TMI Blog2023 (10) TMI 25X X X X Extracts X X X X X X X X Extracts X X X X ..... of the A.O who had confined the application of the order of the Tribunal, dated 13.09.2013 only to the order of reassessment u/s 143(3) r.w.s 147, dated 30.12.2008, which was the subject matter of appeal before the Tribunal, and had due to a bonafide omission failed to stretch the application of the said order to the original assessment order u/s 143(3), dated 29.11.2007 r.w order of CIT(Appeals), dated 22.01.2009. Also, it is not a case where the department is trying to take shelter of an explanation that the delay had taken place because the file was kept pending for several months/years due to a considerable degree of procedural red tape in the process. As there is an explanation as regards the bonafide reasons/omission on the part of the departmental officers to file the appeal within the prescribed period, therefore, the said explanation cannot be dismissed at the threshold. Considering the fact that there is an inordinate delay of 3966 days involved in filing the present appeal before us, and the sustainability of a huge addition of Rs. 821.75 crores (approx.) based on multi-facet additions /disallowances is at stake, we, therefore, respectfully following the judgment of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Judicial Member And Shri Arun Khodpia, Accountant Member For the Assessee : S/shri Praveen Khandelwal Praveen Goyal, CAs For the Revenue : Dr. Simran Bhullar, CIT-DR ORDER PER RAVISH SOOD, JM: The present appeal filed by the revenue is directed against the order passed by the CIT(Appeals), Raipur dated 22.01.2009, which in turn arises from the order passed by the A.O. u/s. 143(3) of the Income-tax Act, 1961 (for short Act ), dated 29.11.2007 for A.Y. 2006-07. The revenue has assailed the impugned order on the following grounds of appeal before us: 1. That the Ld. CIT(A) has erred in law in holding that the assessment order passed u/s. 143(3) of the Income-tax Act, 1961 dated 29.11.2007 (against which the appeal was filed by the assessee) was no more in existence. 2. That the Ld. CIT(A) has erred in law in not appreciating that whatever law that might have prevailed earlier on the said issue, after the enactment of the 2nd proviso to section 147 of the Income-tax Act, 1961 (which was inserted w.e.f. 01.04.2008) stating that Provided also that the Assessing Officer may assess or reassess such income, other than the income involving matters which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r u/s 147 r.w.s 143(3), dated 30.12.2008, the impugned order u/s 143(3), dated 29.11.2007 based on which the appeal was preferred before him did not exist anymore. For the sake of clarity, the observations of the CIT(Appeals) are culled out as under: The appeal has been instituted on 27-12-2007 from the order of Smt. Shital Shaswai Verma, ACIT-2(1), Raipur dated 29-11-2007. During the course of appellate proceedings on 27-11-2008, the appellant brought to my notice that subsequently the assessment has been reopened by issuance of notice u/s 148 dated 07-01-2008 and in response to the same, it has filed a return of income u/s 148 on 08-02-2008. Accordingly, a letter dated 27-11-2008 was written to the A.O requesting him to state the status quo of the assessment order against which the appeal was filed. Later on, during the course of appellate proceedings on 22-01-2009, Shri Praveen Khandelwal, CA and Id. AR filed a written submission dated 22-01-2009 stating that the A.O has passed a re-assessment order u/s 147 r.w.s. 143(3) for the relevant assessment year. A copy of the order was also enclosed. In view of the above facts, the order against which the appeal has been preferre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... but sustained the other additions/disallowances. Accordingly, the CIT(Appeals) vide his order dated 06.11.2009 partly allowed the assessee s appeal. 8. Being aggrieved, both the assessee company and the revenue assailed the order of the CIT(Appeals) before the Tribunal. The Tribunal observed that the A.O. had framed the reassessment vide his order passed u/s 143(3) r.w.s 147 of the Act, dated 30.12.2008, without issuing any notice u/s 143(2) of the Act within the prescribed period. Based on its observation that the A.O. had, despite inherent lack of jurisdiction, framed the reassessment vide his order passed u/s 143(3) r.w.s 147, dated 30.12.2008, the Tribunal quashed the same. For the sake of clarity, the observations of the Tribunal are culled out as follows:- 7.4 Therefore, there is no doubt that the amended provisions will apply to the pending returns as on 01.04.2008 irrespective of assessment year to which it pertains and notice u/s 143(2) can only be issued on or before 30/09/08 in that year In this case the notice was issued on 18/12/08 beyond time limit prescribed. As considered by the Hon ble jurisdictional High Court in the case of CWT vs. HUF of H.H. Late J.M. Sc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... - Add: As discussed above : Income offered by the assessee with respect to which there is no dispute Rs. 19,00,06,125/- Total income Rs. 8,40,75,70,697/- 10. Aggrieved with the order dated 16.01.2014 passed by the A.O giving appeal effect to the order of the Tribunal, wherein its income was determined at Rs. 840.75 Crores (approx.), the assessee company carried the matter in appeal before the CIT(Appeals). 