MRS.NAHID SHAFFI vs. INCOME TAXOFFICER

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ITA/1350/2009HC KeralaKLHC01026111200918 January 2019Bench: HONOURABLE MR.JUSTICE K.VINOD CHANDRAN,HONOURABLE MR. JUSTICE ASHOK MENON12 pages
AI SummaryDismissed

What did the High Court hold?

The Tribunal's order was upheld. The High Court found that the Supreme Court's decision in Dalmia Manganese Corporation, which dealt with rectification under Section 154 concerning withdrawal of development rebate, was distinguishable. In that case, a regular assessment had been made, and rectification was sought. Here, there was no regular assessment. The Tribunal correctly reasoned that Section 148 was the appropriate recourse as Section 155 applies only to completed assessments, and the income enhancement from the Settlement Commission order was not part of the partners' completed assessments. The High Court found no interference warranted with the Tribunal's order, answering the question of law against the assessee and in favour of the Revenue. The appeals were rejected. However, the issue of limitation, which was a ground raised before the First Appellate Authority, was left open for consideration by that authority.

What were the facts?

The appeals concern two assessees, partners in a firm, for assessment years 1986-1987 and 1988-1999. The firm had approached the Settlement Commission, which passed an order under Section 245D of the Income Tax Act, 1961, leading to an enhancement of the partners' income. The partners did not file returns pursuant to this order. Consequently, the Assessing Officer issued notices under Section 148, with sanction under Section 151, and completed best judgment assessments under Section 144. The assessees appeared before the Assessing Officer, sought adjournments, but did not appear subsequently. The First Appellate Authority ruled in favour of the assessees, citing a Supreme Court decision, while the Tribunal disagreed.

What were the issues?

1. Whether the Assessing Officer ought to have proceeded under Section 155(1)(C) of the Income Tax Act, 1961, instead of Section 148, for re-opening the assessment (mixed question of law and fact). Assessee's contention: The Assessing Officer should have proceeded under Section 155(1)(C) and not Section 148. They relied on the Supreme Court decision in Commissioner of Income Tax v. Dalmia Manganese Corporation [236 ITR 46 (SC)]. Revenue's contention: The Tribunal's order is in tune with the law, implying that Section 148 was the appropriate provision. The judgment does not explicitly record the revenue's arguments beyond this implicit stance.

Which sections of the Income-tax Act were involved?

Section 245D,Section 148,Section 151,Section 144,Section 155(1)(C),Section 154

AI-generated summary — verify with the full judgment below

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT THE HONOURABLE MR.JUSTICE K.VINOD CHANDRAN & THE HONOURABLE MR. JUSTICE ASHOK MENON FRIDAY, THE 18TH DAY OF JANUARY 2019 / 28TH POUSHA, 1940 ITA. No.1349 of 2009 AGAINST THE ORDER IN ITA NO.1310/2004 OF THE INCOME TAX APPELLATE TRIBUNAL, COCHIN BENCH DATED 30.10.2006 APPELLANT/RESPONDENT: MRS.NAHID SHAFFI, NO.15, SARASWATHY, IST FLOOR,, DENA BANK COLONY, GANGA NAGAR, BANGALORE-560 032. BY ADVS. SMT.PREETHA S.NAIR SRI.ANIL D. NAIR SRI.E.K.NANDAKUMAR (SR.) RESPONDENTS/APPELLANT: 1 INCOME TAX OFFICER KOCHI. WARD-1(3), RNAGE-2, KOCHI. 2 COMMISSIONER OF INCOME-TAX KOCHI. BY ADVS. SRI.P.K.RAVINDRANATHA MENON (SR.) SRI.JOSE JOSEPH, SC, FOR INCOME TAX THIS INCOME TAX APPEAL HAVING BEEN FINALLY HEARD ON 18.01.2019, ALONG WITH ITA.1350/2009, ITA.1351/2009, ITA.1353/2009, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:

