SUNIT KATYAL,NEW DELHI vs. ITO, NEW DELHI

This appeal filed by the Assessee is directed against the Order dated 28.3.2013 of the Ld. CIT(A)-XXII, New Delhi relevant to assessment year 2003-04 on the following grounds:-

“1. The Ld. CIT(A) has legally erred by directing

ITO Ward 38(3) to make fresh order u/s. 147 inspite of the facts the notice u/s. 148 was validly issued only after expiry of time limit provided u/s. 149 of the Income Tax Act.

2. That the Ld. CIT(A) has exceeded his powers as provided u/s. 251(1)(a) of the Income Tax Act,

1961 by ordering for the fresh assessment to be made u/s. 147 of the Act.

of hearing.

3. Ld. Counsel of the assessee has stated that Ld. CIT(A) has legally erred by directing the ITO, Ward 38(3) to make fresh order u/s. 147 in spite of the facts of the notice u/s. 148 of the Act was validly issued only after expiry of time limit provided u/s. 149 of the Income Tax Act, 1961. He further stated that Ld. CIT(A) has also exceeded his powers as provided u/s. 251(1)(a) of the Income Tax Act, by ordering for the fresh assessment to be made u/s. 147 of the Act. He further stated that the assessment order was passed by the ITO on 29.12.2010, and on that date the time limit for issuance of notice u/s. 148 of the Act had already expired by reason of provision of section 149 limiting the time limit to six years from the ends of the relevant assessment year i.e. 31.3.2010. In support of his contention, he relied upon the following cases laws:-

- Hon’ble Supreme Court of India decision dated

11.4.2002 passed in Civil Appeal No. 7742 of 1997 reported (2002) 122 Taxman 0426) in the case of K.M. Sharma vs. ITO.

- Hon’ble Karnataka High Court at Bengaluru

Judgement dated 14.8.2015 passed in of 2009 in the case of Mrs. Maina Shetty vs. DCIT

- ITAT, ‘C’ Bench, Chennai decision in the case of M/s Emgeeyar Pictures P. Ltd. vs. DCIT passed in ITA No. 992/Mds./2015.

However, the Ld. Counsel of the assessee has claimed that this was an error. He further stated that there is no evidence or material to Page 4 of 12 show that such claimed error was a bona fide mistake, and looking into the entire facts and circumstances of the case, it is apparent that the assessee deliberately filed the return in another ward so as to escape scrutiny of the case; and further if the case was scrutinized, to be able to deny the jurisdiction. He further stated that though the assessee claims that a letter was filed before the ITO, Ward-19(2) informing that the jurisdiction is with Ward-38(3), but there is nothing to show that any such letter was actually filed and this claim of the assessee was rightly rejected as false claim. In fact, if the ITO, Ward- 19(2) had been made aware that the jurisdiction was with ITO, Ward- 38(3), then the case would have been sent to the ITO having the jurisdiction, and then the assessment made would have been perfectly valid. It was further stated that no such information was given to the ITO, Ward-19(2) during the assessment proceedings before him which shows the conduct of the assessee as not being one of a person who appeared with clean hands. In view of the above, he requested that the appeal of the assessee may be dismissed.

“150. Provision for cases where assessment is in pursuance of an order on appeal, etc. - (1)

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 proceeding under this Act by way of appeal, reference or revision.

(2) 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 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.

5.1 After perusing the above said provisions, I note that Sub-s (2) of S. 150 lays down an exception and, where such an exception exists, the provisions of sub-so (1) would not be applicable. Sub-s.

(1) of S. 150 shall not apply where the notice for reassessment for an assessment year had become barred by limitation at the time when the order, which was the subject-matter of appeal, revision or reference, was passed. Generally, the time limits prescribed in S. 149 shall not apply where reassessment proceedings are initiated by a notice to give effect to any finding or direction, under sub-s. (1) of S.