11. Before the CIT(Appeals), the assessee company claimed that the A.O ought to have observed, viz. (i). the CIT(Appeals) had vide his order dated 22.01.2009 quashed the original assessment order passed u/s 143(3), dated 29.11.2007.; and (ii). the Tribunal had quashed the reassessment proceedings for want of valid assumption of jurisdiction vide its order dated 13.09.2013. Based on its claim above, it was stated by the assessee company that its original return of income and that filed in compliance to notice u/s 148 of the Act, both declaring nil income, had become final. However, the CIT(Appeals) did not find favor with the aforesaid claim of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thorities till the same is reversed or varied by a higher authority, which in the present case, it is not disputed that such finding of the Id. CIT(A) has been accepted by the department, therefore, there is no question of the original order subsisting.Thus, as the assessee has filed a return in pursuance of the notice under section 148 of the Act, the income in the return of income filed by the assessee pursuant to the said notice has to be accepted as final income. Notably, the Tribunal in its order dated 13.09.2013 has only cancelled the re-assessment order and not the reassessment proceedings. Therefore, the notice under section 147 is valid and the return filed pursuant thereto is also valid. As no change have been made to the said return of income, the return has become final. Hence, the income of the assessee has to be computed on the basis of said return of income. Therefore, we direct the AO to recompute the final income accordingly. 13. On receipt of the order of the Tribunal, dated 13.09.2013, which in turn arose from the order passed by the AO u/ss. 143(3)/147 of the Act dated 30.12.2008, wherein it was, inter alia, observed by the Tribunal that the CIT(Appeals) sho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the department had filed an application, dated Nil, seeking condonation of delay of 4,025 days involved in the filing of the appeal along with an affidavit of the Dy. CIT-4(1), Raipur, dated 05.02.2020. (ii). After that, the department filed an application (revised) marked as Annexure- A to the letter dated 04.01.2023 of the Dy. CIT, Circle-1(1), Raipur, along with an affidavit dated 04.01.2023 of the Dy. CIT-1(1), Raipur, seeking condonation of the delay of 3,599 days involved in filing the appeal. (iii). On the last occasion, the department had filed an application (revised for the second time) marked as Annexure - A to a letter dated 06.03.2023 of the Dy. CIT, Circle-1(1), Raipur, seeking condonation of delay of 3,966 days that was involved in the filing of the present appeal (though the same is not accompanied with any supporting affidavit ). 16. The application (revised for the second time) marked as Annexure - A to a letter dated 06.03.2023 of the Dy. CIT, Circle-1(1), Raipur, seeking condonation of delay of 3,966 days involved in the filing of the present appeal which supersedes the earlier applications reads as under: 17. As there is a delay i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d 22.01.2009 but was also fortified by the aforesaid judgments of the Hon ble Supreme Court. 19. The Ld. D.R further submitted that it was only when the Chief Commissioner of Income Tax, Raipur, while discussing the order passed in the case of the assessee company u/ss. 143(3)/147 of the Act, dated 30.12.2008, had observed that pursuant to insertion of the 3rd proviso to Sec. 147 of the Act, wherein the A.O was vested with the jurisdiction to assess or reassess such income, other than the income involving the matters which are the subject matters of any appeal, reference or revision, which is chargeable to tax and has escaped assessment, it was only then that the A.O taking notice of the aforesaid amendment had considered it expedient to file an appeal against the order of the CIT(Appeals), dated 22.01.2009. The ld. D.R. further submitted that as a substantial amount of tax was involved in the present appeal, therefore, a lenient view may be taken and the delay therein involved be condoned. The Ld. D.R., to support his aforesaid contention, had relied upon a plethora of judgments of the Hon ble Supreme Court, as follows: (i). Collector, Land Acquisition v. Mst. Katiji and I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ere was no malafides in delaying the filing of the present appeal by the department, therefore, in all fairness and the interest of justice, the delay involved in filing the present appeal may be condoned and the appeal be disposed of on merits. The ld. DR further submitted that as the failure to file the appeal within the prescribed time was not attributable to any lethargy, negligence, malafide, or callous conduct of the officers of the department but because of a bonafide misinterpretation of the law, therefore, the same in all fairness be condoned. 