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Income Tax Appellate Tribunal, AHMEDABAD “C” BENCH
Before: SHRI PRADIP KUMAR KEDIA & SHRI MAHAVIR PRASAD
PER MAHAVIR PRASAD, JUDICIAL MEMBER
These two appeals filed by the Revenue are directed against the order of the Ld. CIT(A)-2, Vadodara dated 10.07.2017 pertaining to A.Y. 2006-07 and a common grounds have been taken by the Revenue in both the appeals:
ITA Nos. 2260 & 2261/Ahd/2017 2 . A.Y. 2006-07 & 2007-08 1. "On the facts and in the circumstances of the case, the learned CIT(A) erred in the law and on facts in directing that the assessment order passed on 04.02.2015 was barred by limitation of time without appreciating that the delay in receipt of Hon'ble Gujarat High Court's order dated 29-07-2013 was not attributable to the A.O. and the A.O. without receipt of Hon'ble Gujarat High Court's order dated 29- 07-2013 could not have proceeded with reassessment proceeding since proceeding further with reassessment proceedings without the direction of Hon'ble Gujarat High Court would amount to contempt of Court." 2. "On the facts and in the circumstances of the case, the learned CIT(A) erred in the law and on facts in annulling reassessment order by relying on the decision of Hon'ble Allahabad High Court in the case of CIT vs. Chandra Bhan, 46 taxmann. 108 (All.) and decision of Hon'ble I.T.A.T. Mumbai in the case of Dilip Dahanukar vs. ACIT reported in 90 ITD 525 without taking note of the fact that till the date preceding the date of receipt of Hon'ble Gujarat High Court's order dated 29.07.2013, in S.C.A. No. 2966 of 2013, the A.O. was unaware of the fact that stay on finalizing assessment was vacated."
The facts of the case are that assessee is a Pharma Company listed in BSE/NSE. It is engaged in manufacturing of bulk drugs as well as formulation products. The assessee filed original return of income [ E Return] for A.Y. 2006-07, declaring total income of Rs. (-) 40,85,09,332/- under normal provisions and book profit u/s. 115JB of Rs. 83,47,52,785/- on 29.12.2006. The return was processed u/s. 143(1) of the Act on 27.09.2007. Further, the assessee has also filed revised return on 30.03.2008, declaring total income of Rs. (-) 40,98,79,270/- under normal provisions and book profit u/s. 115JB of Rs. 83,47,52,785/-.
Subsequently, notice u/s. 148 was issued after recording reasons on 30.03.2012. The notice was served on the same date. The reasons recorded were also communicated to the assessee. After receipt of reasons, the assessee filed an objection vide letter dated 08.10.2012. The objections of the assessee were disposed off by the Assessing Officer by passing a speaking order dated
ITA Nos. 2260 & 2261/Ahd/2017 3 . A.Y. 2006-07 & 2007-08 16.01.2013. The reasons recorded for reopening of the assessment have been reproduced by the Assessing Officer in para-3 of the assessment order.
The assessee was not satisfied with the reasons recorded by the Assessing Officer and accordingly it has filed a writ petition before the Hon'ble Gujarat High Court vide SCA No. 3013 on 12.03.2013. The Hon'ble Court passed an oral order on 18.03.2013 stating that the respondent may continue with assessment and final order in pursuance to impugned notice shall not be passed without leave of the court. Thereafter, the writ petition was adjudicated by the Hon'ble Court by Oral Judgment dated 29.07.2013. The Court upheld the notice of reopening on the ground relating to the diversion of profit by transfer of technology through Sun BVI to Caraco, USA, but the reopening on second ground of allocation of R & D expenditure was not upheld. Subsequently, the Assessing Officer passed the order u/s 143(3) r.w.s. 147 on 27.02.2015, assessing the total income at Rs.97,28,38,307/- under normal provisions of the Act and Rs. 114,03,61,418/- as per the section 115JB of Income Tax Act.
While passing the assessment order u/s. 143(3) r.w.s. 147, the Assessing Officer made additions on account of diversion of profit and disallowance of remuneration paid to the partners.
Thereafter an appeal was filed before the ld. CIT(A) after taking ground including the technical one that the assessment got barred by the limitation of time. Since the assessee has challenged the assessment order on the ground that it was barred by the limitation of time. The ld. CIT(A) decided the issue in favour of the assessee holding that the assessment order passed on 27.02.2015 was barred by limitation time and thus same annulled.
ITA Nos. 2260 & 2261/Ahd/2017 4 . A.Y. 2006-07 & 2007-08 7. Against the order of the ld. CIT(A), revenue has come before us in an appeal.
