TMI Blog2003 (5) TMI 194X X X X Extracts X X X X X X X X Extracts X X X X ..... 4. The assessee is an individual and is proprietor of two concerns viz., M/s. Bio Basic Industrial Undertaking (Daman) and M/s. Basix (India). The original return of income for the assessment year 1994-95 was filed on 27-10-1994 declaring total income of Rs. 6,74,750. The return of income was processed under section 143(1)(a) on 20-12-1994. Thereafter the assessment under section 143 was made on a total income of Rs.21,64,320. As a result of survey conducted under section 133A of the Income-tax Act, 1961 on 23-10-1997, it transpired that income chargeable to tax escaped assessment mainly on account of wrong deduction of Rs. 23.85 crores under section 80-IA of the Income-tax Act, 1961. Therefore, after recording reasons the Assessing Officer issued a notice under section 148, which was served on the assessee on 25-3-1998. In response to this notice, return of income was filed on 28-10-1998 declaring income of Rs. 18,67,667. Subsequent to the filing of return of income, the assessee filed a writ petition No. 3016/99 before the Honourable Bombay High Court on 17-12-1999 challenging the issue of notice under section 148. The writ petition was admitted on 18-1-2000 and interim stay was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Grindlays Bank Ltd. v. ITO [1980] 122 ITR 55 (SC) (iii) Limitation saved by section 12 of the Limitation Act and relies on CST v. Madan Lal Sons AIR 1977 SC 523. On 31-7-2000, the Assessing Officer completed the Assessment. 5. During the course of re-assessment proceedings, the assessee never raised any objection to the effect that the time for completion of the assessment expired on 4-6-2000. This objection was taken for the first time before the CIT(A). The learned CIT(A) called upon the Assessing Officer to submit his report on the objection raised by the assessee. The Assessing Officer replied that the Central Government advocate, Ministry of Law vide the letter dated 19-7-2000 opined that in the present case the provisions of section 153(3) are applicable and therefore, re-assessment can be completed at any time without any bar or limitation. The issue was argued before the learned CIT(A) on behalf of the assessee in detail and ultimately vide para 4.13, the learned CIT(A) dismissed the ground of appeal raised by the assessee, in this regard with the following observations:- "I have considered the submissions made by the Learned Representative for the Appellant and als ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... court in a proceeding otherwise than by way of appeal or reference under this act]; Explanation 1.-In computing the period of limitation for the purposes of this section- (i)...... (ii) the period during which the assessment proceeding is stayed by an order or injunction of any or" 7. Shri S.E. Dastur commenced his arguments by submitting that section 153(3) of the Income-tax Act, 1961 is applicable in a case where the assessment or re-assessment is made in consequence of or to give effect to any "finding or direction" contained in an order of any Court. It is pointed out that the Revenue authorities, on the basis of the opinion of Central Government Advocate, are of the view that the bar of limitation does not apply to this case. It is pointed out that this view of the Revenue authorities flows from the Law Ministry's opinion dated 19-7-2000. Since, this opinion is the very basis for the re-assessment made on 31-7-2000, it would be appropriate, at this stage, to reproduce the relevant portion of the opinion. Copy of which is compiled at pages 16-20 of assessee's paper book. The relevant portions are as under:- "It is pertinent to observe that the High Court of Mumbai in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessment order on a specific date and not before the said assessment order passed in pursuant to the court direction not barred by limitation. The Supreme Court further observed as such "the interest of justice requires that any undeserved or unfair advantage gained by a party invoking the jurisdiction of the court, by mere circumstances, that it has initiated a proceeding in the court, may be neutralized. The simple fact of institution of litigation by itself should not be permitted to confer the advantage on the party responsible for it". Another decision of the Calcutta High Court [reported in (1978) 114 ITR 379] in the matter of Cachar Plywood Limited, which is also relevant and applicable in the present reference, wherein the Calcutta High Court has laid down that wherein the court is in seisin of the such proceeding the time limit of assessment was provided in sub-section (2) of section 153 shall have no application to the assessment which may be made at any time in consequence or to give effect to any finding or direction contained in order of the court in the said proceeding". 