ITA. No.1349 of 2009 etc. 2 IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT THE HONOURABLE MR.JUSTICE K.VINOD CHANDRAN & THE HONOURABLE MR. JUSTICE ASHOK MENON FRIDAY, THE 18TH DAY OF JANUARY 2019 / 28TH POUSHA, 1940 ITA. No.1350 of 2009 AGAINST THE ORDER IN ITA NO.1311/2004 OF THE INCOME TAX APPELLATE TRIBUNAL, COCHIN BENCH DATED 30.10.2006 APPELLANT/RESPONDENT: MRS.NAHID SHAFFI, NO.15, SARASWATHY, IST FLOOR,, DENA BANK COLONY, GANGA NAGAR, BANGALORE-560 032. BY ADVS. SRI.E.K.NANDAKUMAR SMT.PREETHA S.NAIR RESPONDENTS/APPELLANT: 1 INCOME TAX OFFICER KOCHI. WARD-1(3), RNAGE-2, KOCHI. 2 COMMISSIONER OF INCOME-TAX KOCHI. BY ADVS. SRI.P.K.RAVINDRANATHA MENON (SR.) SRI.JOSE JOSEPH, SC, FOR INCOME TAX THIS INCOME TAX APPEAL HAVING BEEN FINALLY HEARD ON 18.01.2019, ALONG WITH ITA.1349/2009, ITA.1351/2009 & ITA.1353/2009, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:

ITA. No.1349 of 2009 etc. 3 IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT THE HONOURABLE MR.JUSTICE K.VINOD CHANDRAN & THE HONOURABLE MR. JUSTICE ASHOK MENON FRIDAY, THE 18TH DAY OF JANUARY 2019 / 28TH POUSHA, 1940 ITA. No.1351 of 2009 AGAINST THE ORDER IN ITA NO.154/2005 OF THE INCOME TAX APPELLATE TRIBUNAL, COCHIN BENCH DATED 30.10.2006 APPELLANT/RESPONDENT: MRS. NILOFER HAMEED S-4, MONARCH RESIDENCE, ST.JOHN'S CHURCH ROAD, BANGALORE. BY ADVS. SMT.PREETHA S.NAIR SRI.ANIL D. NAIR SRI.E.K.NANDAKUMAR (SR.) SRI.JOSE JOSEPH, SC, FOR INCOME TAX RESPONDENTS/APPELLANT: 1 INCOME TAX KOCHI WARD-2(3), RANGE-2, KOCHI. 2 COMMISSIONER OF INCOME-TAX KOCHI. BY ADV. SRI.P.K.RAVINDRANATHA MENON (SR.) THIS INCOME TAX APPEAL HAVING BEEN FINALLY HEARD ON 18.01.2019, ALONG WITH ITA.1349/2009, ITA.1350/2009 & ITA.1353/2009, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:

ITA. No.1349 of 2009 etc. 4 IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT THE HONOURABLE MR.JUSTICE K.VINOD CHANDRAN & THE HONOURABLE MR. JUSTICE ASHOK MENON FRIDAY, THE 18TH DAY OF JANUARY 2019 / 28TH POUSHA, 1940 ITA. No.1353 of 2009 AGAINST THE ORDER IN ITA NO.153/2005 OF THE INCOME TAX APPELLATE TRIBUNAL, COCHIN BENCH DATED 30.10.2006 APPELLANT/APPELLANT: MRS. NILOFER HAMEED S-4, MONARCH RESIDENCE, ST.JOHN'S CHURCH ROAD, BANGALORE. BY ADVS. SMT.PREETHA S.NAIR SRI.ANIL D. NAIR SRI.E.K.NANDAKUMAR (SR.) RESPONDENTS/RESPONDENTS: 1 INCOME TAX OFFICER WARD-2(3), RANGE-2, KOCHI. 2 COMMISSIONER OF INCOME-TAX KOCHI. BY ADVS. SRI.P.K.RAVINDRANATHA MENON (SR.) SRI.JOSE JOSEPH, SC, FOR INCOME TAX THIS INCOME TAX APPEAL HAVING BEEN FINALLY HEARD ON 18.01.2019, ALONG WITH ITA.1349/2009, ITA.1350/2009 & ITA.1351/2009, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:

ITA. No.1349 of 2009 etc. 5 JUDGMENT K. Vinod Chandran, J. Two assessees, who are partners of a firm, are before us in the above two appeals arising from the assessment years 1986-1987 and 1988- 1999. The short facts required for consideration of the appeals are that the firm, in which the appellants were partners, was before the Settlement Commission, who had passed an order under Section 245D of the Income Tax Act, 1961 [for brevity, 'the Act']. The order passed by the