We have gone through the relevant record and impugned order . Ld. A.R. vehemently relied on the order of the ld. CIT(A) and stated that he has passed detailed and reasoned order and same should not be disturbed. In order to understand the time limit, we reproduced the below table of the notice served u/s. 148 and subsequent date of the orders:
Sr. No. Particulars Dates 1 Date of issuing notice u/s 148 30/03/2012 2 Date on which notice u/s 148 was served on the 30/03/2012 Appellant 3 18/03/2013 Stay order passed by the Gujarat High Court against Writ Petition filed by the Appellant 4 Final order passed by the Gujarat High Court and stay 29/07/2013 vacated against Writ Petition filed by the Appellant 5 Assessment order passed by the Assessing Officer u/s 27/02/2015 143(3) r.w.s. 147
As we can see, notice u/s. 148 was served on the assessee on 30th March 2012, the reassessment order u/s 147 ought to be passed by the Assessing Officer by 31st March 2013 i.e. one year from 31st March 2012 i.e. the end of the financial year in which the notice is served.
However, the appellant had filed a Civil Petition application dated 8th March 2013 against the validity of the said notice before the Hon’ble Gujarat High Court on 12th March 2013. Thereafter Hon’ble Gujarat High Court vide oral judgment order dated 18th March 2013 had issued directives to the respondent
ITA Nos. 2260 & 2261/Ahd/2017 5 . A.Y. 2006-07 & 2007-08 i.e. the Assessing Officer that it may continue with the assessment but final order pursuant to the impugned notice shall not be passed without the leave of the court. Thus, the Hon’ble Gujarat High Court had stayed the assessment proceedings with effect from this date. Till this date, only 13 days ( 18th March 2013 to 31st March 2013) were remaining as per section 153 of pass the order u/s 147 since the last date to pass the order u/s 147 was 31st March, 29013.
The Honourable Gujarat High Court passed the final order on 29th July, 2013 (Page no.14 to Page no.16 paper book). Accordingly by virtue of the provisions of Explanation 1 to S. 153, the period during which the reassessment proceedings were stayed by the order of the Honourable Gujarat High Court is to be excluded. Explanation 1 to sec. 153 which provides for the period to be excluded while calculating the period of limitation reads as under:
"Explanation l.—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 court, or (iia) ..... (in) ...... (iv)..... (iva) ..... (v)..... (vi) .... (vii).... (viii) ..... (ix).....
ITA Nos. 2260 & 2261/Ahd/2017 6 . A.Y. 2006-07 & 2007-08 shall be excluded" Thus, the period from the date on which interim relief was granted by the High Court till the date of vacation of relief by the High Court will be excluded. Subsequently, the High Court with oral judgment order dated 29th July, 2013 permitted the Assessing Officer to proceed with the reassessment proceedings on the first ground raised in reasons recorded for reassessment. Thus, the period from 18th March 2013 to 29th July 2013, i.e. 134 days will be excluded in calculating the period of limitation [Explanation 1 to S. 153]. 2.7 Hence, the Assessing officer had to pass the order within 13 days from 29th July, 2013 (date when High Court vacated the stay). However, as per 1st proviso to Explanation 1 to 153 if after vacation of stay the time period remaining to pass an order is less than sixty days it will be extended to sixty days. The relevant extract is produced herein below: "Provided that where immediately after the exclusion of the aforesaid time or period, the period of limitation referred to in sub-sections (1), 65[(1A), (IB),] 66[(2), (2A) and (4)] available to the Assessing Officer for making an order of assessment, reassessment or recomputation, as the case may be, is less than sixty days, such remaining period shall be extended to sixty days and the aforesaid period of limitation shall be deemed to be extended accordingly:" Thus based on the above, the Assessing Officer ought to have passed the order by 27th September 2013.
But ld. A.O. passed the assessment order 143(3) r.w.s. 147 on 27.02.2015.
In support of its contention on similar facts and circumstances in assessee’s own case for A.Y. 2005-06 ld. A.R. filed a copy of the Co-ordinate Bench wherein Co-ordinate Bench dismissed the appeal of the Revenue with following observations:
ITA Nos. 2260 & 2261/Ahd/2017 7 . A.Y. 2006-07 & 2007-08 4.2. The appellant during the course of the appellate proceeding Jias made following submissions in this regard:
"Ground No. 3: Assessment order passed u/s. 143 rws 147 is outside/beyond the period of limitation specified u/s. 153 and needs to be quashed as void ab initio:
Ground of Appeal in brief:
The Assessing Officer has grossly erred in passing an assessment order u/s. 143 r.w.s. 147 dated 26th February, 2014, without appreciating that it is time barred and beyond the time limit specified in section 153(2) i.e. after the expiry of one year from the end of financial year in which the notice u/s. 148 was served and hence, void ab initio.
