COMMISSIONER OF INCOME TAX JAI vs. SHRI JUGAL KISHORE GARG

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ITA/160/2008HC RajasthanRJHC02031521200709 May 20174 pages
AI SummaryDismissed

What did the High Court hold?

The High Court held that the Tribunal had not committed any error in its decision. The Tribunal's reasoning, as quoted in the judgment, indicated that the assessment order dated March 28, 2002, was indeed barred by limitation. The Tribunal referred to the proviso to sub-section (2A) of Section 153 of the Income Tax Act, 1961, and its amendment. It concluded that the time limit for passing the assessment order in compliance with the Tribunal's earlier order of May 29, 1998, was up to March 31, 2001. Since the assessment order was passed on March 28, 2002, it was beyond the prescribed time limit. The Tribunal also found substance in the assessee's argument, citing the Supreme Court's decision in CIT Vs. Rao Thakur Narayan Singh, that an assessment cannot be reopened solely to overcome an adverse finding by an appellate authority. Furthermore, the Tribunal relied on decisions of the Supreme Court in Ghanshyam Das Vs. Regional Asst. Comm. Of S.T. and the Allahabad High Court in S.P. Kochhar Vs. ITO, to hold that reassessment proceedings cannot be initiated if the assessment proceedings are still pending and have not terminated in a final order. Consequently, the Tribunal quashed the assessment order dated March 28, 2002. The High Court affirmed this decision, answering the issues in favour of the assessee and against the department.

What were the facts?

The appeals by the Revenue challenge a judgment of the Income Tax Appellate Tribunal (ITAT). The ITAT had dismissed the Revenue's appeal and partly allowed the assessee's appeal. The core of the dispute revolves around an assessment order passed by the Assessing Officer (AO) on March 28, 2002. The assessee, Shri Jugal Kishore Garg, is the respondent. The appeals concern the assessment year(s) which are not explicitly stated in the provided text. The procedural history indicates that an earlier order in the first round of appeal was passed on May 29, 1998. The ITAT's decision to quash the assessment order was based on it being barred by limitation.

What were the issues?

1. Whether the ITAT was right and justified in dismissing the Revenue's appeal as having become infructuous and not deciding it on merits, on the ground that the assessment order was quashed as being barred by limitation? (Question of law) 2. Whether the ITAT was right and justified in quashing the assessment order by holding it to be barred by limitation, despite the order being passed within the limitation period and this issue not being raised before the first appellate authority? (Question of mixed law and fact, concerning Section 153 of the Income Tax Act, 1961) 3. Whether the ITAT was justified in observing that the AO initiated reassessment proceedings during the pendency of a fresh assessment of a set-aside case, ignoring that the ITAT had earlier held the assessment made under Section 144 as invalid and not legally correct, meaning there was no set-aside assessment? (Question of mixed law and fact) Assessee's Contentions: The assessee argued that the assessment order dated March 28, 2002, was barred by limitation as per Section 153(2A) of the Income Tax Act, 1961, considering the ITAT's earlier order dated May 29, 1998. The assessee relied on the Supreme Court decision in CIT Vs. Rao Thakur Narayan Singh and the Allahabad High Court decision in S.P. Kochhar Vs. ITO. The assessee also contended that an assessment cannot be reopened merely to overcome an adverse finding by an appellate authority, and reassessment proceedings cannot be initiated while a fresh assessment of a set-aside case is pending. Revenue's Contentions: The Revenue contended that the Tribunal committed an error in dismissing its appeal and wrongly partly allowing the assessee's appeal. The Revenue argued that the assessment order was passed within the limitation period and that the issue of limitation was not raised before the first appellate authority. The Revenue also argued that the ITAT's observation regarding reassessment proceedings during the pendency of a fresh assessment of a set-aside case was incorrect, as there was no issue of set-aside assessment in this case.

Which sections of the Income-tax Act were involved?

Section 153,Section 144,Section 147,Section 250,Section 254,Section 263,Section 264

AI-generated summary — verify with the full judgment below

HIGH COURT OF JUDICATURE FOR RAJASTHAN BENCH AT JAIPUR D.B. Income Tax Appeal No. 160 / 2008 Commissioner Of Income Tax Jai ----Appellant Versus Shri Jugal Kishore Garg ----Respondent Connected With D.B. Income Tax Appeal No. 170 / 2008 Commissioner Of Income Tax Jai ----Appellant Versus Shri Jugal Kishore Garg Jaipur ----Respondent _____________________________________________________ For Appellant(s) : Mr. Anil Mehta For Respondent(s) : Mr. Gunjan Pathak with Mr. Aditya Bohra _____________________________________________________ HON'BLE MR. JUSTICE K.S. JHAVERI HON'BLE MR. JUSTICE VIJAY KUMAR VYAS Judgment 09/05/2017

Both these appeals involve common question of law and facts, hence, are decided by this common judgment. 1. By way of these appeals, the department has assailed the judgment and order of the Tribunal whereby the Tribunal has dismissed the appeal preferred by the department and partly allowed the appeal preferred by the assesseee.