8. The learned counsel for the assessee pointed out that, alternatively, the Law Ministry expre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Bom.) 10. Referring to the case of Pt. Hazari Lal, the learned counsel for the assessee pointed out that in that case re-assessment proceeding were initiated against the assessee for the assessment year 1947-48 under section 34 of Indian Income-tax Act, 1922. The learned counsel for the assessee invited our attention to the ratio of the decision of Honourable Allahabad High Court the relevant portion of which is reproduced below :- "(ii) That the word 'finding' in law had a definite meaning and that was, as indicated by the provisions of the Code of Civil Procedure, that a finding was a decision of a court on material question in issue. There was no other wider meaning of the Word 'finding' in common use, which could be applied to that word as used in the proviso to section 34(3). The word 'finding' did not include any state of fact contained in a decision irrespective of whether that fact was or was not material to the decision and whether the court or the tribunal, when recording the decision, had any occasion to hear the parties on that question of fact and to record a decision on it instead of merely reciting it as a statement of fact. It covered only material question whic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (3)(ii) of the Act, it is now well settled that it must be an express direction necessary for the disposal of the case before the authority or court. It must also be a direction which the authority or court is empowered to give while deciding the case before it. The expressions "finding" and "direction" in section 153(3)(ii) must be accordingly confined. Section 153(3)(ii) is not a provision enlarging the jurisdiction of the authority or court." 12. Leading us through the case of Muralidhar Bhagawan Das, the learned counsel for the assessee invited our attention to the relevant observations of the Court which are reproduced below :- "(v) That the expressions "finding" and "direction", in the second proviso to section 34(3), meant respectively, a finding necessary for giving relief in respect of the assessment for the year in question and a direction which the appellate or revisional authority, as the case may be, was empowered to give under the sections mentioned in that proviso. A "finding", therefore, could only be that which was necessary for the disposal of an appeal in respect of an assessment of a particular year. The Appellate Assistant Commissioner might hold, on the ev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... period of limitation. In such a case, section 153(3) has no applicability, as there is no finding or direction by a Court. The learned counsel for the assessee has also relied on the Honourable Bombay High Court decision in the case of Grasim Industries Ltd. [Writ Petition No. 665 of 1999, dated 17-4-2000] copy of which has been made available. The relevant portion of the judgment contained in para 14 is reproduced below :- "Before concluding, it may be mentioned that, in the present matter, notice under section 148 was given on 28-6-1996. Under section 153(2), the department was required to pass an order of assessment on or before 31-3-1999. The writ petition was filed on 8-3-1999. The assessment proceedings were stayed by the order of the Division Bench of this Court on 10-3-1999. Therefore, the proviso to Explanation (1) to section 153 of the Income Tax Act would apply. Under the said proviso, in cases where allegedly, after exclusion of the period as per clause (ii) to Explanation (1), the period of limitation referred to in section 153(2) available to the Assessing Officer for making an order of reassessment is less than 60 days then, in such a situation. The remaining peri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for the period from 24-3-1969 when the Supreme Court dismissed the appeal, till notice reviving proceeding was issued by the Income-tax Officer on 19-8-1969. We are informed at the Bar that only 29 days were available to the department on 24th March, 1969 when appeal was disposed of by the Supreme Court. The "undertaking" cannot give any advantage to the department after expiry of 29 days. If representative of the department in the Supreme Court did not care to intimate the decision of the Supreme Court to the department, the said circumstance cannot save limitation after 29 days subsequent to 24th March, 1969. It was obviously the duty of the department itself to make necessary arrangement to get itself informed of what ultimately happened in the Supreme Court. If they chose not to move in the matter, fault is theirs. The case apparently is one of gross negligence on the part of the officer concerned. Suffice it to note that the Respondents cannot rely on this undertaking of the petitioner given through their counsel in this court on 17th January, 1969 for this purpose. We are unable to agree with the Single Judge that undertaking is of absolute nature the petition, in our opinio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ned counsel for the assessee pointed out that in that case the assessee's lands were acquired by the Government and compensation was awarded to it in 1965. On an appeal, the High Court enhanced the compensation and the assessee received such enhanced compensation and interest on it in January 1975. On account of this finding of the High Court, ITO started proceedings under section 147 of the Income-tax Act, 1961. In this context, it was held that the proceedings were not barred by limitation in view of section 153(3)(ii) of the Income-tax Act, 1961. The relevant portion of the ratio is reproduced below :- "The language of section 150, section 153(3)(ii) are not similar and they govern entirely different situations. Section 150 is intended to give effect to the orders made by superior authorities and superior courts without any period of limitation. Section 153(3)(ii) has not been enacted for that purpose and the construction placed on section 150 will not apply to section 153(3)(ii). The first part of section 153(3)(ii) deals with a finding or direction contained in an order made under sections 250, 254, 260, 262, 263 and 264 of the Act. When there is an order made under any of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d