RAMESH CHAND SONI HUF,JAIPUR vs. ITO, BEAWAR

per Sub-section (2) of Section 150 as it is meant for providing a chech

on the Assessing Authority against the misuse of power for assessment,

reassessment or re-computation as provided U/s 150(1) of the Act. For

example if the Assessing Officer instead of assessing the income in the

hands of the correct assessee assessed the same in the hands of the

wrong assessee then, the Assessing Officer is not permit for misuse the

provisions of law for assessment or reassessment of the said income for

unlimited period. Therefore, to put a chech on this unlimited power of

AO Sub-section (2) is inserted in the statute which stipulates the time

limit for such assessment or reassessment by considering the

hypothetical situation that if at the time of framing the assessment at

the wrong hand and subsequently the appellate or revisional authority

passed the direction to assess in the right hand then the limitation for

such reassessment has to be considered on the date when such order

of assessment in the wrong hand is passed instead of the assessment

in the right hand. If the AO was having the power and jurisdiction to

ITA No. 1024 &1025/JP/2013 Sh. Ramesh Chand Soni HUF vs. ITO

assess the said income in the right hand instead of wrong hand as per

the limitation provided U/s 149 then the time taken in the proceedings

before the appellate or revisional authority which passed the directions

will not take away the jurisdiction and power of the Assessing Officer

which was very much available with the AO on the date when the

assessment was made in the wrong hand. In other words if the

Assessing Officer could have assessed the same income in the hands of

the assessee instead of assessing the same in wrong hand then the

limitation for reassessment of the said income is still available with the

AO irrespective of the time consumed in the appeal proceedings and

date of the directions passed by the appellate or revisional authority. In

nut shell Sub-section (2) of Section 150 excludes the time consumed in

the proceeding before appellate or revisional authority wherein such

directions are passed from the limitation prescribed U/s 149 of the Act.

considered whether it is assessment order or the order of first appellate

authority in case the directions are passed by the Tribunal we are of the

considered opinion that it makes no difference whether the directions

are passed by the first appellate authority or in the second appellate

proceedings by this Tribunal as the time consumed in the proceedings 14

ITA No. 1024 &1025/JP/2013 Sh. Ramesh Chand Soni HUF vs. ITO

in the appeal cannot be attributed to any party either the AO or the

assessee for the purpose of limitation as per Sub-section (2) of Section

150 of the Income Tax Act. However, we find that the Hon’ble Kerala

High Court in case of CIT vs. Vaikundam rubber Co. Ltd. (supra) while

dealing with this issue has held in para 4 to 6 as under:-

“4. The two questions to be decided in this case are whether the reassessment was under s. 147(a) or s. 147(b) ? The counsel for the Department tried to argue that it comes under s. 147(a). According to them, the assessee has not disclosed about the pendency of the appeal in the Madras High Court for enhanced compensation. This is a circumstance which could be made use of for reopening the assessment. According to us, this submission cannot be accepted. It is an admitted case that the earlier view was that as per the judgment in Jayaram vs. CIT (supra), interest on the compensation amount is liable to be assessed in the year in which it is received. It was only by a later decision in Peter John's case (supra) a Full Bench of this Court held that interest is liable to be spread over. Hence, we agree with the Tribunal that it cannot be said that the assessee failed to disclose all materials before the AO. If that be so, the assessment cannot be under s. 147(a). Then it can be only under s. 147(b). Here, it was by virtue of the decision of the Tribunal on 19th Feb., 1988, that information was received by the AO that interest can be spread over. There was a contention as to actually whether there is any such direction or finding in the Tribunal's order. According to us, when the Tribunal hold that only interest that accrued for the year 1980-81 can be assessed for that year, it becomes clear that rest of the interest is spread over to various years and this gives a right to the AO under s. 147(b) to start proceedings for escaped assessment read with s. 150(1) of the Act. Sec. 150(1) says that,

