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Facts
The assessee's income was assessed at Rs. 2,42,11,640/- for AY 2013-14, against a returned income of Rs. 95,51,550/-. Aggrieved by the assessment order and its confirmation by the CIT(A), the assessee appealed. The primary contention was that the assessment order, although dated 28/12/2016, was dispatched on 02/01/2017 and received on 03/01/2017, making it time-barred as the limitation period for passing the order was 31/12/2016.
Held
The Tribunal, relying on judicial precedents, held that an assessment order becomes effective only upon communication. Since the assessment order was dispatched after the prescribed limitation period (i.e., after 31/12/2016), it was time-barred and void ab initio. Accordingly, Ground No. 1 of the assessee's appeal was allowed, and the assessment order was set aside.
Key Issues
Whether an assessment order dispatched after the statutory limitation period, despite being dated within it, renders the assessment time-barred and void.
Sections Cited
143(3), 153, 234B, 234C, 271(1)(c), 153A, 144, 132, 132A, 153B(1)(a), 153D, 156
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Income Tax Appellate Tribunal, DELHI
Before: SH. SHAMIM YAHYA & SH. YOGESH KUMAR U.S.
PER YOGESH KUMAR, U.S. JM:
This appeal is filed by the Assessee against the order of Learned Commissioner of Income Tax (Appeals) Delhi [“Ld. CIT(A)”, for short], dated 30/01/2019 for the Assessment Year 2013-14.
Instrumentation Laboratory India Pvt. Ltd. Vs. DCIT 2. Grounds of the Assessee are as under:-
“1. That the learned Commissioner of Income Tax (Appeals) has grossly erred both on facts and in law in dismissing the ground of the appellant that assessment made u/s 143 (3) is barred by limitation as they were required to be completed by 31-12-2016 as per section 153 of the Income-tax Act while the same was made in January, 2017.
That the learned Commissioner of Income Tax (Appeals) has grossly erred in law as well as on facts in confirming the addition of Rs 1,46,60,086/- on account of rejection of claim of Performance Incentive paid during the year because:
a) he has failed to appreciate that the appellant in its computation of income has added back the provision of performance incentive of Rs 1,11,48,788/- and claimed Rs 1,46,60,086 paid during the year but the AO has added back the entire amount of payment without giving the benefit of amount which was already added back. This resulted in to the addition of same amount twice. b) He has failed to appreciate that due to the inadvertent mistake of the accountant identical amount of Rs 1,11,48,788/- was claimed in AY 2014- 15. The rectification request of the same was rejected by the AO during the assessment proceeding. c) The Ld CIT (A) has erred in law as well as on facts in holding that appellant could not justifies its claim of Rs 1,46,60,086/- on account of performance incentive paid with evidence despite the fact that appellant has produced all the books of account before the AO and payment proof of performance incentive paid before the CIT (A).
Instrumentation Laboratory India Pvt. Ltd. Vs. DCIT 3. That the learned CIT(A) has erred both on facts and in law in upholding the levy of interest under the provisions of section 234B, section 234C and initiation of penalty u/s 271 (1)(c) of the Income Tax Act, 1961.
It is, therefore, prayed that addition made to the returned income be deleted, and interest levied u/s 234B section 234C of the Income Tax Act, 1961 be deleted.”
Brief facts of the case are that, an assessment order dated 28/12/2016 came to be passed u/s 143(3) of the Act by computing the income of the assessee at Rs. 2,42,11,640/- as against returned income of Rs. 95,51,550/-. Aggrieved by the assessment order dated 28/12/2016, the assessee preferred an Appeal before the CIT(A), the Ld. CIT(A) vide order dated 30/01/2019 dismissed the Appeal filed by the assessee . The order of the Ld. CIT(A) dated 30/01/2019 is under challenge by the assessee on the grounds mentioned above.
The Ld. Counsel for the assessee arguing on the Ground No. 1 of the assessee, submitted that the assessment order passed by the A.O. is barred by the limitation as the assessment order has been dispatched only on 02/01/2017 by mentioning ‘back date’ in the assessment order as if the same is passing on 28/12/2016. The Instrumentation Laboratory India Pvt. Ltd. Vs. DCIT Ld. Counsel has drawn our attention to the postal track assignment produced at page No. 34 of the paper book and submitted that, the Assessment Order has been dispatched only on 02/01/2017 and the assessee received the assessment order on 03/01/2017. The assessment order was required to be passed on or before 31/12/2016 i.e. within 21 months of the end of Assessment Year in which the income was first assessable, therefore submitted that the orders of the Lower Authorities are bad in law.
5. Per contra, the Ld. Departmental Representative relied on the orders of the Lower Authorities and sought for dismissal of the Appeal filed by the assessee.
We have heard both the parties and perused the material available on record. It is not in dispute that the limitation for passing the assessment order in the present case was on or before 31/12/2016 i.e. within 21 months from the end of assessment year in which the income was first assessable. Apparently, the assessment order has been dispatched by the A.O. only on Instrumentation Laboratory India Pvt. Ltd. Vs. DCIT 02/01/2017, which has been served on the assessee only on 03/01/2017, the assessee has produced the online postal track consignment which reproduced as under:
It is found from the above that the assessment order has been dispatched by the A.O. after the lapse of period of limitation prescribed under law.