court had been conferred such jurisdiction which it should exercise in national interest as otherwise taxes payable for these years would be irrecoverable for no fault of the revenue : Held further, that section (3) of the section 153 was not a mere proviso to its earlier sub-sections. The sub-section conferred plenary powers on the appropriate authority to pass appropriate directions in regard to assessment, reassessment or recomputation which could be made and completed at any time in consequence of any finding of court or to give effect to its direction as might be made. In such cases, the provisions of sub-sections (1) and (3) were not applicable at all so that sub-section (3) which by its own force excluded operation of the earlier sub-sections cannot be said to be a mere proviso to them. Even a proviso may in appropriate cases be considered as a substantive provision dealing independently with matters specified therein and not as qualifying the main or preceding provision." 19. Shri Dastur pointed out that the re-assessment in the above-mentioned case was permitted in special circumstances and under specific direction of the Court under section 153(3) of the Income-ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... situations, which fall outside their purview. These provisions do not adumbrate any general principles of substantive law nor do they confer any substantive rights on litigants and, therefore, cannot be permitted to have greater application than what is explicit or implicit in them." 21. The learned counsel for the assessee has referred to Honourable Supreme Court decision in the case of Sakuru v. Tanaji AIR 1985 SC 1279. The learned counsel for the assessee has relied upon the following observations at page 1279 of AIR :- "The provisions of the Limitation Act, 1963 apply only to proceedings in "Courts" and not to appeals or applications before bodies other than Courts such as quasi-judicial Tribunals or executive authorities, notwithstanding the fact that such bodies or authorities may be vested with certain specified powers conferred on Courts under the Codes of Civil or Criminal Procedure. But even in such a situation the relevant special statute may contain an express provision conferring on the appellate authority the power to extend the prescribed period of limitation on sufficient cause being shown by laying down that the provisions of section 5 of the Limitation Act sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an Mai Sons [1974] 96 ITR 390. To emphasise the point further, the learned counsel for the assessee submitted that it is mandatory for Courts to consider limitation even if the parties do not raise the issue. For this preposition reliance is placed in the case of Chaturbhuj Sahay v. Muhammed Habib AIR 1920 Pat. 280. The learned counsel for the assessee, further, submitted that the period prescribed under the Income-tax Act, 1961 for assessment or reassessment is not merely a period of limitation but it imposes a fetter upon the powers of the Assessing Officer to bring to tax escaped income. For this proposition, reference is made to the Honourable Supreme Court decision in the case of S.S. Gadgil v. Lai Co. [1964] 53 ITR 231. 24. Reverting back to the question of applicability of section 12(2) of the Limitation Act, Shri Dastur pointed out that the aforesaid provisions are applicable to an appeal or an application for leave to appeal or for revision or for review of a judgment. Apparently, the section does not apply to an assessment. Similar is the legal position with regard to applicability of section 29 of the Limitation Act. 25. Joining the issue, the learned CIT/DR Shri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the opinion of the Central Government Advocate, which have already been discussed by us. 28. Regarding the applicability of the Limitation Act to income tax proceedings, Sri Sethi submitted that it has been held in various cases that ITO or Assessing Officer is a court and therefore provisions of the Limitation Act are applicable. For this proposition the learned CIT/DR relied on Honourable Supreme Court decision in the case of Lalji Haridas v. State of Maharashtra [l964] 52 ITR 423. The ratio of the judgment from the head note is reproduced below :- "that section 37(4) of the Indian Income-tax Act, 1922, made the proceedings before an Income-tax Officer judicial proceedings under section 193 of the Indian Penal Code and these judicial proceedings must be treated as "proceedings in any court" for the purpose of section 195(I)(6) of the Code of Criminal Procedure. The court can take cognizance of the offence of making false statements in proceedings before the Income-tax Officer under section 37 only on complaint in writing made by the Income-tax Officer." 29. Reference is also made to the case of Hayatkhan v. Mangilal AIR 1971 MP 140. In this case, it was held that the prov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act is expressly excluded by such special or local law. By this change it is not necessary to expressly state in a special law that the provisions contained in section 5 of the Limitation Act shall apply to the determination of the periods under it. By the general provisions contained in section 29(2), this provision is made applicable to the periods prescribed under the special laws. An express mention in the special law is necessary only for an exclusion". 