ITA No. 1024 &1025/JP/2013 Sh. Ramesh Chand Soni HUF vs. ITO

notwithstanding anything contained in s. 149, the notice under s. 148 may be issued at any time for the purpose of making an assessment or reassessment or recomputation in consequence of or to give effect to any finding or direction contained in an order passed by any authority in any proceedings under this Act by way of appeal, reference or revision. Thus, the limitation under s. 149 does not apply to s. 150(1). But sub-s. (2) of s. 150 says that the provisions of sub-s. (1) shall not apply in any case where any such assessment, reassessment or recomputation as is referred to in that sub-section relates to an assessment year in respect of which an assessment, reassessment or recomputation could not have been made at the time the order which was the subject- matter of appeal, reference or revision as the case may be, was made by reason of any other provision limiting the time within which any action for assessment, reassessment or recomputation may be taken. The question is what is the meaning of subject- matter of appeal. While the Department contends that subject- matter of appeal refers to order or assessment passed for the year 1980-81, i.e., 27th Jan., 1983; the assessee would contend that assessment order passed on 27th Jan., 1983, was subjected to appeal before the CIT(A) and that appeal was dismissed and against that order, an appeal before the Tribunal was filed. It is the Tribunal which passed the order on 19th Feb., 1988. So, according to the assessee, it is the order of the CIT(A) which was subject-matter of appeal, before the Tribunal which is relevant. That date is 1st March, 1984.

ITA No. 1024 &1025/JP/2013 Sh. Ramesh Chand Soni HUF vs. ITO

next two years are 1978-79 and 1979-80. The Department has found that so far as these two years are concerned, there is no bar of limitation if the date is taken from 27th Jan., 1983. But, the assessee contends that if 1st March, 1984, is taken, the reassessment, for 1978-79 and 1979-80 would have been barred. So, the question to be considered is the meaning of the words, "at the time the order which was the subject-matter of appeal, reference or revision". Learned counsel for the assessee would rely on the decision of the Andhra Pradesh High Court in CIT vs. G. Viswanatham (1988) 73 CTR (AP) 123: (1988) 172 ITR 401(AP) : TC 51R.2015. Even though in that case, the Court observed as follows :

"The judgment of the Tribunal in second appeal is dt. 9th Sept., 1974. According to sub-s. (2) of s. 150, the initiation of reassessment proceedings would be bad, even when they are initiated in consequence of or to give effect to any finding or direction contained in the appellate order, if such initiation of reassessment proceedings is barred by any other provision of the Act on the date of the order which was the subject-matter of appeal. In this case, the second appeal in which the finding was recorded arose from the order of the AAC dt. 6th Oct., 1972. The question is, whether on that date the initiation of reassessment proceedings is barred by any provision of law ? According to s. 149(1)(b) reassessment proceedings cannot be initiated after the expiry of four years from the end of the relevant assessment year. Four years therefrom would expire on 31st March,1971. Thus, the impugned initiation of proceedings under s. 147 by a notice issued on a date subsequent to 9th Sept., 1974, would be clearly barred."

But in that case, the Court found that even if the date is construed as referring to the original order of assessment, the proceedings will be barred. Another decision relied on by the Department is ITO vs. Eastern Coal Co. Ltd. (1975) 101 ITR

