THE ITO, WARD-2(1)(4),, AHMEDABAD vs. M/S. M.G.F. GROWTH RESEARCH AND INVESTMENT LTD.,, AHMEDABAD

Though Revenue has taken four grounds of appeal, but its grievance revolves around a single issue i.e. the ld.CIT(A) has erred in deleting the addition of Rs.69,02,700/- which was added by the AO with help of section 68 of the Income Tax Act, 1961. In the CO the assessee has taken up jurisdictional issue whereby it has pleaded that the assessment order is time

Brief facts of the case are that the assessee has filed its return of income electronically on 22.9.2009 declaring total income at Rs.59,280/-. This return was processed under section 143(1) of the Act. The AO, thereafter, received information from Dy.Director of Income Tax (Invt.), New Delhi exhibiting that a search/survey under section 132/133A of the Act was conducted at the residence and business premises of Shri Surendra Kumar Jain and his brother wherein it revealed that these persons were indulging in providing accommodation entries to various beneficiary companies/entities/persons. According to the AO, the assessee is one of the beneficiaries. Hence, he recorded reasons and issued a notice under section 148 on 7.6.2013 which was served upon the assessee on 13.6.2013. The assessee challenged the reopening by way of Special Civil Application no.16235 of 2014 before the Hon’ble High Court of Gujarat. The Hon’ble Gujarat High Court has issued notice and stayed further proceedings. However, its application was dismissed on 8.2.2015. The AO has passed assessment order on 22.3.2016. According to the assessee this order is time barred. This plea of the assessee has been rejected by the AO as well as by the ld.CIT(A).

Since the issue disputed in the CO is a jurisdictional issue, therefore, first we take this issue.

Before us, the ld.counsel for the assessee has compiled details in tabular form demonstrating as to how the assessment order is time barred. We deem it appropriate to take note of these details, which read as under: “A. The appellant most respectfully craves liberty to submit the following dates for your kind perusal:- Name Date Annexure

Date of Issuing of Notice section 148 7 June 2013 2. Service of Notice issued under section 13 June 2013 148

End of the financial year in which the 31 March 2014 notice was served

One Year from the end of the FY in 31 March 2015 which notice was served

Stay order passed by Hon'ble High 1 Court against assessee's writ filed by the 10 November Assessee 2014

Final Order Passed by the Hon'ble High 8 April 2015 2 Court and stay vacted against the writ.

Days Remaining for AO to complete the Nil Asstt. after order of the Hon’ble High Court 9. Since the time remaining is less than 60 60 days, extended period is 60 days( as per Proviso to Expln 1 to section 153(4)) 10. Extended ate after, 60 days of 7 June, 2015 pronouncement of the order and vacation of interim relief 11. Order under section 143(3) rews 147 22 March 2016 passed on

From the above table, it is evident that the order was required to be passed before 7th June 2015 whereas it has been passed on 22nd March 2016 and therefore it is time barred and therefore the order passed by the Id.AO is required to be quashed. In this regard reliance is placed on the order of the Co- Ordinate Hon'ble ITAT-Ahmedabad Bench, in the case of DCIT Vs Sun Pharmaceuticals Limited (ITA 1688/Ahd/2015).Copy enclosed as Annexure 3.Further relience is placed on the ,(A) Hon'ble Apex Court in the case of Regional Director ONGC Limited & Ans. Vs Assn.of Sc. & Tech Offr.ONGC Ltd & Ors.(354 ITR 156)(SC) and (B)Hon'ble Delhi High Court in the case Saheb Ram Om Prakash Marketing Pvt Ltd Vs CIT (398 ITR 252)(Del) dated 8/9/2017.