(2 of 4) [ITA-160/2008]

2.

This Court while admitting the appeal (160/2008) on the following substantial question of law:- “Whether the ITAT was right and justified in dismissing the appeal as having become infructuous and not deciding the same on merits, on the ground that the asseessment order has been quashed on the ground of being barred by limitation?” 3. Another appeal (170/2008) has been admitted on the following questions of law”- “i) Whether the ITAT was right and justified in quashing the assessment order by holding ity to be barred by limitation, inspite of the fact that the order was passed within the limitation and the said issue was never raised by the assessee before the first appellant authority? ii) Whether the ITAT was justified in observing that the AO has initiated reassessment proceedings during the pendency of a fresh assessment of the set aside case, ignoring the fact that in the present case the ITAT vide its earlier order dated 29.05.98 has held the assessment made under Section 144 as invalid and not legally correct and thus, in the present case there was no issue of set aside assessment?” 4. Counsel for the appellant contended that the Tribunal has seriously committed an error in dismissing the appeal preferred by the department and appeal preferred by the assessee has wrongly been partly allowed. 5. However, we have gone through the order of the CIT(A) as well as the Tribunal. The Tribunal in para 2.5 observed as under:- “2.5. We have considered the arguments advanced by the parties in view of orders of the lower authorities and the decisions relied upon by the Ld. AR. The proviso to sub-section (2A) to section 153 of the Act has come in effect from 01.06.2001

(3 of 4) [ITA-160/2008]

substituted by the Finance Act, 2001. In this proviso it has been made clear that where the order u/s 250 or section 254 is received by the Chief Commissioner or Commissioner or, as the case may be, the order u/s 263 or section 264 is passed by the Chief Commissioner or Commissioner, on or after the first day of April, 1999 but before the first day of April, 2000, such an order of fresh assessment may be made at any time upto the 31st day of March, 2002. In the present case before us the order in the appeal in the first round was passed on 29.05.1998 which might have been received by the Chief Commissioner or Commissioner well before 01.04.1999 as no such objection has been raised by the department in the present case that the order of the Tribunal was received on or after 01.04.1999 and before 01.04.2000. Thus the computation of limitation of time for passing of assessment order in compliance of the order of the Tribunal will not come within the ambit of the proviso to sub-section(2A) to section 153 of the Act, as submitted by the Ld. DR. The prescribed time limitation for passing of assessment order in compliance of the order of the Tribunal as per sub- section (2A) to section 153 of the Act before its amendment with effect from 01.06.2001 was two years from the end of the financial year in which the order u/s 254 is received by the chief commissioner or commissioner. After amendment of this sub section with fact from 01.06.2001 this time limit has been reduced to 1 year. Thus in the present case the time limit for passing the assessment order before the AO was upto 31.03.2001. The assessment order however has been passed on 28.03.2002 i.e. much after the expiry of the time limit. Besides above we find substance in the submission of the Ld. AR that in view of decision of Hon’ble Supreme Court in the case of CIT Vs. Rao Thakur Narayan Singh (supra) the assessment cannot be reopened merely to get over adverse finding given by any appellate authority in original assessment proceedings. It is also unestablished position of law that in case an assessment had been completed by the AO and the same is set aside in appeal, in such a situation, initiation of reassessment proceeding is not possible till a fresh assessment of the set aside case has been completed. This is so because, so long as assessment, as per appellate direction, or otherwise, is pending, the AO cannot have any reason to believe that income for the year has escaped assessment. Income cannot be said to have escaped assessment within the meaning of section 147, if the assessment proceeding in respect of income are still pending and have not yet

(4 of 4) [ITA-160/2008]

terminated in a final order. In this regard we find support from the decision of Hob’ble Supreme Court in the case of Ghanshyam Das Vs. Regional Asst. Comm. Of S.T. (supra) and of Hon’ble Allahabad High Court in the case of S.P. Kochhar Vs. ITO (supra) relied on by the Ld. AR. We thus hold that the assessment order dated 28.03.02 in the present case is barred by limitation. The same is thus quashed. The ground Nos. 1 to 3 are thus decided in favour of the assessee.” 6. Taking into consideration the decision of the Supreme Court in the case of Ghanshyam Das vs. Regional Assistant Commissioner of S.T. (1964) 51 ITR 557 (Sc) and the decision of the Allahabad High Court in the case of S.P. Kochar vs. ITO, (1984) 145 ITR 255,264 (All.), in our considered opinion, the Tribunal has not committed any error. 7. The issue is answered in favour of the assessee and against the department. 8. The appeals stand dismissed. A copy of this order be placed in each file.

(VIJAY KUMAR VYAS),J. (K.S. JHAVERI),J. A.Sharma/84-85

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