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Income Tax Appellate Tribunal, DELHI BENCH “D” NEW DELHI
Before: SHRI G.D. AGRAWAL, HON’BLE & SHRI AMIT SHUKLA
PER AMIT SHUKLA, J.M.: The aforesaid appeal has been filed by the Revenue against the impugned order dated 06.02.2013, passed by Ld. CIT (Appeals), Bareilly u/s.154/251/143(3) for the Assessment Year 2003-04. In the grounds of appeal, the Revenue has challenged the action of the ld. CIT (A) holding that proceedings initiated u/s.154 is barred by limitation. The relevant ground raised reads as under: - “1. In the facts and circumstances of the case, Ld. CIT(A) has erred in allowing relief to the assessee by holding that the proceeding initiated u/s.154 has been barred by limitation whereas the AO has clearly held in his order that the proceedings were well within the limitation order.
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In the facts and circumstances of the case, Ld. CIT(A) has erred in not appreciating the fact that after the order u/s 251 /143(3)/l54 dated 02.08.2010 was passed, the original assessment merged with the order dated 02.08.2010 and therefore, the date of limitation u/s.154(7) would be reckoned from 31.03.2011. 3. On the facts and in the circumstance of the case, Ld. CIT (A) has erred in not appreciating the fact that since the book profit of the assessee was sought to be amended by the AO u/s 154. the last order in which the book profit was computed, i.e. order dated 02.08.2010, would qualify to be the ‘‘Order Sought to be amended” u/s.154(7) and therefore, can be amended up to 31.03.2015.”
The facts in brief qua the issue of limitation is that, the return of income for Assessment Year 2003-04 was filed by the assessee on 27.11.2003, declaring total income at Rs. Nil and income in the form of book profit u/s.115JB was offered at Rs.35,95,27,137/-. The said return was subject to scrutiny and accordingly, order u/s.143(3) was passed on 31.03.2006 on Nil income and book profit u/s.115JB was computed at Rs.37,55,50,511/-. Thereafter, order u/s.154/143(3) was passed by the AO on 17.03.2008, but again the book profit u/s.115JB was accepted at Rs.37,55,50,511/-. Subsequently, in the first appeal filed before the CIT (A), wherein part relief was allowed to the assessee and consequently an order u/s.251/143(3)/154 was passed by the Assessing Officer on 02.08.2010 giving effect to order of CIT(A), wherein the income u/s.115JB still remained at Rs.37,55,50,511/-. Another order u/s.251/143(3)/154 was passed by the AO on 12.08.2010 giving effect to order of CIT(A). After completing
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the assessments in the aforesaid manner, once again, the Assessing Officer issued notice u/s.154 on 05.08.2010 proposing to re-compute the book profit of the assessee u/s.115JB of IT Act, 1961 by making certain adjustments and in consequent to that, order u/s.154/251/143(3) was passed on 15.10.2010 and the book profit u/s.115JB of the assessee was recomputed at Rs.64,09,00,500/-. For the sake of convenience, the chronology of events leading to the passing of impugned assessment order u/s.154 extracted hereunder: -
Sl. No. Date Events 1. 27/11/2003 Return filed at Book Profit of Rs.35,95,27,137/- u/s.115JB. 2. 31.03.2006 Assessment completed at book profit of Rs.37,55,50,511/-u/s.115JB. Income under normal provision was assessed at Nil after setting off brought forward unobserved depreciation of Rs.35,93,46,010/-. 3. 26.07.2007 Application u/s. 154 was filed by the assessee vide application dated 26.07.2007. 4. 17.03.2008 Order u/s.154 was passed on the said application dated 26.07.2007 5. 25.06.2008 Appeal filed against order u/s.143(3) was decided 6. 12.08.2008 Assessing Officer passed order giving effect & of order of ld. CIT(A) u/s.251/143(3)/154 at 02.08.2010 Nil income. The book profit u/s.115JB remained same at Rs.37,55,50,510/-. 7. 05.08.2010 Notice u/s.154 was issued against order dated 2.8.2010 which was in respect of to
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give appeal effect u/s.251/143(3)/154. 8. 15.10.2010 Order u/s.154 was passed against notice dated 5.8.2010.