The ld.counsel for the assessee has raised two fold submissions. In his first fold contentions, he contended that clause (ii) to Explanation 1 appended to section 153(1) provides exclusion of that period during which assessment proceedings remains stayed by an order or injunction of any court. He pointed that this explanation has fallen for consideration before the Hon’ble High

In his next fold of contentions, the ld.counsel for the assessee submitted that the AO has been counting the period of limitation from the date of communication of the order for the purpose of exclusion. He placed on record details obtained under RTI Act from the Hon’ble High Court and pointed out that Mrs.Mauna M. Bhatt had applied for copy of order of the Hon’ble High Court on 10.4.2015 vide application no.12837/2015. This order was delivered on 22.12.2015. From this date, at the most 60 days would be counted as per the proviso to Explanation 1 to section 153(4) of the Act. Even the benefit of 60 days from the date of receipt of copy is being given, then also the assessment order is time barred. Copy was delivered on 22.12.2015 and assessment order has been passed on 22.3.2016. Thus, on all count, it is time barred.

The ld.DR contended that period consumed in communication of the order to the AO deserves to be included. He relied upon the order of the ITAT in the case of Pawan Kumar Jain Vs. DCIT, 32 taxmann.com 378 (Mum.Trib.). He placed on record copy of this decision. He further relied upon the order of National Consumer Disputes Redressal Commission. He placed on record online analysis obtained from Supreme Court cases in online blog. He also relied upon the judgment of the Hon’ble Gujarat High Court in the case of Laladhar T. Khushlani Vs. Commissioner of Customs, Tax Appeal No.915 of

We have duly considered rival contentions and gone through the record. Certain facts are not in dispute viz. notice under section 148 was served upon the assessee on 13.6.2013. It was issued in financial year which would end on 31.3.2014. Thus, time limit for passing assessment order in this case was upto 31.3.2015. The assessee challenged reopening of the assessment before the Hon’ble High Court and obtained stay. The stay granted on proceedings on 10.11.2014 was vacated on 8.4.2015 and writ petition was dismissed. Thus, short controversy between the assessee and the Revenue is, whether the time limit consumed during the pendency of writ petition where further proceedings before the AO remained stayed by Hon’ble High Court is to be excluded or time consumed in communicating this judgment of the Hon’ble High Court to the AO also deserves to be excluded in view of the clause (ii) of Explanation 1 appended to section 153(1). In the case of Sun Pharmaceuticals (supra), we have relied upon the judgment of the Hon’ble Allahabad High Court wherein this explanation has been considered. The finding of the Hon’ble Allahabad High Court in the case of Chandra Bhan Bansal (supra) has been extracted by the Tribunal wherein cognizance to clause (ii) of Explanation 1 appended to section 153(1) has been taken by the Hon’ble High Court. Such discussion reads as under:

Hon’ble Delhi High Court has also considered clause (ii) of Explanation 1 appended to section 153 and observed that only the period during which assessment proceedings is stayed by an order or injunction of higher court would be excluded. The discussion made by the Hon’ble Delhi High Court on this issue reads as under: “17. At the outset, it requires to be noticed that although it is asserted in the counter-affidavit by the Revenue that a copy of the order of the High Court dated 9th November 2016 was received in the office of the Principal CIT-8 only on 2nd December 2016, there is no document placed on record to substantiate the assertion. This could have been substantiated by producing the relevant extract from the dispatch and receipt register maintained in the said office or even a copy of the order

In any event, clause (ii) to Explanation 1 only excludes from the computation of limitation "the period during which the assessment proceeding is stayed by an order or an injunction of any court." It does not exclude the period between the date of the order of vacation of stay by the Court and the date of receipt of such order by the Department. Therefore, in the present case, the Revenue cannot take advantage of the fact that it received a copy of the order dated 9th November 2016 of this Court only on 2nd December 2016.

Even otherwise, the assertion that the Revenue was aware of the order only on 2nd December 2016 does not appear to be correct. The Revenue has been unable to dispute the fact that, on 30th November 2016, a notice was issued by the AO to the Assessee under Section 142 (1) of the Act and this was pursuant to the order passed by this Court on 9th November 2016. Clearly, therefore, on the date that such notice was issued, the AO was aware of the order dated 9th November 2016 of this Court. Also, the order dated 9th November 2016 was passed in the presence of counsel for the Revenue and, therefore, the Revenue clearly was aware of the said order on that date itself.

