TMI Blog2000 (7) TMI 212X X X X Extracts X X X X X X X X Extracts X X X X ..... to the appellant." The second point raised was also disposed of in the same terms. The last sentence of the appellate orders, however, stated that the assessments were "set aside". These orders were passed on 28-4-1988. 3. The assessments were taken up by the ITO for being redone, purportedly as per directions of the DC(A). They were completed under section 251 read with section 144 on 29-1-1990 on the ground that there was no compliance with the notices issued by the ITO. 4. On appeal, the DC(A) by orders dated 27-6-1990, accepted the assessee's contentions that (i) the assessments made on 29-1-1990 were barred by limitation and that (ii) the non-computation of the tax payable in the orders of assessment invalidated them as held by the Jammu Kashmir High Court in the case of S. Mubarik Shah Naqshbandi v. CIT[1997] 110 ITR 217. 5. It is against the above findings that the revenue is in appeal. It is contended on its behalf that the assessments are saved by the provisions of section 153(2A) and section 153(3)(ii). It is pointed out that the fresh assessments were made on 29-1-1990 on the directions of the appellate authority after being set aside. As regards the computatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e the assessment is circumscribed by the condition that in such a case he should refer the case back to the ITO for making a fresh assessment in accordance with his directions. The reason for the difference is clear. An assessment is annulled when there is a lack of pecuniary jurisdiction or territorial jurisdiction or jurisdiction over the subject-matter of the proceeding. In such a case after the assessment is annulled, there is no scope for passing a fresh assessment. However, if the assessment is set aside it is generally done only if there is a procedural irregularity which can be cured or if the assessment is made without proper enquiry, etc. In such cases the assessment will have to be set aside but since there is no lack of jurisdiction, the appellate authority would be bound in law to direct the assessing authority to make a fresh assessment after curing the irregularity. There are any number of authorities laying down the principles as to when an assessment is to be annulled and when it is to be only set aside for being redone afresh. But that is not the point that arises in the present appeals and, therefore, there is no need to refer to them. The position made clear by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ases it would be proper for the appellate authority to ask the Assessing Officer to consider such material or evidence and redecide the issue. Even in such a case it would not be necessary always for the appellate authority to set aside the entire assessment. Be that as it may, we are unable to see how the appellate authority can restore a ground of appeal, which questions the very validity of the assessment, back to the ITO. The validity of the assessment is for the appellate authority to decide. Therefore, when in the present case, the assessee questioned the validity of the assessments on the ground that the tax payable had not been computed in the assessment order itself, it was his duty to adjudicate upon the same and in the very nature of the powers conferred upon him it would be wholly improper if he asks the ITO to decide the same. That would be an impermissible exercise of the appellate function. Mr. Ray could not have put it more appropriately when he said that the DC(A) abdicated his functions to the ITO by directing him to decide the ground of appeal. This direction cannot by any stretch of imagination be construed as a direction to reframe the assessment. Even assuming ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In the judgment cited above the ITO had treated the assessee as an unregistered firm on the ground that there was no application for registration. The AAC set aside the assessment and directed the ITO to accept a duplicate application from the assessee and deal with it according to law. In the proceedings after the order of the AAC, the ITO directed the assessee by notice to produce the books. Thereupon the assessee moved the High Court under Article 226 seeking a writ of prohibition on the ground that the ITO had no jurisdiction to make a de novo assessment. Accepting the assessee's contention it was held by the High Court that what all the AAC directed the ITO was only to receive a duplicate application for registration and deal with it according to law and that there was no direction as was envisaged by section 31(3)(b) of the old Act setting aside the assessment with directions to make fresh assessment. It was held that since the AAC's order was specific, it was not open to the ITO to conduct a fresh enquiry and proceed to make a fresh assessment. The notice was, therefore, quashed and the ITO was held to have no jurisdiction to issue the same. The aforesaid judgment was follow ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has arisen in the present case. 11. For the reasons stated above, we are of the view that the ITO had no power to make fresh assessments. The assessments made on 29-1-1990 are, therefore, invalid and without jurisdiction. They are not also saved by section 153(2A) and section 153(3)(ii) of the Act. There are no directions in the orders of the DC(A) dated 28-4-1988 setting aside the assessments with authority to make fresh assessments. The order of the DC(A) which is challenged before us on behalf of the revenue has to be upheld (for both the years). 