Assessing Officer has thus, sought to revised the order dated 02.08.2010 which was in respect to order giving appeal effect u/s.251/143(3)/154, wherein he has sought to add ‘deferred tax’ amounting to Rs.25,62,00,000/- and withdrawal from ‘revaluation reserve’ amounting to Rs.91,49,989/- and thereby enhancing the book profit u/s.115JB at Rs.64,09,00,500/- as against book profit computed by him vide order dated 02.08.2010 at Rs.37,55,50,511/-. In so far as the assessee’s objection that such a rectification u/s.154 is barred by limitation, because what is sought to be rectified is the original assessment order passed u/s 143(3) on 31.03.2006, which is beyond 4 years as per limitation provided in section 154(7). However, the Assessing Officer has rejected the said contention on the reasoning that the limitation of four years would apply from the order of 02.08.2010 and not original assessment order; and in support he also referred and relied upon the decision of Hon'ble Apex Court in the case of Hind Wire Industries Ltd. vs. CIT, (1995) 212 ITR 639.
Ld. CIT(A) after considering the entire facts and considering catena of decisions held that, limitation in the present case has to be taken into account from the date of original assessment order which was passed on 31.03.2006.
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and not order dated 2.08.2010. His observations and findings are as under: -
“I have carefully considered the issue, perused the submissions and heard the AR at length. The return of income for the year under appeal was filed on 27.11.2003 and the assessment was completed on 31.03.2006 as book profit Rs. 37,55,50,511/- u/s 115JB. Income under normal provision was assessed at Nil after setting off brought forward unabsorbed depreciation of Rs. 35,93,46,010/- On 26.7.07 application u/s 154 was filed and order u/s 154 was passed on 17.3.2008 rectifying the assessed income of the appellant to NIL under normal provisions of the Act after setting off brought forward unabsorbed depreciation of Rs. 34,52,36,689/. In appeal my predecessor in office vide appellate order dated 25.06.2008 partly allowed the appeal filed by the appellant, restoring some of the issues to the file of the AO. The AO passed order u/s 251/143(3)/154 of the Act dated 12.08.2008 and 02.08.2010 giving effect to the appellate order supra. The assessing officer, thereafter, issued notice u/s 154 of the Act seeking to rectify the order dated 2.8.2010 on various grounds. The AO accordingly passed the order dated 15.10.2010 u/s 154 rectifying the book profit of the appellant at Rs. 64,09,00,500/-. The assessing officer issued notice u/s 154 for the year under appeal on 5.8.2010 to rectify the appeal effect in respect of the issues which were not raised by the appellant in appeal and not dealt with by the CIT (A). The rectification was in fact proposed to the original assessment order which was completed vide order dated 31.03.2006. The AR before the AO stated that proposed rectification is time barred and void-ab-initio as the original order was passed on 31.3.2006. The AO did not accept this plea of the assessee-appellant and passed the order u/s 154. In this back ground of the case and also
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the various judicial pronouncement cited by the appellant, it is clear that the issue before the Commissioner of Income-tax (Appeals) or order passed u/s 154 by the learned Assessing Officer was not the issue of Deferred tax Liability and revaluation reserve. Therefore, the limitation will be counted by the date of original assessment order passed on 31/3/2006 which is expired on 31/3/2010 while notice of rectification is issued on 5/8/2010. Thus, order dt. 15/10/2010 is barred by limitation. Accordingly, the order passed by the AO under appeal is annulled.”