150 of the Act. But, under sub-so (2) of S. 1,50, the period of limitation as laid down in S. 149 shall come into play. If the action for assessment or reassessment cannot be initiated for an assessment year on the date of the order, which was a subject-matter of appeal, reference or revision, that would prevent the AO from proceeding under s, 148 of the Act. It is also noted that according to sub-s (2) of S. 150, the provisions of sub-so (1) of that section shall not apply where, by virtue of any other provision limiting the time within which action for assessment or reassessment may be initiated, issuance of notice for such assessment or reassessment is barred on the date of the order, which is the subject-matter of appeal, reference or revision, in which the finding or direction is contained. It would, thus, mean that an appellate or revisional authority cannot give a direction for assessment or reassessment which goes to the extent of conferring jurisdiction upon the AO if his jurisdiction had ceased due to the bar of limitation. If the issuing of a notice for assessment or reassessment Page 8 of 12 for a particular assessment year had become time-barred at the time of the order, which was the subject-matter of the appeal, the provisions of s. 150(1) cannot be invoked to the aid of the Revenue for making an assessment or reassessment. In my view the rationale behind this provisions is not to confer upon the A.O the jurisdiction to reopen an assessment which the act did not otherwise possess. It says that where the assessment proceedings would have been barred by time even at the point of time when the order which became subject matter of the appeal was passed, resort cannot be made to sub-sec (1) of sec 150.

5.2 I further note that as per following provisions of section 149(1) - No notice u/s 148 shall be issued for the relevant assessment year. a) If four years have elapsed from the end of the relevant assessment year, unless the case falls under clause (b) or clause (c) d) If four years, but not more than six years, have elapsed from the end of the relevant assessment year unless the income chargeable to tax which has escaped assessment amounts to or is likely to amount to one lakh rupees or more for that year.

5.3 Therefore, if there is any specific direction contained in an order passed by the authority in any proceeding under act by way of appeal revision or by a court. In that situation time limit for issuance of notice is indefinite period. But, if at the time when the order which was subject matter of appeal or revision was passed, the time-limit for issuance of Notice u/s 148 of the Act had already expired, the Time limit of indefinite period will not apply. Hence, the assessment order which is the subject-matter of appeal was passed by the Ld ITO on 29/12/2010, and on that date the time limit for issuance of Notice uls 148 had already expired by reason of provision of section 149 limiting the time limit to six years from the end of the relevant assessment year i.e 31/03/2010. In view of the above, in our considered opinion, the action of the Ld. CIT(A) in directing the ITO, Ward 38(3) to make fresh order u/s. 147 inspite of the facts the notice u/s. 148 was validly issued only after expiry of time limit provided u/s. 149 of the Income Tax Act is not valid, hence, the same is cancelled and appeal of the assessee is accordingly allowed.

My aforesaid view is fortified by the following case law:-

- Hon’ble Supreme Court of India decision dated

11.4.2002 passed in Civil Appeal No. 7742 of 1997 reported (2002) 122 Taxman 0426) in the case of K.M. Sharma vs. ITO. Wherein the Hon’ble Supreme

Court has observed as under:-

“Reassessment-Limitation-Applicability of amended s. 150(1) – Amendment made to s.150(1) which intends to lift embargo of period of limitation under s. 149 to enable the authorities to reopen assessment not only on the basis of orders passed in proceedings under the I.T. Act but also on the basis of order of a Court in any proceedings under any law has to be applied prospectively on or after 1st April,

1989, when the amendment was introduced –

Sub-S. (2) of S. 150 cannot be held applicable only to reassessment based on orders ‘in proceedings under the Act’ and not to orders of Court ‘in proceedings under any other law’-

Sub-s. (2) intends to insulate all proceedings of assessment which attained finality – Thus, only those assessment can be reopened which have not already attained finality due to bar of limitation under s. 149 and this position is applicable equally to reassessments proposed on the basis of orders passed under the Act or under any other law.”