12. Mr. Ray raised an alternative submission to the effect that even assuming that there were directions in the order of the DC(A) dated 28-4-1988 to make fresh assessments, no such direction can extend the period of limitation prescribed after it had expired. According to him the limitation for making fresh assessments expired on 31-3-1987 and 31-31988 respectively. He cited the Delhi High Court judgment in the case of Narinder Singh Dhingra v. CIT [1973] 90 ITR 110 and the Supreme Court judgment in the case of Director of Inspection v. Pooran Mal Sons [1977] 96 ITR 390, at page 397 in support of this contention. In the view we h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ain grounds of appeal and decision of the DC(A) thereon. Two grounds taken up before the then DC(A) are as under :--- (i) The ITO not having determined therein the sum payable on the basis of his assessment of the total income, the order made by him purportedly under section 143(3) is altogether invalid in law and liable to be summarily annulled. (ii) There being no order passed under the Act in consequence of which any tax or interest was payable by the assessee, the notice of demand issued by the ITO purportedly under section 156 is equally invalid. Decisions taken by the DC(A) on them are as under :--- "On this point the matter is set aside and restored to the file of the ITO who is directed to decide the matter afresh in accordance with law after giving adequate opportunity to the appellant. It is claimed that there was no order passed under the Act in consequence tax or interest was payable by the appellant and the notice of demand issued by the ITO under section 156 was invalid. On this point also the matter is set aside and restored to the file of the ITO to be determined afresh in accordance with law, after giving adequate opportunity to the appellant. In the res ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not mentioned, demand notice under section 156 is invalid, is covered by the Supreme Court decision in the case of Kalyankumar Ray wherein it was held as under :--- "ITNS 150 is also a form for determination of tax payable and when it is signed or initialled by the Income-tax Officer, it is certainly an order in writing by the Income-tax Officer determining the tax payable within the meaning of section 143(3). It may be only a tax calculation form for departmental purposes as it also contains columns and code numbers to facilitate computerisation of the particulars contained therein for statistical purposes, but this does not detract from its being considered as an order in writing determining the tax payable by the assessee. There is no reason why this document, which is also in writing and which has received the imprimature of the Income-tax Officer, should not be treated as part of the assessment order in the wider sense in which the expression has to be understood in the context of section 143(3). All that is needed is that there must be some writing initialled or signed by the Income-tax Officer before the period of limitation prescribed for completion of the assessment has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re, it cannot be interpreted that he has annulled the assessment. 24. Coming to second issue as to whether the assessment order dated 29-1-1990 reframed by the Assessing Officer in pursuance of DC(A)'s order dated 24-4-1988 is barred by limitation,--- We notice that assessments are set aside by the then DC(A) on 28-4-1988 and in pursuance of that re-assessments are made on 29-1-1990, i.e., within two years from the end of the financial year in which assessments are set aside as prescribed under section 153(2A) of the Act. As the limitation period according to the provisions of law expired on 31-3-1991 and as the assessments were completed on 29-1-1990, they are well within time limits and not barred by limitation. Thus, on this ground too, the DC(A) could not have cancelled the assessment. 25. While considering the third issue as to whether the assessment order is otherwise invalid or without jurisdiction, we have to examine the grounds of appeal and submissions of the assessee before the DC(A). The grounds before the DC(A) are as under :--- (i) that the assessment order is without jurisdiction; (ii) that the assessments are barred by limitation; and (iii) that they are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h the assessment years, the Jammu Kashmir High Court's decision does not help the cause of assessee. When all three decisions cited and relied on by the assessee did not help the cause of the assessee, what prompted the DC(A) to cancel the assessment order is best known to him only. 29. In this way we come to the conclusion that the assessee's contention that assessment order is bad ab initio void is also not correct. It is neither barred by limitation nor suffers from the infirmity of jurisdiction. On the basis of foregoing discussion and reasons as well as on the basis of these facts and circumstances and legal position the main issue can be decided in favour of the Revenue. In my opinion, therefore, the DC(A) was not justified in cancelling the assessment orders for assessment years 1982-83 and 1983-84 and his order, therefore, cannot be sustained in the eyes of law. 30. The above view gets support from two jurisdictional High Court's decisions and one decision from Andhra Pradesh High Court given as under : (1) Following the decision of the Supreme Court in the case of Kalyankumar Ray the Calcutta High Court in the case of Shahdara (Delhi) Saharanpur Light Railway Co. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t, the Revenue's appeals are allowed. ORDER UNDER SECTION 255(4) OF THE INCOME-TAX ACT, 1961 We, having differed on the points in the above appeals filed by the Department, refer the following points of difference to the President under section 255(4) of the Income-tax Act, 1961: (1) Whether, the original assessment orders dated 29-9-1984 are set aside with directions to make fresh assessments or annulled by the then DC(Appeals) vide his order dated 28-4-1988? (2) Whether, the assessment orders dated 29-1-1990 reframed by the Assessing Officer in pursuance of the order of the DC(Appeals) dated 28-4-1988 are barred by limitation? (3) Whether, the DC(Appeals) was justified in cancelling the assessment order dated 29-1-1990? THIRD MEMBER ORDER Shri R.P. Garg, Vice President ---On a difference of opinion between the two Members constituting the Division Bench, the following points of difference were referred to me for my opinion as Third Member by the Hon'ble President acting under sec. 255(4) of the I.T. Act, 1961 :--- (1) Whether, the original assessment orders dated 29-9-1984 are set aside with direction to make fresh assessments or annulled by the then D.C.(A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 143(3) was invalid as the ITO had not determined the sum payable by order in writing. On this point the matter is set aside and restored to the file of the ITO to be done afresh in accordance with law. (2) It was claimed that the notice of demand under section 156 was invalid as the Act empowered the ITO to issue a notice of demand only when any sum is payable in consequence of an order passed under the Act. On this point the matter is also set aside and restored to the file of the ITO. (3) Third ground of appeal relates to the action of the ITO in not paying interest due to the appellant under section 214(1) and section 243(1)(b) of the I.T. Act and also in setting off the said sum against the refund due for the assessment year without giving prior intimation to the appellant. On this point also the matter is also set aside and restored to the file of the ITO who is directed to decide the matter afresh in accordance with law. (4) Last ground of appeal relates to the action of the ITO not refunding Rs. 8,172 to the appellant. There is no need to give any finding on this point as this is an administrative matter to be decided by the Assessing Officer and the remedy, if any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e proceedings which result in assessment after the period of limitation is over". The assessee contested the order of the Deputy CIT(A), R-IV, Calcutta dated 28-4-1988 by relying on the decision of the Supreme Court in ITO v. Seghu Buchiah Setty [1964] 52 ITR 538, at p.544 and pointed out that 'there is not much difference between annulling an order and setting it aside; both wipe out the original order.' Further reliance was made on the decision in the case of S. Mubarik Shah Naqshbandi v. CIT [1977] 110 ITR 217 where the questions--- (3) Whether it is obligatory in law on the part of the Income-tax Officer himself to determine the tax payable on the basis of the total income assessed under sec. 144 and show the amount so determined in the assessment order itself? (4) If the tax determined on the basis of total income assessed under sec. 144 is not shown in the assessment order itself and is shown in a notice of demand issued under sec. 156, along with the assessment order, does the assessment become invalid in law? were both answered in the affirmative. It is pointed out that the law thus laid down is final and conclusive because the Department has accepted it without a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4 of the Act. So, this being the state of affairs, we do not think that the order dated 27-6-1990 of the learned D.C.(A), Range-IV, Calcutta is correct in holding that the orders passed under section 251/144 of the Act were hit by limitation under section 153(1)(a)(iii) of the Act and that cannot be even saved by the provision of section 153(3)(ii) of the Act. The orders dated 29-1-1990 passed under section 251/144 of the Act for the assessment years 1982-83 and 1983-84 are in pursuance to the order passed under section 250 of the Act by the first appellate authority and so naturally it will not be hit by the aforesaid two provisions, particularly the provision of section 153(3)(ii) of the Act because sub-section (2A) of section 153 is a rider thereon. Here, there is no question of extending the limitation period by the appellate authority as has been discussed and the finding given in the impugned order by the D.C.(A), R-IV, Calcutta. So, regard being had to the entire facts and circumstances of the case we find that the order of the learned D.C.(A), Range-IV, Calcutta is bad in law and so we reverse it." 10. On a Misc. Application filed by the assessee, the aforesaid order of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion. The D.C.(A), according to him, thus abdicated his functions to the I.T.O. by directing him to decide the ground of appeal. This direction, he held, cannot by any stretch of imagination be construed as a direction to reframe the assessment. He proceeded further by assuming that the D.C.