20. Per contra, Shri. Praveen Khandelwal, Chartered Accountant, the ld. Authorized Representative (for short AR ) for the assessee company submitted that as there was an inordinate delay involved in filing the present appeal by the department, i.e. 3966 days, for which it had not come forth with any cogent explanation, therefore, the same being barred by limitation was liable to be dismissed at the threshold on the said count itself. The Ld. A.R, in support of his contention above, had relied on the Hon ble Supreme Court s judgment, viz. Office of the Chief Post Master General Vs. Living Media India Ltd. (2012) 348 ITR 7 (SC). Re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thus, had rendered the same as suffering from a mistake apparent from record making it amenable for rectification u/s 154 of the Act. The ld. A.R submitted that when the A.O at the time of filing of application u/s 154 of the Act, i.e., on 16.01.2014, had rightly interpreted the observations recorded by the Tribunal in its order dated 13.09.2013 (supra), as per which the jurisdiction of the CIT(Appeals) while disposing of the appeal vide his order dated 06.11.2009 (arising from reassessment order u/ss. 143(3)/147, dated 30.12.2008) was limited to the issues which arose from the impugned reassessment order and could not be extended to such issues which were not the subject matter of the said appeal, then, in case the order of the CIT(Appeals), dated 22.01.2009 which had impliedly knocked down the additions that were made by the A.O u/s 143(3) of the Act, dated 29.11.2007, resulting to determining of its income at Rs. 821.75 Crores (supra) [as against the returned income of Rs. Nil (as revised)] by holding the order u/s 143(3), dated 29.11.2007 as non-existent, was not to be accepted, then the recourse available with him was to assail the order of the CIT(Appeals), dated 22.01.2009 b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 09 (supra), i.e., pursuant to the reassessment order u/s 143(3) r.w.s 147, dated 30.12.2008, the original order of assessment passed u/s 143(3), dated 29.11.2007 was wiped off was not approved by the Tribunal vide its order dated 13.09.2013 (supra), had however acted most carelessly and had not assailed the impugned order of the CIT(Appeals), dated 22.01.2009 (supra) for 6 years (approx.) thereafter, i.e. upto 31.01.2020. The Ld. A.R further submitted that the failure of the A.O., who admittedly on 16.01.2014 (supra) was very well aware of the fact that in case the additions/disallowances that were impliedly vacated by the CIT(Appeals), vide his order dated 22.01.2009 (supra) were not to be accepted, then, the said order was required to be challenged before the Tribunal, had, however, sat tight over the matter and had woken up from his slumber only as on 31.01.2020 (i.e., the date on which appeal against the order of CIT(Appeals), dated 22.01.2009 was filed with the Tribunal) i.e. 6 years after getting fully aware about the view taken by the Tribunal vide its order dated 13.09.2013 (supra). The Ld. AR, based on the facts mentioned above and drawing support from the judgment of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rein it is stated that the A.O held a firm conviction that, as observed by the CIT(Appeals), vide his order dated 22.01.2009 (supra) that was further supported by the judgments of the Hon ble Supreme Court in the case of V. Jaganmohan Rao vs. CIT/CEPT 175 ITR 373 (SC) and Income Tax Officer vs. K.L. Srihari (HUF) 250 ITR 193 (SC), pursuant to the reassessment order passed u/s 143(3) r.w.s 147, dated 30.12.2008 the original assessment order passed u/s 143(3), dated 29.11.2007 lost its existence and was effaced, therefore, there remained no occasion for him to have challenged any further the order of the CIT(Appeals), dated 22.01.2009 (supra), the same in our humble understanding is an incorrect view. We say so because the Hon ble Apex Court, in its order passed in the case of CIT Vs. Sun Engineering Works (1992) 198 ITR 297 (SC), had way back observed that to read the judgment in V. Jaganmohan Rao s case (supra) as if laying down that reassessment wipes out the original assessment and that reassessment is not only confined to escaped assessment or under-assessment but to the entire assessment for the year and starts the assessment proceedings de novo giving the right to an asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tified his aforesaid view, can also not be ruled out and summarily brushed aside. The fact that the Hon ble Apex Court in CIT Vs. Sun Engineering Works (supra) had clarified the principle laid down in the case of V. Jaganmohan Rao (supra), i.e. once an assessment is validly reopened by the issuance of notice under section 34 of the 1922 Act (corresponding to section 147 of the 1961 Act), then, it is only the previous under-assessment and not the original assessment proceedings which is set-aside, therein, fortifies the existence of subscribers to the second school of thought, though erroneous, i.e the original assessment order on a valid reopening of such assessment was effaced. For the sake of clarity, the relevant observations of the Hon ble Apex Court in the case of CIT Vs. Sun Engineering Works (supra) are culled out as under : 37. The principle laid down by the Supreme Court in V. Jaganmohan Rao s case (supra) therefore, is only to the extent that once an assessment is validly reopened by issuance of notice under section 34(2) of the 1922 Act (corresponding to section 148 of the 1961 Act), the previous under-assessment is set aside and the ITO has the jurisdiction and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he impugned order of the CIT(Appeals), dated 22.01.2009 before the Tribunal, the said justification, however, could not be stretched beyond 16.01.2014, i.e. the date on which the A.O had after well understanding the view taken by the Tribunal dated 13.09.2013, i.e. the additions made in the original assessment order u/s 143(3), dated 29.11.2007 could not be challenged in the appeal filed against the reassessment order u/s 143(3) r.w.s 147 of the Act, dated 30.12.2008, had filed an application u/s 154, dated 16.01.2014 with the CIT(Appeals) for bringing his order in conformity with the aforesaid observations of the Tribunal. After learning about the position of law as was canvassed by the Tribunal in its order dated 13.09.2013 (supra) the A.O had filed an application for rectification u/s 154 of the Act, dated 16.01.2014 with the CIT(Appeals) for withdrawing the relief of bad debts of Rs. 150.03 crores (supra) which the latter had earlier allowed to the assessee company while disposing off its appeal vide his order dated 06.11.2009 (supra). The A.O, in his application u/s 154, dated 16.01.2014, had claimed that as the issue of bad debts did not emanate from the reassessment orde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the aforesaid application of the A.O, and vide his order dated 23.04;2014 (supra) on being pointed out by the A.O rectified his order and withdrawn the relief of bad debts of Rs. 150.03 crore (supra) that was earlier allowed by him to the assessee company. We have purposively referred to the aforesaid fact to refute the claim of the Ld. A.R that the failure of the department to carry the order of the CIT(Appeals), dated 22.01.2009 (supra) in appeal before the Tribunal was due to the callous approach and lackadaisical conduct that the A.O had adopted in the matter of filing of the present appeal. Admittedly, there is no gainsaying that the A.O should have remained extra-vigilant, and after understanding the ramifications of the order of the Tribunal, dated 13.09.2013 (supra), as per which the additions/disallowances made by the A.O u/s 143(3), dated 29.11.2007 in absence of an appeal against the order of the CIT(Appeals), dated 22.01.2009 (supra) could not be sustained, thus, involving any further loss of time should have filed an appeal with the Tribunal (which was already substantially delayed) along with an application explaining the reasons leading to the delay therein invol ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isallowance of claim for deduction of bad debts : Rs. 150.03 crores (approx.); (iii). disallowance (on an ad hoc basis) out of a claim for deduction of repair maintenance of building expenses: Rs. 10.67 crores; (iv). disallowance (on an ad hoc basis) out of a claim for deduction of repair maintenance expenses of plant machinery: 82.06 crores (approx.); and (v). re-characterization of the interest income (claimed by the assessee as business income) as income from Other sources . Accordingly, the fact that the assessee company had itself assailed in its appeal against the reassessment order passed u/s. 143(3) r.w,s 147, dated 30.12.2008 before the CIT(Appeals), the additions/disallowances that were made by the A.O in the original assessment u/s 143(3), dated 29.11.2007, therein evidences that the assessee was also instrumental in the formation of and/or fortifying the conviction of the A.O that the additions made by the A.O u/s 143(3), dated 29.11.2007 had merged with the re-assessment order passed u/s 143(3) r.w.s 147, dated 30.12.2008. It is, thus, more or less, to some extent, a case of contributory negligence of both the parties to the present appeal, i.e. the assessee an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... could not be sustained. As observed by us hereinabove, as the assessee company had also assailed the additions/disallowance made u/s 143(3), dated 29.11.2007 in its appeal before the CIT(Appeals) against reassessment order u/s 143(3) r.w.s 147, dated 30.12.2008, therefore, till the order of the Tribunal dated 13.09.2013 (supra) there was a clear case of contributory negligence by both the parties before us, i.e the assessee company and the department. In so far the delay subsequent to the order passed by the Tribunal dated 13.09.2013 (supra) is concerned, it transpires that the same has to be attributed to the fact that the A.O was not extra-vigilant in not stretching the application of the said order to the original assessment u/s 143(3), dated 29.11.2007 r.w order of CIT(Appeals), dated 22.01.2009, and thus, appreciating the ramifications of the same to the sustainability of the additions/disallowances which were made vide order u/s 143(3), dated 29.11.2007 (supra) in case the order of the CIT(Appeals) dated 22.01.2009 (supra) was not carried in appeal before the