ACIT, CIRCLE-7(1), KOLKATA, KOLKATA vs. HI TECH SYSTEMS AND SERVICES LIMITED, KOLKATA

The facts in brief are that the assessee filed the return of income on 30.12.1992, which was revised on 30.03.1994, declaring total income at ₹162,97,59,233/-. The case of the assessee was selected for scrutiny and assessment was accordingly completed u/s 143(3) of the Act vide order dated 28.02.1995, assessing the income at ₹165,65,02,220/-. While framing the assessment the assessee was allowed deduction u/s 80HHD and 80HHC of the Income-tax Act, 1961 (the Act) at ₹11,69,99,014/- and ₹11,73,61,242/- respectively qua which the assessee had filed audited report in form no.10CCAD and 10CCAC respectively. The assessee is engaged in the business of manufacturing and trading of cigarettes and tobacco, agro-products, paper and hotel business etc. According to the ld. AO the assessee is entitled to deduction u/s 80HHD of ₹3,44,67,125/- as against the

In the appellate proceedings, the CIT (A) dismissed the appeal on this issue after taking into account contentions raised by the assessee and thus upheld the order of AO.

The ld. AR vehemently submitted before us that the assessment framed by the ld. AO is hopelessly barred by limitation and therefore, the same deserved to be quashed as being passed in violation of timeline prescribed u/s 153(2) of the Act. The ld. AR submitted that the assessment was framed u/s 143(3) vide order dated 28.02.1995.Thereafter notice u/s 148 of the Act was issued on 17.01.1997 and served on the assessee on 18.06.1997, a copy of which is available at page no. 62 of the Paper Book. The ld. AR further submitted that in terms of provisions of Section 153(2) of the Act as was applicable at the relevant point of time, no assessment shall be framed u/s 147 of the Act after expiry of two years from the end of financial year in which the notice u/s 148 was issued. The ld. AR submitted that the assessee has challenged the assessment proceedings by filing the writ petition before the Hon'ble Calcutta High Court and Hon'ble High Court has passed an interim order directing the revenue that no final assessment order shall be passed without the leave of the court. The ld AR submitted that during the pendency of the writ petitions, section 153 of the Act was substituted by the Finance Act, 2016 with effect from June 1, 2016 by inserting a proviso in sub-section (9) of the substituted section by the Finance Act, 2017 with retrospective effect from June 1, 2016. Sub-section (9)

The ld AR while referring to the assessment order submitted that , the Assessing Officer had accepted the Assessee's calculation of limitation as correct (paragraph 5.7 of the assessment order for the assessment

The ld. AR ,in rebuttal, submitted that the question whether two years' time granted by the proviso to sub-section (2) of section 153 of the Act in respect of notices served during the financial year 1999-2000 can be applied in a case where the notice under section 148 of the Act was served during any other period came up for consideration before

The ld DR strongly objected to the arguments of the ld AR by submitting that limitation of two years from the end of the financial year in which the notice under section 148 was issued as contained in section 153(2) of the Act as it stood on the date of issue of the notice under section 148 of the Act would apply and not the curtailed period of one year consequent to the amendment made by the Finance Act, 2001 and therefore same is without merit. The ld Dr also filed detailed submissions supporting the order of lower authorities on the issue of limitation which are considered and placed in the appellate folder.

We have heard the rival contentions of both the parties and perused the records placed before us carefully including the interim and final orders passed by the Hon’ble Jurisdictional High Court. In our considered opinion it is settled position of law that the time taken during which the matter remained stayed by the Hon’ble High Court "(9) The provisions of this section as they stood immediately before the commencement of the Finance Act, 2016, shall apply to and in relation to any order of assessment, reassessment or recomputation made before the 1st day of June, 2016: Provided that where a notice under sub-section (1) of section 142 or sub- section (2) of section 143 or section 148 has been issued prior to the 1st day of June,2016 and the assessment or reassessment has not been completed by such date due to exclusion of time referred to in Explanation 1, such assessment or reassessment shall be completed in accordance with the provisions of this section as it stood immediately before its substitution by the Finance Act, 2016 (28 of 2016)."

After perusal of the above it is clear that in terms of the aforesaid proviso, for the assessment year 1992-93 notice under section 148 was issued prior to June 1, 2016, but no order could be passed

We also note that the AO accepted the Assessee's calculation of limitation as correct (paragraph 5.7 of the assessment order however, wrongly relied upon the provisions of the Taxation & Other Laws (Relaxation & Amendment of Certain Provisions) Act, 2020 ("TOLA") and Notifications issued thereunder to hold that time was available till September 30, 2021 to pass the assessment order. The ld AO even made reference to the order dated September 23, 2021 passed by the Hon'ble Supreme Court in Miscellaneous Application No. 665 of 2021. Similarly, the appellate order passed by the ld CIT(A) upholding the assessment order is also incorrect as TOLA or Notifications issued thereunder are not application in the instant case. For the sale of ready reference the TOLA provisions are discussed as under:-

We do not find any merit in the contention of the Revenue that limitation of two years would apply from the end of the financial year in which the notice under section 148 was issued pursuant section 153(2) of the Act as it stood on the date of issue of the notices under section 148 of the Act and not the curtailed period of one year consequent to the amendment made by the Finance Act, 2001. The proviso to sub-section (9) of section 153 of the Act as it stood at the time when the writ petitions were disposed of by the Hon'ble High Court expressly stipulated completion of reassessment in accordance with the provisions of section 153 of the Act as it stood immediately before its substitution by the Finance Act, 2016 in cases where notice under section 148 of the Act had been issued prior to June 1, 2016 and the reassessment had not been completed by such date because

The case of the assessee find support from the decision of Hon'ble Punjab & Haryana High Court in CIT v Smt. Anchi Devi, (2008) 171 Taxman 228 (P&H) wherein the question whether two years' time granted by the proviso to sub-section (2) of section 153 of the Act in respect of notices served during the financial year 1999-2000 can be applied in a case where the notice under section 148 of the Act was served during any other period was considered.. In the said case, the notice under section 148 of the Act was served on January 11, 2001 i.e. after the period mentioned in the proviso and before June 1, 2001 when the amendment to section 153(2) by the Finance Act, 2001 took effect. The Hon'ble High Court was pleased to hold thus:

Considering the above facts in the light of provisions of the Act and the ratio laid in the various decisions as discussed above , we hold that the assessment framed by the AO is barred by limitation and is hereby quashed.

Since we have allowed the appeal of the assessee on the legal issue of being barred by limitation , the other grounds raised by the assessee are not being adjudicated at this stage and are left open to be decided if need arises for the same in future.

Since we have quashed the assessment order on the ground of being barred by limitation , the cross appeal by the revenue in No. 1318/KOL/2023 (Assessee’s Appeal) & (Revenue’s Appeal) A.Y. 1993-94

The facts qua A.Y. 1992-93 Vis a Vis A.Y. 1993-94 are as under:

In the result, both the appeals of the assessee are allowed and both the appeals of the revenue are dismissed.