ITA No. 1024 &1025/JP/2013 Sh. Ramesh Chand Soni HUF vs. ITO

477(Cal) : TC 51R.947. In that case, there is no discussion regarding this aspect. But, it is assumed there that, date mentioned is the date of the original order. According to us, the words "at the time the order which was the subject-matter of appeal, reference or revision, as the case may be, was made......." in s. 150(2) are significant. It is because of the word "appeal" that, it is contended that the subject-matter should be construed as the original order. There are two tiers of appeals from the assessment order; one to the CIT(A) and another to the Tribunal. But, the next word is reference. Reference is made under s. 256(1) of the Act. What is referred is the subject-matter of the order of the Tribunal. Can we say that when the Tribunal refers the matter to the High Court, the order that was considered by the Tribunal is the order of the AO?. No. It is the order of the Tribunal that is being referred. For example, in this case, where there is a reference to the High Court against the order of the Tribunal, it will be order of the Tribunal that will be material. Further according to us, when an order is passed by the original authority and an appeal is filed, the order passed by the original authority merges with that of the order of the appellate authority. When a second appeal is filed, the subject-matter is the order of the appellate authority. So also, when the order of the Tribunal is challenged, what is the subject-matter, is the order of the Tribunal. If that be so, there is no difficulty in construing s. 150(2). Then, in this case, the order which was subject-matter of appeal is to be construed as the order passed by the CIT(A), on 1st March, 1984. If so, the reassessment for 1978-79 will also be barred.

ITA No. 1024 &1025/JP/2013 Sh. Ramesh Chand Soni HUF vs. ITO

The Hon’ble High Court has clearly held that when the directions were

passed by the Tribunal then the order of ld. CIT(A) was the subject

matter of appeal before the Tribunal and therefore, the order of ld.

CIT(A) is relevant for the purpose of Section 150(2) of the Act and not

the assessment order. Since, no contrary decision has been brought to

our notice on this point, therefore, we are bound to follow the decision

of Hon’ble kerala High Court in case of CIT Vs. Vaikundam rubber Co.

Ltd. (supra) and accordingly hold that the limitation for reassessment

has to be considered on the date when the ld. CIT (A) passed the order

in case of M/s Tirupati Automobiles Pvt. Ltd. which was subject matter

of appeal before the Tribunal in which the Tribunal passed the

directions on 26.03.2010. There is no dispute that the ld. CIT(A) in case

of M/s Tirupati Automobiles Pvt. Ltd. passed the order on 15.07.2009

and on that date the limitation for reassessment for the assessment

years 2001-02 & 2002-03 already expired as 6 years from the end of

the relevant assessment years expired on 31.03.2008 and 31.03.2009

respectively. Therefore, the limitation as on the date of the order

passed by the ld. CIT(A) dated 15.07.2009 was not available for

reassessment of this income for these two assessment years.

Accordingly, the reopening of the assessment is barred by limitation as

ITA No. 1024 &1025/JP/2013 Sh. Ramesh Chand Soni HUF vs. ITO provided u/s 149 r.w.s. 150(2) of the Act. Since the reopening is

barred by limitation, therefore, the consequent reassessed is not sustainable and the same are quashed. When the reassessments itself

are quash being void and barred by limitation then the ground No. 2 raised by the assessee on the merits of the addition becomes

infructuous. Therefore, we do not propose to go into the said ground of the assessee’s appeal.

In the result, the appeals of the assessee are allowed.

Order pronounced in the open court on 08/12/2017 Sd/- Sd/- ¼fot; iky jko½ ¼foØe flag ;kno½ (Vikram Singh Yadav) (Vijay Pal Rao) ys[kk lnL;@Accountant Member U;kf;d lnL;@Judicial Member Tk;iqj@Jaipur fnukad@Dated:- 08/12/2017. *Santosh. आदेश की प्रतिलिपि अग्रेf’ात@ब्वचल वf जीम वतकमत वितूंतकमक जवरू 1. vihykFkhZ@The Appellant- Shri Ramesh Chand Soni HUF, M/s M/s Tirupati Automobiles, Village- Santera, NH-08, Kotputli, Jaiapur. 2. izR;FkhZ@ The Respondent- The ITO, Ward Behror, Behror. 3. vk;dj vk;qDr@ CIT 4. vk;dj vk;qDr@ CIT(A) 5. विभागीय प्रतिनिधि] आयकर अपीलीय अधिकरण] जयपुर@क्त्ए प्ज्Aज्ए Jंपचनत. 6. xkMZ QkbZy@ Guard File {ITA No. 1024 &1025/JP/2013} vkns'kkuqlkj@ By order, सहायक पंजीकार@Aेेज. त्महपेजतंत 20