(A) was right in directly the I.T.O. to decide the ground and held that there was no need to set aside the assessment. The D.C.(A), according to him, could not have possibly set aside the assessment and still directed the I.T.O. to consider the ground questioning the validity of assessment since by setting aside the assessment he would have decided the very ground. He, accordingly, found himself unable to read the 1st order of the D.C.(A) as setting aside the assessment within the power conferred upon him under section 251(1)(a) of the Act. He rejected the preliminary objection of the Revenue that the assessee having not filed the appeal against the 1st order of the D.C.(A) dated 28-4-1988, the assessee was precluded from contending that these orders could not be so read as setting aside the assessment. He held that in fresh proceedings initiated by the I.T.O. purported to have been derived from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o the assessee. It was, according to him, an usual, normal and simple ground which cannot invalidate the assessment order passed under section 143(3). He further observed that this was a procedural mistake curable under sections 154 and 292B and it was under ITNS- 150 that tax payable has been computed and, therefore, there was no infirmity in the assessment on that ground and the assessment orders cannot be annulled for that. 13. Noting that the second ground before the D.C.(A) was that there was no order passed under that Act in consequence of which tax and interest was payable by the assessee and the notice of demand issued under section 156 was invalid, he observed that this ground was set aside and restored to the file of the Assessing Officer with a direction to decide the matter afresh in accordance with law. In this connection, he observed that the first part of the second ground was contradictory to the first ground as the assessee on one hand stated that the sum payable was not determined on the basis of the assessment under section 143(3), on the other hand he stated that there was no order passed under the Act. Secondly, he observed that the 2nd part of 2nd ground tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssments were completed on 29-1-1990, they were well within time limits and not barred by limitation. He, therefore, held that on this ground too, the D.C.(A) could not have cancelled the assessment. 14. On the 3rd issue as to whether the assessment was otherwise invalid or without jurisdiction, he referred to grounds raised before the D.C.(A) and observed that the assessee had not challenged and proved with evidence that the D.C.(A) did not have the jurisdiction over the case, nor the D.C.(A) had considered the same while cancelling the assessment. The three submissions raised before the D.C.(A) were considered and the assessment records were examined by the D.C.(A) before cancelling both the assessments. A question, according to him, raised when D.C.(A) examined the record and found that tax and interest were computed in ITNS-150 and were also given in the demand notice issued under section 156, can the D.C.(A) cancel the assessment on that ground on the face of the decision of the Supreme Court in the case of Kalyankumar Ray. Obviously the answer he gave was no, He then came to the conclusion that the assessee's contention that the assessment order was bad ab initio void was al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntative carried us through the 1st. order of the D.C.(A) and the ground raised before him. He submitted that the prayer of the assessee before the D.C.(A) was for annulment but the D.C.(A) has only set aside. This according to him shows the intention of the D.C.(A) that what he did was to set aside of the order and not its annulment. He submitted that on a perusal of the order of the D.C.(A) it is clear that he set aside the matter and restored back for consideration of the Assessing Officer. afresh. It is not a shot in vain, as observed by the Ld. Judicial Member. Reference in this connection is invited to the decision of the Calcutta High Court in the case of Katihar Jute Mills (P.) Ltd. relied upon by J.M. which, according to him, was rendered on different facts and in different context. It was a case of set aside on a particular point, whereas in this case the same income was the subject-matter of consideration and, therefore, the Assessing Officer was right in making the assessment afresh in accordance with the direction of the D.C.(A). As regards abdication of jurisdiction by the D.C.(A), as stated by the Judicial Member, he submitted that even if he could exercise the power ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rections to make the fresh assessment, they were issued beyond jurisdiction and could not extend the time limit prescribed under section 153(2A) of the Act. It was further submitted that the fresh assessment on the face of it shows that it is not made in pursuance of the direction, if any, by the D.C.(A). He further submitted that before the D.C.(A) the assessee submitted that it was not proper in law for the D.C.(A) to give such a direction to make the assessment afresh, because on 28-4-1988 when he passed the order under section 250, the period of limitation for making the assessments for assessment years 1982-83 and 1983-84 had already expired. The D.C.