Overview of Facts
The time limit for the Assessing Officer to pass order u/s.147 is one year from end of Financial Year in which notice was served [S. 153(2)] and the Assessing Officer had to pass the order by 31th March, 2013 since the notice u/s.148 was issued on 30th March, 2012. 2. Explanation 1 to sec. 153(4) provides for the period to be excluded while calculating the period of limitation. Thus, the period from the date on which interim relief was granted by the High Court till the date of vacation of relief by the High Court will be excluded. Thus the period from 18th March 2013 to 29th July 2013, i.e. 134 days will be excluded in calculating the period of limitation [Explanation 1 to S. 153(4)]. 3. Thus, the time limit within which reassessment order u/s. 143(3) r. w. s. 147 as per sec. 153(2) r.w.s. proviso to sec. 153(4) is to be passed is 27-09-2013.
ITA Nos. 2260 & 2261/Ahd/2017 8 . A.Y. 2006-07 & 2007-08 ITA No.1688/Ahd/2015 4- The Assessing Officer has erred in passing the reassessment order on 26-02-2014 and hence, the same is void-ab-initio.
Submissions:
Firstly all the relevant dates of proceedings are mentioned as under: Particulars Dates Sr, No.
1 Date of issuing notice u/s 148 30/03/2012
2 Date on which notice u/s 148 was 30/03/2012 served on the Appellant
3 18/03/2013 Stay order passed by the Gujarat High Court against Writ Petition filed by the Appellant
4 Final order passed by the Gujarat High Court 29/07/2013 and stay vacated against Writ Petition filed by the Appellant
The Assessment order passed by the 26/02/2014 Assessing Officer u/s 143(3) r.w.s. 147
We enclose herewith the following documents to substantiate e above at Page 1 to Page 5 of the paperbook:
• Notice issued u/s 148 • Stay order passed by the Gujarat High Court against Writ Petition filed by the Appellant • Final order passed by the Gujarat High Court and stay vacated against Writ Petition filed by the Appellant • Assessment order passed by the Assessing Officer u/s 143(3) r.w.s. 147
ITA Nos. 2260 & 2261/Ahd/2017 9 . A.Y. 2006-07 & 2007-08
Section 153 states the time limits for completion of assessments and reassessments. Sub-section 2 of 153 reads as under "No order of assessment, reassessment or recomputation shall be made under section 147 after the expiry of one year from the end of the financial year in which the notice under section 148 was served"
Since the notice u/s 148 was served on the Appellant on 30th March 2012, the reassessment order u/s 147 ought to be passed by the Assessing Officer by 31st March 2013 i.e. one year from 31st March 2012 i.e. the end of the financial year in which the notice is served.
However, the Appellant had filed a Civil Petition application dated 8th March 2014 against the validity of the said notice before the Honourable Gujarat High Court on 12th March 2013. Subsequently, the Honourable Gujarat High Court vide oral judgement order dated 18th March, 2013 had issued directives to the respondent i.e. the Assessing Officer that it may continue with the assessment but final order pursuant to the impugned notice shall not be passed without the leave of the court. Thus, the Honourable Gujarat High Court had stayed the assessment proceedings with effect from this date. Till this date, only 13 days (18th March 2013 to 31st March 2013) were remaining as per section 153 to pass the order u/s. 147 since the last date to pass the order u/s. 147 was 31st March, 2013.
The Honourable Gujarat High Court passed the final order on 29th July, 2013 (see Annexure 1.5 of paper book page no. 6 to 14). Accordingly by virtue of the provisions of Explanation 1 to S. 153(4), the period during which the reassessment proceedings were stayed by the order of the Honourable Gujarat High Court is to be excluded. Explanation 1 to sec. 153(4) which provides for the period to be excluded while calculating the period of limitation reads as under:
ITA Nos. 2260 & 2261/Ahd/2017 10 . A.Y. 2006-07 & 2007-08
"Explanation l.--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 court, or (iia)..... (iii) ......
(iv) (v) ..... (vi).... (vii).... (viii) ..... (ix).....
shall be excluded "
Thus, the period from the date on which interim relief was granted by the High Court till the date of vacation of relief by the High Court will be excluded. Subsequently, the High Court with oral judgment order dated 29th July, 2013 permitted the Assessing Officer to proceed with the reassessment proceedings on the first ground raised in reasons recorded for reassessment. Thus, the period from 18th March 2013 to 29th July 2013, i.e.134 days will be excluded in calculating the period of limitation [Explanation 1 to S. 153(4)].