For all of the aforementioned reasons, the Court is unable to accept the plea of the Revenue that, since it became aware of the order of this Court only on 2nd December2016, the period of 60 days in terms of the first proviso to Explanation 1 to Section 153 of the Act should begin to run from that date.

The Court is also unable to accept the submission that the 60 day period in terms of the first proviso to Explanation 1 to Section 153 of the Act should begin to run from the date on which the Revenue received a copy of the order of vacation of stay. Such an interpretation is not supported by the plain language of the proviso to Explanation 1. In fact, Circular No. 621 dated 19th December 1991 issued by the Central Board of Direct Taxes, while explaining the reasons for introduction of the proviso under Explanation 1, acknowledged that the time remaining after vacation of stay in terms of Section 153 (2) of the Act may not be sufficient to complete the re-assessment proceedings which is why the language used in the first proviso is that the period "shall be extended to 60 days" for passing the assessment order in terms of Section 153 (2) of the Act if the period remaining within limitation after the excluded period has elapsed is less than 60 days.

In the present case, on the date that the stay order stood vacated only 13 days were left for completion of the proceedings. Since this period was less than 60 days, the period of limitation got extended to 60 days from the date of such vacation of stay, i.e. 60 days from 9th November 2016. This, therefore, meant that the order in the re-

The decision of the Madras High Court in Thanthi Trust (supra) turned on the fact that the Madras High Court narrowly interpreted that the word 'assessment' occurring in Explanation 1 (ii) to not take within its ambit re- assessment proceedings. Yet, there appears to be a contradiction in terms because the Madras High Court proceeded to exclude the period during which there was stay of the proceedings in terms of that very Explanation. Further, no reference was made to the proviso below Explanation 1. The Madras High Court proceeded on the assumption that there was a time of period of 4 years from the last date of the assessment year in which the notice was served. Going by that yardstick in the present case, the re- assessment order would still be time-barred.

The decision of the Calcutta High Court in India Ferro Alloy (supra) is distinguishable on facts. The Calcutta High Court too did not take into account the purpose for the introduction of the proviso to Explanation 1. However, the essential approach of exclusion of period during which the period during which the stay was operating is the same in all these cases. The interpretation placed by this Court on the above provision finds support from the decision of the Allahabad High Court in Chandra Bhan Bansal (supra) where it was held:

For all of the aforementioned reasons, the Court holds that in the present case the impugned assessment order dated 30th January 2017 was time barred and it is accordingly hereby set aside. Consequently, demand notice dated 30th January 2017 and the penalty order dated 26th July 2017, passed by the AO under Section 271(1) (c) of the Act, are also hereby set aside.”

As far as the order relied upon by the ld.DR are concerned, they are not directly on the point. The issue before the ITAT in the case of Pawan Kumar Jain (supra) was whether the MA for rectification of the Tribunal’s order under section 254(2) could be filed from the date of acknowledgment of the order or from the date of order. The Tribunal has dismissed the appeal of the assessee ex parte. The assessee has applied for recall of that order. In that context the Tribunal observed that from the date of acknowledgement limitation would start. It is so provided in Rule 24 of the Income Tax (Appellate Tribunal) Rules, 1963 also. The Tribunal is supposed to serve order upon the assessee and from the date of communication of the order, limitation would start. Similarly, under Consumer Protection Act, period of limitation under section 15 would be counted from the date when the order was communicated to the parties free of charge. The Consumer Courts are under obligation to communicate the order and from that date limitation would start. It is so provided in the statute itself. Orders of the ITAT, Chandigarh and Mumbai Benches are also to that effect. The judgment of Hon’ble High Court in the case of Liladhar T. Khushalani is also distinguishable on facts. The Hon’ble Court while analyzing the scope of section 35C(2) of Customs Act held that limitation for filing an MA for rectification would start from the dispatch of the order from CESTAT and not from date of order. This was on the basis of provision in Custom Act. Thus, in all these cases an obligation upon the adjudicating authority was there for communicating order. Whereas for the purpose of excluding thess number of days specific provision has been made in clause (ii) to Explanation 1 appended to section 153. This has been

In the result, appeal of the Revenue is dismissed and CO of the assessee is allowed.