(A) was inclined to accept the contention of the assessee and held that the assessment orders could not be sustained in the given facts and circumstances. According to the learned counsel of the assessee, at the time of hearing of the appeal filed by the Revenue, it was contended on behalf of the Revenue that the orders under section 251/144 were passed as appeal effect orders so that there was no question of there being barred by limitation. On the other hand, the order under appeal was strongly supported on behalf of the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 90 were made in pursuance of the appellate orders dated 28-4-1988 was a mistake apparent from record. Under section 254(4) this order, according to the learned counsel, became final and inviolable. By refixing the appeals, the Tribunal had not accepted the third ground as valid and rejected the same vide separate order dated 3-8-1994. 19. I have heard the parties and considered their rival submissions. An apparent look of the first two orders of D.C.(A) of even date 28-4-1988 show that the assessments appealed against were set aside. This is because in both the orders the last sentence is 'In the result the assessment is set aside'. I find myself in agreement with the assessee's contention that the term 'set aside' simplicitor may mean nothing but annulment in the sense that in both the cases assessment is wiped out. See in this connection the decision of the Supreme Court in the case of Seghu Buchiah Setty. The tenor and scope of the order of D.C.(A) is to be seen by reading his order as a whole. On a reading of the two orders as a whole, I find that the necessary directions to consider the claim afresh were given by the D.C.(A) while dealing with each of the grounds. Two ground ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 153(2A) were introduced by Taxation Laws (Amendment) Act, 1970 w.e.f. 1-4-1971. As per this new provision, an order of fresh assessment in pursuance of an order-under section 250 is to be made within two years from the end of the financial year in which the appellate order under section 250 is received by the Commissioner. The order under section 250 dated 28-4-1988 was received by the Commissioner in the financial year 1988-89. A period of two years from the end of this financial year was to expire on 31-3-1991. The Assessing Officer made the assessments on 29-1-1990. Therefore, these fresh assessments cannot be said to be barred by limitation. Accordingly, I reject the assessee's objection that the alleged direction was given beyond the jurisdiction and, therefore, could not extend the time limit, which is devoid of any force. 21. Challenging the competence of the D.C.(A) to set aside the matter, the learned counsel for the assessee contended that he had no power to restore back the matter for decision of the ITO and, consequently, they were to be ignored. I do not find any force in this submission of the assessee, -- firstly, because the power to set aside with direction to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... "It must be remembered that the order of the Tribunal dated April 22, 1954, was not under challenge before the Judicial Commissioner. That order had become final and binding on the parties, and the respondent could not question it in anyway. As a matter of fact the Commissioner of Income-tax had made an application for a reference, which application was subsequently withdrawn. The Judicial Commissioner was not sitting in appeal over the Tribunal and we do not think that, in the circumstances of this case, it was open to him to say that the order of the Tribunal was wrong and, therefore, there was no injustice in disregarding that order. As we have said earlier, such a view is destructive of one of the basic principles of the administration of justice." Kerala High Court decision in the case of CIT v. Swaraj Motors (P.) Ltd. [1987] 167 ITR 83/34 Taxman 290 may also be seen where also the A.A.C set aside the matter to the Assessing Officer for recomputation of profit under section 41(2). The assessee did not challenge that order of the A.A.C. The ITO completed the fresh assessment pursuant to the direction of the A.A.C. recomputing the 41(2) profit. The assessee appealed against t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ven by the first appellate authority. Here in this case the Assessing Officer has not travelled beyond his jurisdiction. He proceeded to complete the assessment pursuant to the directions of the D.C.(A) as no new issue has been raised or considered by him in the fresh assessments. Therefore, these two decisions would have no help in resolving the issue under consideration. 24. Another objection of the assessee relying upon the decision of the Delhi High Court in the case of Narinder Singh Dhingra and the Supreme Court decision in the case of Pooran Mall Sons was that the D.C.(A) could not have set aside and directed the Assessing Officer to make the assessment afresh after the time limit was over. This issue has already been settled by the Supreme Court decision in the case of the CIT v. National Traders [1980] 121 ITR 535/[1979] 2 Taxman 564 (SC), wherein a similar contention was raised and rejected. 25. The next contention of the assessee that the first assessment on the face of it was not made in pursuance of the direction of the D.C.(A) if any, and is invalid has also to be rejected in view of the finding of fact that the assessment was made pursuant to direction of the D ..... X X X X Extracts X X X X X X X X Extracts X X X X
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