31. The learned CIT/DR has also referred to the Honourable Supreme Court judgment in the case of Jagannath Prasad v. State of Uttar Pradesh [1963] 14 STC 536, copy of which is compiled at page 116 of the assessee's paper book. The learned CIT/DR invited our attention to the internal page 554 of the judgment where a reference is made to the Full Bench judgment of Honourable Bombay High Court in the case of Pooranchand Maniklal(19l4) 38 ILR 642. In this case, an Income-tax Collector was held to be a revenue court within the meaning of section 195 of the Criminal Procedure Code. The learned CIT/DR forcefully submitted that ITO is a Court and therefore the Limitation Act is fully applicable. To further substantiate this argument ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is excluded, the assessment made by the Assessing Officer on 31-7-2000 is within the limitation period even as per section 153(2) of the Income-tax Act, 1961. The learned CIT/DR, however, reiterated that recourse to section 12(2) of Limitation Act is taken by the revenue only as an alternative plea and that the main argument is that the bar of limitation is not applicable as the case is covered under section 153(3) of the Income-tax Act, 1961. In this connection, the learned CIT/DR has also referred to the Honourable Andhra Pradesh High Court in the case of B.A.R. AbdulRahman Saheb v. ITO [1975] 100 ITR 541. Sri P.R. Sethi also submitted that various case laws cited on behalf of the assessee are distinguishable on facts. The learned CIT/DR also relied upon the Honourable Supreme Court decision in the case R. Dalmia v. CIT [1999] 236 ITR 480. In this case, it was held that additional period given by Explanation 1(iv) to section 153 is available when assessment or re-assessment is made under section 147 read with section 144B of the Income-tax Act, 1961. The learned CIT/DR also submitted that the rules or procedures are designed to advance justice and the assessee should not be allo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing Officer was also requested not to proceed further in the matter pending filing of SLP. The learned CIT/DR also submitted that during the entire re-assessment proceedings, the assessee never raised any objection or any plea regarding limitation period and therefore by his own conduct, the assessee is estopped from raising such plea subsequently. The learned CIT/DR summed up his arguments by reiterating that the re-assessment order has been passed within the limitation period and is therefore a valid order. 34. In his rejoinder, Shri Dastur, the learned counsel for the assessee submitted that there is no concept of implied direction in the order of the High Court and that before the provisions of section 153(3) are invoked, it must be shown that there are clear findings or directions in the order and the assessment order is to be framed to give effect to such directions. It is argued that when the writ petition of the assessee is dismissed, the Assessing Officer is free to implement the notice issued under section 148. The learned counsel for the assessee has referred to Honourable Supreme Court decision in the case Hope Textiles v. Union of India [1994] 205 ITR 508. The facts ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... order and the assessment or re-assessment is to be framed in consequence of or to give effect to such finding or direction. In the present case, notice under section 148 was issued and assessee filed writ petition challenging the issue of such notice. The High Court dismissed the writ petition with the result that the proceedings initiated under section 147 of the Income-tax Act, 1961 by issue of notice under section 148 were revived and the Assessing Officer thereafter was free to take action with regard to reassessment under section 147. After going through the plethora of judgments delivered by the Apex Court and various other High Courts, relevant portions of which have already been extensively quoted, we have no hesitation in holding that the High Court's order dismissing the writ petition cannot be said to contain any finding or direction. As a matter of fact for deciding the writ petition, the Honourable Bombay High Court had no occasion to record any finding or to give any direction. The only issue was the validity of the proceedings initiated under section 147. The Honourable Bombay High Court examined this issue and upheld the initiation of such proceedings with the resul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rt. Further, there is no doubt that the provisions of the Limitation Act cannot be excluded from application to Income-tax proceedings. It has been held in various cases that provisions of sections 5,12,14 and 29 of the Limitation Act can be applied to the Income-tax proceedings if it is shown that such provisions have been specifically and clearly made applicable to the Income-tax proceedings. The revenue has heavily relied on the provisions of section 12(2) of the Limitation Act, which is reproduced below :- "12(2) In computing the period of limitation for an appeal or an application for leave to appeal or for revision or for review of judgment, the day on which the judgment complained of was pronounced and the time requisite for obtaining a copy of the decree, sentence or order appealed from or sought to be revised or reviewed shall be excluded." 37. In our view, the provisions are very clear, leaving no scope for any ambiguity or speculation. The provision is applicable for computing the period of limitation for appeal or an application for leave to appeal or for revision or for review of a judgment. It may be mentioned that subsection (1) of section 12 of the Limitation Ac ..... X X X X Extracts X X X X X X X X Extracts X X X X
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