MRS.SUMAN C SANU ,MANGALORE vs. ASSISTANT COMMISSIONER OF INCOME TAX CIRCLE-1(1), MANGALORE

The issues involved in all these appeals are identical and arise under identical facts and circumstances. These appeals were heard together. We deem it convenient to pass a common order.

There is a delay of 38 days, in filing ITA No.2588/Bang/2018, delay of 37 days in filing ITA No.2591/Bang/2018 and a delay of 37 days in filing ITA No.2592/Bang/2018. The delay in filing these appeals have been explained in an Affidavit filed by the respective Assessees as owing to non- availability of their counsel Mr. Edmond D Souza, Chartered Accountant, who was away to United States of America (USA) between 17.6.2018 and 20th August, 2018. A copy of his passport evidencing this fact was filed on behalf of the Assessees. All these appeals were filed on 17.9.2018 whereas they ought to have been filed within 60 days from the date of communication of the order of the CIT(A) to the Assessee, which date, in the case of all the Assessees was 7.6.2018. The appeals ought to have been filed on or before 6.8.2018, but were filed on 17.9.2018 resulting in the delay in filing these appeals before the Tribunal. The reasons for the delay are stated to be that the counsel who was handling the tax matters of all the three Assessee’s returned from USA on 20.8.2018. He started attending his office only from 23.8.2018. He was busy in filing income-tax

I have considered the reasons given for the delay in filing the two appeals and am of the view that the circumstances explained in the Affidavit for the belated filing of two appeals are due to reasonable and due to sufficient cause. The delay in filing the appeals is not inordinate and there is no lack of bonfides on the part of the Assessees and they are also not guilty of negligence in handling their affairs in the matter of these income tax proceedings. I therefore condone the delay in filing these appeals.

As far as the merits of these appeals are concerned, the factual details are that all the three Assessee’s are individuals. They filed their returns of income for AY 1985-86 on or before the due date and their returns were accepted u/s.143(1) of the Act by the AO, as per the following details: (i) Mrs.Sumana C.Sanu filed return of income on 18.6.1986 declaring total income of Rs. 27,590. An intimation u/s.143(1) of the Income Tax Act, 1961(Act) was issued by the AO dated 24.7.1986 accepting the total income declared by the Assessee. (ii) Mr.Umesh Shet filed return of income declaring total income of Rs. 26,500. An intimation u/s.143(1) of the Income Tax Act, 1961(Act) was issued by the AO dated 22.7.1986 accepting the total income declared by the Assessee. (iii) Mr.K.Mohan Shet, filed return of income declaring total income of Rs. 25,100. An intimation u/s.143(1) of the Income Tax Act, 1961(Act) was issued by the AO dated 24.7.1986 accepting the total income declared by the Assessee. 6. One Chandrakant P.Sanu, an individual, was assessed to tax for AY 1985-86 u/s.143(3) of the Act by an order dated 30-10-1986. There was a search in his residential and business premises u/s.132 of the Act on

Based on the documents found in the course of search, proceedings u/s.147 of the Act were initiated in the case of Mr.Chandrakantha P.Sanu for AY 1985-86. Since the sum of Rs.7 lacs compensation and Rs.20,000 advance was paid to all the 9 agreement holders, they were examined by the AO in the assessment proceedings u/s.147 of the Act initiated against Mr.Chandrkantha P.Sanu. Some of the Agreement holders (Purchasers) denied the Agreement. The AO thereafter initiated proceedings against Association of Persons (AOP) comprising of Mr.Chandrakantha P.Sanu and 8 others (Purchasers). The AO assessed Mr.Chandrakanth P.Sanu the sum of Rs.7 lacs substantantively in his hands by an order of assessment dated 14.3.1990 and protectively in the hands of AOP comprising of Mr.Chandrakantha P. Sanu and 8 others.

Mr.Chandrakantha P. Sanu filed appeal against the order of assessment dated 14.3.1990 and the first appellate authority by order dated 13.9.2000 held that the sum of Rs.7 lacs received was capital receipt not chargeable to tax. On further appeal by the revenue against the order

The relevant statutory provisions read thus:- “Provision for cases where assessment is in pursuance of an order on appeal, etc. 150. (1) Notwithstanding anything contained in section 149, the notice under section 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 proceeding under this Act by way of appeal, reference or revision or by a Court in any proceeding under any other law. (2) The provisions of sub-section (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 the 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.” 153. (1) No order of assessment shall be made under section 143 or section 144 at any time after the expiry of—

The learned counsel for the Assessee submitted that the conclusions of the CIT(A) are not correct and legally sustainable. He submitted that the provisions of clause(ii) to Sub-Section-3 of Sec.153 of the Act or Sec.150(1) of the Act would be attracted only when the person concerned, the Assessee’s in the present case were given opportunity of being heard before the order is passed. He submitted that the Assessee’s in these appeals were not parties to the proceedings before the Hon’ble High Court and therefore aforesaid provisions are not attracted at all. His next submission was that there is no finding or direction given by the Hon’ble High Court vis-à-vis these Assessees. He placed reliance on the decision of the Hon’ble Delhi High Court in the case of Rural Electrification Corporation Ltd. Vs. CIT (2013) 34 taxmann.com 197 (Del.) wherein on identical issue, the Hon’ble Delhi High Court held that Expln.3 to Sec.153(3) would come into play only when person against whom proceedings are initiated without the bar of limitation u/s.149 of the Act was given an opportunity of being heard. The following observations of the Hon’ble Court were brought to my notice. “14. It is apparent from the said decision that before a notice under Section 148 can be issued beyond the time limits prescribed under Section 149, the ingredients of Explanation 3 to Section 153 have to be satisfied. Those ingredients require that there must be a finding that income which is excluded from the total income of one person must be held to be income of another person. The second ingredient being that before such a finding is recorded, such other person should be given an opportunity of being heard. In the context of the present case, when the Tribunal held in favour of the said society by concluding that the interest income was not taxable in its hands and held against the petitioner by concluding that the said interest income ought to

I have carefully considered the rival submissions. I am of the view that the provisions of Sec.153(3)(ii) of the Act cannot save limitation in the present case. The order of the Hon’ble High Court has been extracted in the earlier part of this order. It is undisputed that the Assessees were not parties before the Hon’ble High Court nor were they heard before the decision of the Hon’ble Court was rendered. In the circumstances, Explanation 3 to Sec.153(3) read with Sec.153(3)(ii) of the Act cannot come to the rescue of the revenue because the condition laid down in Explanation 3 that the Assessees should have been heard before the order, based on which the period of limitation is sought to be overlooked, was passed is not satisfied. I therefore hold that the initiation of assessment proceedings u/s.147 of the Act, issue of notice u/s.148 of the

In the result, the appeals by the Assessees are allowed

Appellant 2. Respondent 3. CIT 4. CIT(A) 5. DR, ITAT, Bangalore. 6. Guard file