Before us, the learned Department Representative submitted that the Assessing Officer has clearly dealt with this issue in detail and has stated that the rectification order is within four years, because what he is seeking to rectify is order dated 10.08.2010; and the Hon'ble Apex Court in the case of Hind Wire Industries Ltd. (supra) has been held that order in Section 154(7) has not been qualified in any way and it does not necessarily mean the original order. The expression ‘order sought to be amended’ would mean even the rectified order. Thus, he strongly relied upon the order of the Assessing Officer.
On the other hand, learned counsel for the assessee relied upon the order of the ld. CIT(A) and also explained the entire fact and background of the case and pointed out that the issue of rectification which has been raked up in the impugned order was not the subject matter of dispute either before the ld. CIT(A) or in the order passed u/s.251/154/143(3), because the book profit remained the
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same. He also relied upon the decision of Hon'ble Allahabad High Court in the case of Shree Naw Durga Bansal Cold Storage & Ice Factory v. CIT, reported in (2017) 397 ITR 626 (Alld.) wherein the Hon'ble High Court has discussed, analyzed and explained the said judgment of Hon'ble Apex Court in the case of Hind Wire Industries Ltd. (supra).
We have heard the rival submissions and also perused the relevant material placed on record. Here, in this case, the assessment was completed u/s.143(3) on 31.03.2006 at a book profit of Rs.37,55,50,511/- u/s.115JB and under the normal provision, income was assessed at Nil after setting off brought forward unabsorbed depreciation. Thereafter, on an application filed by the assessee u/s.154 on 26.07.2007, an order was passed on 17.03.2008 rectifying the assessed income after reducing the claim of setting of brought forward unabsorbed depreciation. Ld. CIT(A) vide order dated 25.06.2008 has partly allowed the appeal of the assessee after restoring some of the issues to the file of the Assessing Officer. The issue for which present rectification has been done by the Assessing Officer was neither the subject matter of appeal before the ld. CIT(A) nor there was any direction to the Assessing Officer to examine or to investigate the issue of deferred tax or withdrawal from revaluation reserve for book profit. In the order giving effect by the Assessing Officer vide order dated 02.08.2010, the book profit was computed at Rs.37,55,50,511/-, i.e., the computation of book profit was not tinkered with from the original assessment order. The
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Assessing Officer vide notice issued u/s.154 dated 05.08.2010 is now seeking to rectify the appeal effect order in respect of the issues which was neither raised by the assessee nor has been dealt by the ld. CIT(A), and therefore, the learned Assessing Officer could not have tinkered with such an order dated 15.10.2010. Section 154(7) provides a time limit of four years which reads as under: “Section 154(7)- Save as otherwise provided in section 155 or sub- section (4) of section 186, no amendment under this section shall be made after the expiry of four years from the end of the financial year in which the order sought to be amended was passed.”
7.1 Thus, order which is sought to be amended or rectified has to be an order which would determine the period of limitation. Here, in this case, the order which is sought to be amended cannot be order dated 02.08.2010, because such an order was strictly circumscribed to the direction and giving effect to the ld. CIT(A) order, wherein the issue relating to deferred tax liability and revaluation reserve for the purpose of computation of book profit was neither an issue nor was his direction. If any, such direction or issue would have been there in such an order of the ld. CIT(A) then perhaps limitation could have been reckoned from the order giving effect to such an appellate order dated 02.08.2010. Here, in this case, Assessing Officer has raked up completely new issue which ostensibly not falling from order dated 02.08.2010. If at all there was any kind of mistake then it
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could have been in the original assessment order dated 31.10.2003 for which limitation to pass an order has expired on 31.03.2010. Therefore, the impugned order dated 15.10.2010 is clearly barred by limitation and the order of the ld. CIT(A) is not only correct on facts but also in law.