ITA Nos. 2260 & 2261/Ahd/2017 11 . A.Y. 2006-07 & 2007-08 7. Hence, the Assessing officer had to pass the order within 13 days from 29th July, 2013 (date when High Court vacated the stay). However, as per 1st proviso to Explanation 1 to 153(4) if after vacation of stay the time period remaining to pass an order is less than sixty days it will be extended to sixty days. The relevant extract is produced herein below:
"Provided that where immediately after the exclusion of the aforesaid time or period, the period of limitation referred to in subsections (1), 65[(1A), (IB),] 66[(2), (2A) and (4)] available to the Assessing Officer for making an order of assessment, reassessment or recomputation, as the case may be, is less than sixty days, such remaining period shall be extended to sixty days and the aforesaid period of limitation shall be deemed to be extended accordingly:" Thus based on the above, the Assessing Officer ought to have passed the order by 27th September 2013. The whole working is summarised as under: Sr. No. Particulars Dates
Date of issuing notice u/s 148 30/03/2012
„ Date on which notice u/s 148 was 30/03/2012 served on the Appellant
31/03/2012 End of the Financial Year in which the notice was served
4 One /ear from the end of the Financial 31/03/2013 Year in which notice was served - Time limit given for Assessing Officer to pass order u/s. 147 (as per section 153(2))
5 Stay order passed by the Gujarat 18/03/2013 High Court against Writ Petition filed by the Appellant
ITA Nos. 2260 & 2261/Ahd/2017 12 . A.Y. 2006-07 & 2007-08 6 Final order passed by the Gujarat 29/07/2013 High Court and stay vacated against Writ Petition filed by the Appellant
7 Number of days which will be excluded 134 in computing the time limit (As per expl 1 to sec 153(4)) [6- 5]
8 13 Da ys remaining for AO to complete the assessment after HC order [4 - 5 ]
9 6 Since the time remaining is less than 60 days, time period is extended to 60 days [As per proviso to Expl 1 to Sec 153(4)]
10 27/09/2013 Date within which order u/s. 147 has to be passed and served upon the Assessee [ 6 + 9 ]
11 Assessment order passed by the 26/02/2014 Assessing Officer u/s 143(3) r.w.s. 147
In view of the above the reassessment order was passed after the time limit prescribed by the statute. Since the order passed is barred by limitation, the reassessment order passed u/s 143(3) rws 147 by the Assessing Officer is void ab initio and needs to be quashed.
On this issue, we further clarify that the limitation period for completing assessment would start from date when High Court vacated the stay order and not from date when Assessing Officer received such vacation order. Thus in the present the limitation period would start with effect from ITA No.1688/Ahd/2015 27th July 2013. The date of receipt of the vacation order by the Assessing Officer is irrelevant.
ITA Nos. 2260 & 2261/Ahd/2017 13 . A.Y. 2006-07 & 2007-08 10. In this regards, firstly it is submitted that the judgment of the Hon'ble High Court was passed in an open court wherein the Departmental Representative was present. The order of the High Court, was passed in presence of revenue counsel. Thus the date of knowledge of the dismissal of such writ petition to the assessee or AO is immaterial particularly when the decision was pronounced in open Court. Further an affidavit in reply was also filed by the Departmental Representative on 21st June 2013. This shows that the Departmental Representative was aware of the court proceedings.
Hence there was no requirement for the Assessing Officer to wait for the communication of the High Court order as with the passing of the order, the stay as provided by the Hon'ble High Court came to an end. The date of communication of order would be irrelevant."