Settlement

Commission

resulted

in enhancement of the income of the partners. The partners did not file any return pursuant to the order passed by the Settlement Commission. In such circumstances, the Assessing Officer issued notice to the partners under Section 148 of the Act, with sanction obtained under Section 151 and assessment completed under Section 144. 2. The proceedings were completed after affording the assessee with an opportunity,

ITA. No.1349 of 2009 etc. 6 which was not availed of. We find from the assessment order that the assessee's had appeared before the Assessing Officer and sought adjournment, but then did not subsequently appear. The Assessing Officer took the income of the assessee as found by the Settlement Commission and completed the assessment. The ground raised in first appeal was that there were two notices issued under Section 148 and the assessment was barred by limitation. However, before the First Appellate Authority, this was not urged and an additional ground was raised. The ground so raised was that the Assessing Officer ought to have proceeded under Section 155(1)(C) of the Act and not under Section 148. The First Appellate Authority found in favour of the assessee relying on a decision of the Hon'ble Supreme Court in Commissioner of Income Tax v. Dalmia Manganese Corporation [236 ITR 46 (SC)]. 3. The Tribunal found that the subject

ITA. No.1349 of 2009 etc. 7 matter in Dalmia Manganese Corporation [supra] was relating to the withdrawal of development rebate allowed by the Assessing Officer in the regular

assessment

order.

Subsequently, proceedings were taken under Section 154 of the Act for rectification of the assessment. The Hon'ble Supreme Court found that when there is a specific provision in so far as re-opening of assessment, there could be no resort made to a general provision for rectification. 4. The Tribunal found that the dictum does not apply in the present case, when there was no regular assessment made. Resort could only be had to Section 148, since Section 155 applies only in the case of a completed assessment of a partner and the share of the income of the firm as found in an order passed under Section 245D(4)[clause (c) of Section 155(1)] is not included in the partners completed assessment. We do not think any interference can be made to the order of the Tribunal, since the question

ITA. No.1349 of 2009 etc. 8 has been answered perfectly in tune with the law. We hence answer the questions of law raised here against the assessee and in favour of the Revenue and reject the appeals. However, we make it clear that the remand order in so far as the limitation is concerned, would be left open for consideration by the First Appellate Authority. Sd/- K. VINOD CHANDRAN JUDGE Sd/- ASHOK MENON JUDGE sp/22/01/19

ITA. No.1349 of 2009 etc. 9 APPENDIX OF ITA 1349/2009 PETITIONER'S EXHIBITS: ANNEXURE A-A TRUE COPY OF THE ASSESSMENT ORDER DATED 07.10.1997. ANNEXURE B-A TRUE COPY OF THE ORDER OF THE CIT (APPEALS). DATED 21.09.2004. ANNEXURE C-A TRUE COPY OF THE COMMON ORDER OF THE INCOME TAX APPELLATE TRIBUNAL DATED 30.10.2006.

ITA. No.1349 of 2009 etc. 10 APPENDIX OF ITA 1350/2009 PETITIONER'S EXHIBITS: ANNEXURE A A TRUE COPY OF THE ASSESSMENT ORDER DATED 07.10.1997. ANNEXURE B A TRUE COPY OF THE ORDER OF THE CIT (APPEALS) DATED 21.09.2004. ANNEXURE C A TRUE COPY OF THE COMMON ORDER OF THE INCOME TAX APPELLATE TRIBUNAL DATED 30.10.2006.

ITA. No.1349 of 2009 etc. 11 APPENDIX OF ITA 1351/2009 PETITIONER'S EXHIBITS: ANNEXURE-A A TRUE COPY OF THE ASSESSMENT ORDER. ANNEXURE-B A TRUE COPY OF ORDER OF THE CIT (APPEALS) DATED 15/10/2004. ANNEXURE-C TRUE COPY OF THE COMMON ORDER OF INCOME TAX APPELLATE TRIBUNAL DATED 30/10/2006

ITA. No.1349 of 2009 etc. 12 APPENDIX OF ITA 1353/2009 PETITIONER'S EXHIBITS: ANNEXURE A A TRUE COPY OF THE ASSESSMENT ORDER DATED 07.10.1997. ANNEXURE B A TRUE COPY OF THE ORDER OF THE CIT (APPEALS) DATED 15.10.2004. ANNEXURE C A TRUE COPY OF THE COMMON ORDER OF THE INCOME TAX APPELLATE TRIBUNAL DATED 30.10.06

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