (2002) 254 ITR 772 (SC), wherein the Court held as under: "20. According to sub-section (2) of section 150 the provisions of sub-section (1) of that section shall not apply where, by virtue of any other provision limiting the time within which action for assessment or reassessment ..... X X X X Extracts X X X X X X X X Extracts X X X X
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