A perusal of the above details would indicate that 194 days are available to the AO from 29.7.2013. But he passed the assessment order after more than 200 days. The AO was of the opinion that time limit for passing the assessment order would commence from the date of communication of the order. It has been observed that this order was communicated to him on 14.2.2014 and he was to pass an order within 60 days from this date. Accordingly, he has passed it on 26.2.2014. But this interpretation of the Explanation (1)(ii) appended to section 153(1) has not been approved by the ld.CIT(A). The finding of the ld.CIT(A) is based upon orders of the ITAT, wherein the Tribunal has considered scope of Explanation (1)(ii) to section 153(1) of the Income Tax Act. This Explanation has fallen for consideration before the Hon'ble High Allahabad Court and while considering this explanation, the Hon'ble high Court has observed as under:
"The aforesaid writ petitions having been dismissed on 01/8/1995, as per proviso to Explanation 1 to Section 153, the assessment was to be completed by 30/9/1995, but
ITA Nos. 2260 & 2261/Ahd/2017 14 . A.Y. 2006-07 & 2007-08 in the present case the assessment was completed on 04/1/1996 i.e. beyond 30/9/1995. The submission ITA No.1688/Ahd/2015 of Shri Shambhu Chopra, learned counsel appearing for the Revenue to save the assessment from being beyond the period of limitation is that the period of 60 days is to be computed from the date of communication of the order. He submits that the order of the High Court dated 01/8/1995, dismissing the writ petitions could be received by the office of the ACIT (Investigation) on 18/12/1995. There are two reasons due to which the said submission cannot be accepted. Firstly, the order of the High Court dated 01/8/1995, dismissing the writ petitions was passed in the presence of the learned counsel for the revenue, hence the submission that it was communicated on 18/12/1995 has no relevance, and secondly the provision of Explanation 1 (ii) of Section 153 of the Act, 1961 which is to the following effect: "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 Court, or .............shall be excluded".
The above statutory scheme clearly indicates that for computing the period of limitation the period during which the assessment proceedings is stayed shall be excluded. In excluding the above period, the concept of communication of the order of the Court cannot be imported. The exclusion of the period has been provided because of stay or injunction by any Court during which the assessment proceedings are stayed. The intention is clear that when the limitation for assessment has started it can be stayed only by an order or injunction of any Court and as soon as the order or injunction of the Court is vacated, the period of limitation shall re-start since after the vacation of the order of the Court, there is no embargo on the authorities to proceed with the assessment. The submission of Shri Shambhu Chopra learned counsel appearing for the Revenue that the limitation will start again only when the
ITA Nos. 2260 & 2261/Ahd/2017 15 . A.Y. 2006-07 & 2007-08 order is communicated to the Department thus cannot be accepted. The other reason for not accepting the above submission is also equally potent. Explanation 1(v) and (vi) to Section 153 of the Act, 1961 are also part of the same statutory scheme. In Explanation 1 (v) and (vi) to Section 153 of the Act, 1961 the statutory scheme provides for computing the period of limitation from the date when the order under sub-section (1) of Section 245D and 245Q is received by the Commissioner. Thus, the legislature has provided for excluding the period from the date of communication of the order where they so intended. The use of concept of communication of receiving the order in the same provision which is absent in Explanation 1 (ii) concerned clearly indicates that for the purposes of Explanation 1 (ii), the communication of the order of the Court vacating the stay order or injunction is not contemplated."
The Hon'ble Allahabad High Court thereafter considered a large number of decisions rendered by various High Courts and arrived at a conclusion that concept of communication of order of the Court cannot be imported. The ld.CIT(A) has appreciated the controversy in right perspective. Dispute is squarely covered by the decision of the Hon'ble Allahabad High Courts as well by two orders of the ITAT, whose discussions have been reproduced by the ld.CIT(A) in the impugned order. Therefore, we do not see any reasons to interfere in the order of the ld.CIT(A). Accordingly, the appeal of the Revenue is dismissed.
In the result, appeal of the Revenue is dismissed.
Since assessment order passed beyond the limitation period i.e. beyond the time limit of 60 days as per the Explanation 1 (ii) to section 153 read with the Ist proviso to section 153 i.e. the order is passed after the expiry of 60 days from the date of vacation of stay by the High Court.
ITA Nos. 2260 & 2261/Ahd/2017 16 . A.Y. 2006-07 & 2007-08 15. And in parity with the above said ITAT order, we are not inclined to interfere in the order passed by the ld. CIT(A) . In our considered opinion, ld. CIT(A) has passed detailed and reasoned order.
In the result, appeal filed by the Revenue is dismissed.
Now we come ITA No. 2261/Ahd/2017 for A.Y. 2006-07.
Since parties and assessment year are same and facts are identical to the ITA No. 2260/Ahd/2017 only amount of addition is different, therefore, this appeal is also dismissed.
In the result, both the appeals filed by the Revenue are dismissed.
Order pronounced in Open Court on 26 - 09- 2019
Sd/- Sd/- (PRADIP KUMAR KEDIA) (MAHAVIR PRASAD) ACCOUNTANT MEMBER True Copy JUDICIAL MEMBER Ahmedabad: Dated 26 /09/2019 Rajesh Copy of the Order forwarded to:- 1. The Appellant. 2. The Respondent. 3. The CIT (Appeals) – 4. The CIT concerned. 5. The DR., ITAT, Ahmedabad. 6. Guard File. By ORDER
Deputy/Asstt.Registrar ITAT,Ahmedabad