THE COMMISSIONER OF INCOME TAX vs. TCM LTD

While the assessee pursued appeal against assessment sustained for the assessment year 1977-78 before the Tribunal, they did not challenge the conditional order passed by the Assessing Officer for 1979-80 wherein the Assessing Officer left freedom to himself to revise the assessment to include the very same income based on return filed by the assessee for the assessment year 1979-80 in case assessment of the very same amount for 1977-78 gets cancelled in the course of proceedings under the statute. Ultimately, the assessee's claim for exclusion of the income for the assessment year 1977-78 was INCOME-TAX).

After this court rendered the judgment on 22.5.1998, the Assessing Officer issued notice under Section 148 to the assessee on 4 24.7.1998 within the time prescribed under Section 149 with reference to the judgment rendered by this court for the assessment year 1977-78. Even though revised assessment was passed based on the condition stated in the original assessment order and based on the income returned by the assessee, assessee contested the revised assessment on the ground that the same having been passed beyond four years from the end of the year, is time barred under Section 150(2) of the Income Tax Act. The C.I.T.(Appeal) in first appeal dismissed the assessee's contest on limitation by holding that the order of the Tribunal which was the subject matter of reference before this court for the assessment year 1977-78 was the first order dated 30.1.1982, with reference to which, the revision of assessment for 1979-80 was within time. However, the final judgment of this court in the Reference Case was in fact rendered against the Tribunal's revised order (second order) dated 30.12.1992. Therefore, the assessee filed second appeal against the order of the C.I.T.(Appeal) contending that limitation has to be reckoned with reference to second order of the Tribunal. The Tribunal by relying on decision of this court in INCOME-TAX OFFICER VS.

During hearing Standing Counsel referred to the original assessment order passed by the Assessing Officer for 1979-80 which is extracted above and contended that the officer had in fact made the original assessment itself conditional and as and when the assessment for 1977-78 got finalised by judgment of this court in the Reference Case, the Assessing Officer was free to revise the assessment by applying limitation under Section 149 with reference to the judgment of this court. Counsel appearing for the respondent-assessee on the other hand relying on decision of this court and that of the Supreme Court abovereferred contended that limitation for revision of assessment under Section 149 should be reckoned with reference to the 6 date of second order of the Tribunal against which reference was taken to this court by the assessee. Even though the interpretation placed on sub-section (2) of Section 150 by the assessee's counsel is tenable, we are of the view that limitation has no application in this particular case because the original assessment itself was a conditional order passed by the officer reserving right to revise it after the assessment for 1977-78 attains finality. It is seen that assessee themselves offered the income for tax for the assessment year 1979-80 and inspite of inclusion of the amount in the return filed by the assessee, the officer could not assess the same because he had already assessed the very same amount for 1977-78, though contested by the assessee in appeal. In fact it is obvious from the observation of the officer in the original assessment that as on the date of completion of regular assessment for 1979-80, the assessment of the very same amount for the assessment year 1977-78 was sustained in appeal by the first appellate authority. Therefore, if the assessee's return was to be accepted and the amount was included in the original assessment for 1979-80, then it would have resulted in double assessment leading to multiplicity of litigation necessitating the 7 assessee to file appeal against the assessment for 1979-80 also as their contention was that the income is to be assessed for 1979-80 and not for 1977-78. We are of the view that the assessee cannot be permitted to contest the liability on technical ground of limitation after offering the income for assessment in the return filed for the year 1979-80. It is to be noted that the original assessment for 1979-80 was a conditional order passed by the Assessing Officer which require modification depending upon the result of proceedings that were pending against the assessment for 1977-78. When the High Court in the Reference Case upheld the assessee's claim that the income is not assessable for the assessment year 1977-78, then the right reserved by the Assessing Officer in the original assessment completed for 1979-80 could be exercised by him within the time limit provided for rectification of assessment under Section 154. Even though counsel appearing for the assessee contended that time limit for rectification of mistake is four years from the date of order sought to be revised, we are of the view that limitation in this case has to be considered with reference to the original assessment which was a conditional order made subject to the 8 finality of assessment for 1977-78. In fact, by incorporating the condition abovestated in the original assessment for 1979-80, the Assessing Officer has made the assessment of this amount for the year 1977-78 also as part of this order. Therefore, once the assessment of the very same amount for 1977-78 is ultimately cancelled by this court in the Reference Case, the exclusion of the amount in the original assessment for 1979-80 becomes a mistake by virtue of the condition imposed by the Assessing Officer. In other words, the original assessment for 1979-80 on this issue gets finalised only when this court decided the Reference Case for the year 1977-78. Therefore, in our view, the original assesment for 1979-80 becomes a mistaken order on account of operation of judgment of this court with regard to the assessment of the very same amount of refund of excess power charges from KSEB for the assessment year 1977-78. We, therefore, hold that within four years from the date of judgment of this court in the Reference Case for 1977-78, the Assessing Officer is entitled to revise the assessment for 1979-80 by virtue of the right reserved for revision of assessment in the original assessment which is extracted above.