In so far as the reliance placed by the Assessing Officer and learned Department Representative on the judgment of Hon'ble Supreme Court in the case of Wire Industries Ltd. (supra), we are of the opinion that same will not alter our aforesaid decision, because the Hon'ble Supreme Court have clarified that the word ‘any’ in the expression ‘order sought to be amended’ would be even the rectifying order. The said proposition will apply if the Assessing Officer seeks to rectify any earlier rectification order if there is any mistake crept in the said order. Here, in the present case, we have held above that there could not have been any mistake in the order dated 02.08.2010 as pointed out by the Assessing Officer in the impugned order. The Hon'ble Allahabad High Court in the case of Shree Naw Durga Bansal Cold Storage & Ice Factory v. CIT (supra) while explaining the said ratio of Hon'ble Supreme Court had observed as under: - “27. In Hind Wire Industries Ltd. (supra) Supreme Court has used word "including" in the amended or rectified order would mean that word "order" as the case may be can be either "original order" or "amended order" or "rectified order" depending upon the fact as to in which order Assessee is seeking rectification. To read it as if, once rectified order is passed, original order would disappear, would result in nullifying the effect of word "including" in the observations
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made by Supreme Court, while reading meaning of word "order" in Section 54 (7) of Act 1961. 28. In our case there may exist more than one orders. As is evident from the fact that Section 154 (7) used expression "order sought to be amended" meaning thereby for the purpose of attracting Section 154 (7), such order which is sought to be amended, would determine period of limitation. 29. In the present case, subsequent orders dated 31.12.2009 and 25.01.2011 were not in respect to assessment of other items but confined to limited issue of "long term capital gain" since that was the only aspect whereupon, Tribunal has remanded matter to A.A. Issue of set off etc. was not subject matter of consideration before A.A. when he passed orders dated 31.12.2009 and 25.01.2011. Assessee, in fact, wanted amendment in the "original order" dated 31.03.2006 and hence limitation would count from that order. 30. We may also notice at this stage that Supreme Court's judgment in Hind Wire Industries Ltd. (supra) has been considered in CIT v. Alagendran Finance Ltd. [2007] 293 ITR 1/162 Taxman 465 (SC) and it has been said therein that there may not be any doubt or dispute that once an order of assessment is reopened, previous assessment would be held to be set aside and the whole proceedings would start afresh but the same would not mean that even when the subject matter of reassessment is distinct and different, the entire proceedings would deem to have been reopened. Court further said: — "Any Assessee cannot agitate in any such reassessment proceedings matters forming part of the original assessment which are not required to be dealt with for the purpose of levying tax on that which had escaped tax earlier. Cases of under reassessment are also treated as instances of escaped assessment. The order of reassessment is one which deals with the assessment already
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made in respect of items which are not required to be reopened, as also matters to be dealt with in order to bring what had escaped in the earlier order of assessment, to assessment." 31. Learned counsel for Assessee also could not dispute that mistake regarding set off loss had occurred in the assessment order dated 31.03.2006 but on this aspect Assessee did not either carry dispute in appeal before CIT (A) or Tribunal or filed application for rectification within the period of limitation under Section 154 (7). Therefore, in the garb of remand order in relation to some other aspect, Assessee, could not have taken advantage of extension of limitation by seeking commencement thereof from the order passed by A.A. on the issue on which remand was made.”
8.1 Thus, the ratio of the Hon'ble Supreme Court would only apply depending upon the fact that, which order the Assessing Officer/assessee seeks rectification and there may exist one or more than one order as in the present case. However, what must be looked into is, which order is sought to be amended and that would determine the period of limitation. Here, in this case, it has been rightly held by the ld. CIT(A) that order dated 02.08.2010 could not have been subject matter of rectification on the issue which have been roped into the rectification order. Accordingly, the appeal of the Revenue is dismissed. 9. In the result, the appeal of the Revenue is dismissed. Order pronounced in the open Court on 7th September, 2018.
Sd/- Sd/- [G.D. AGRAWAL] [AMIT SHUKLA] PRESIDENT JUDICIAL MEMBER
DATED: 7th September, 2018