Tribunal. Be that as it may, there is more or less some carelessness of the A.O leading to his ignorance about the ram ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... procedural red-tapisim in the process was no more to be accepted as a reasonable explanation for the delay involved in filing the appeal. Also, as a word of caution, the Court had observed that condonation of delay is an exception and should not be used as an anticipated benefit for government departments. For clarity, the observations of the Hon ble Apex Court in Chief Post Master General Vs. Living Media India Ltd. (supra) are culled out as follows : 12. It is not in dispute that the person(s) concerned were well aware or conversant with the issues involved including the prescribed period of limitation for taking up the matter by way of filing a special leave petition in this Court. They cannot claim that they have a separate period of limitation when the Department was possessed with competent persons familiar with court proceedings. In the absence of plausible and acceptable explanation, we are posing a question why the delay is to be condoned mechanically merely because the Government or a wing of the Government is a party before us. Though we are conscious of the fact that in a matter of condonation of delay when there was no gross negligence or deliberate inaction or lack ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , thus, had resulted to the delay in filing of the present appeal, therefore, the same in all fairness be condoned. The Ld. D.R had pressed into service the judgment of the Hon ble Apex Court in the case of CIT Vs. West Bengal Infrastructure Development Finance Corporation Ltd. (2011) 334 ITR 269 (SC). The Ld. D.R submitted that the Hon ble Apex court, in its aforesaid order, had observed that in all such cases where there is a delay on the part of the department, the High Court should consider imposing costs but certainly, it should examine the cases on the merits and should not dispose of cases merely on the ground of delay, particularly when huge stakes are involved. Carrying her contention further, it was submitted by the Ld. D.R that as multi-facet additions/disallowances of Rs. 821.75 crores (approx.) were at stake in the present appeal; therefore, the delay involved in the filing of the present appeal, which had occasioned for bonafide reasons /omissions be condoned and the appeal be admitted in the backdrop of the judgment of the Hon ble Apex Court in West Bengal Infrastructure Development Finance Corporation Ltd.(supra). We have given thoughtful consideration and, on a per ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... kept pending for several months/years due to a considerable degree of procedural red tape in the process. As there is an explanation as regards the bonafide reasons/omission on the part of the departmental officers to file the appeal within the prescribed period, therefore, the said explanation cannot be dismissed at the threshold. Considering the fact that there is an inordinate delay of 3966 days involved in filing the present appeal before us, and the sustainability of a huge addition of Rs. 821.75 crores (approx.) based on multi-facet additions /disallowances is at stake, we, therefore, respectfully following the judgment of the Hon ble Apex Court in the case of CIT Vs. West Bengal Infrastructure Development Finance Corporation Ltd. (supra) condone the same subject to the imposition of a cost of Rs. 20,000/-(rupees twenty thousand) on the department. 32. Apropos the merits of the case, the revenue appellant claims that the CIT(Appeals) vide his impugned order dated 22.01.2009 (supra) had erred in concluding that pursuant to the reassessment order u/s 143(3) r.w.s 147, dated 30.12.2008 the original order of assessment u/s 143(3), dated 29.11.207 was no more in existence. 3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der in V. Jaganmohan Rao (supra)] is found to be clearly misconceived. Apart from that, when the Hon ble Apex Court in CIT Vs. Alagendran Finance Ltd. (2007) 293 ITR 1 (SC) had clarified that for the purpose of computing the period of limitation for revision of an order by the Commissioner of Income-tax u/s 263 of the Act, on an issue that does not arise from the reassessment order, the period of limitation provided for under sub-section (2) of Section 263 of the Act would begin to run from the date of the order of assessment and not from the order of reassessment; therefore, the co-existence of both the original assessment order u/s 143(3) and re-assessment order u/s 143(3) r.w.s 147 stands impliedly approved by the Hon ble Apex Court. Accordingly, the view taken by the CIT(Appeals), vide his order dated 22.01.2009, that pursuant to the re-assessment order u/s 143(3) r.w.s 147, dated 30.12.2008, the original order of assessment passed u/s 143(3), dated 29.11.2007 did not exist anymore and was wiped off is found to be an incorrect view in light of the aforesaid judgments of the Hon ble Apex Court in CIT Vs. Sun Engineering Works (1992) 198 ITR 297 (SC) and CIT Vs. Alagendran Financ ..... X X X X Extracts X X X X X X X X Extracts X X X X
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