Instrumentation Laboratory India Pvt. Ltd. Vs. DCIT
7. The identical issue came for consideration before the Coordinate Bench of the Tribunal in the case of Pankaj Sharma Vs. DCIT Central Circle in and 3557/Del/2017 and vide order dated 08/02/2019, by relying on the judicial precedents held that, when the Assessment Order has been passed within the period of limitation, but the Assessment Order has been dispatched the subsequent date, the Assessee has been construed as assessment framed beyond the time limit, which is barred by limitation and quashed the Assessment Order in following manners:-
“5.2 After perusing the aforesaid Tract Report, it is crystal clear that Income Tax Department has booked the DAK containing assessee's assessment order dated 28.03.2013 in dispute only on 01/04/2013 at 19:20:00 from Model Town S.O. (Ghaziabad) which was received on 02/04/2013 10:02:45 Kavi Nagar, S.O., and did establish that when the assessee has received the assessment order, hence, the assessment is barred by limitation and deserves to be set aside on this account. In this regard, we draw support from the decision dated 27.09.2018 of the ITAT, Cuttack Bench passed in IT(S)A No. 44 to 46/CTK/2016 (AYrs. 2004-05 to 2006-
07) & Ors. in the case of Sri Trinadh Chowdary vs. ACIT, Corporate Circle 1(2), Bhubaneswar & Ors., wherein it has held as under, on similar and identical issue:-
"11. We have heard rival submissions and perused the materials available on record. Ld. AR's contention that the order passed by the AO u/s.153A(b)/254 of the Act is barred by limitation and it was served on the assessee/ld. AR on 06.04.2015. The ld. AR supported his arguments with the paper book and also referred to the earlier directions of the Tribunal in IT(SS)A No.13 to 17/CTK/2017, order
Instrumentation Laboratory India Pvt. Ltd. Vs. DCIT dated 10.10.2013, wherein the Tribunal has restored the matter to the file of AO and observed at para 6 to 8, which read as under :- "6. we have gone through Ground Nos.1 to 3 taken by the assessee, wherein, in Ground No.1, assessee has taken the contention that Id OT(A) has not accepted the fact that the assessment order has been served on the assessee after 46 days from the period of limitation. Therefore, the assessment order is nullity in eyes of law. The second ground is that AO has violated the principles of natural justice by calling return of income u/s.!53A of the I.T.Act, 1961 and third ground is that AO has not given reasonable opportunity to the assessee to produce any evidence in support of return and has violated the principles of natural justice insofar as the issuance of notice u/s.l43(2) is concerned. We also find that Id CIT(A) has dismissed these grounds. We also find from the orders of the AO as well as Id CIT(A) that AO has not given reasonable opportunity of hearing before passing the orders to the assessee. Therefore, in our opinion, AO and Id CIT(A) has passed the orders without following principles of natural justice. In respect of notice under section 143(2), we find that notice was issued on the same date at 11 AM and it was not possible for the assessee to file submission and could not produce details as called for and in view of this, assessee was not able to cooperate with the assessment proceedings.
7. The Hon'ble Orissa High Court in the case of Radhika Charan Banerjee v Sambalpur Municipality, AIR 1979 Orissa 69, has held that right of appeal wherever conferred includes a right of being afforded opportunity of being heard irrespective of language conferring such right that is a part and parcel of principles of natural justice. Where an authority is required to act in a quasi-judicial capacity, it is imperative to give appellant an adequate opportunity of being heard before deciding the appeal. The aim of the rule of natural justice is to prevent miscarriage of justice and denial of principles of audi alteram partem results into such miscarriage of justice. Therefore, the Learned CIT(A) should have afforded reasonable opportunity of being heard to the assessee. Therefore, in order to impart substantial justice to the assessee, we reverse the orders of ld. CIT(A) and restore the appeals to the file of the AO to decide Ground Nos.1 to 3 afresh after giving reasonable opportunity to the assessee.
8. As we have restored Ground Nos.1 to 3, rest of the issues taken in Ground Nos.4 to 8 also restored to the file of the AO for deciding the same afresh. AO is directed to frame denovo assessment as per law."
Accordingly, as per the directions of the Tribunal the AO has passed the reassessment order on 30.03.2015 against which the assessee has filed an appeal with the first appellate authority and was dismissed by the CIT(A). The contention of ld. AR is that the Instrumentation Laboratory India Pvt. Ltd. Vs. DCIT reassessment order passed on 30.03.2015 is barred by limitation as the same was served on 06.04.2015. Further ld. AR demonstrated the service of order with paper book along with copy of the notice of demand u/s.156 of the Act dated 30.03.2015 with endorsement of receipt of the order on 06.04.2015 for the said assessment year, which the Revenue has not disputed. Ld. AR vehemently emphasized that the reassessment order was passed beyond limitation period and is barred by limitation and supported his submissions with the decisions of coordinate bench of the Tribunal.
We have perused the decisions of the Tribunal and the supporting material placed on record. We found that there is no dispute raised by the Revenue in respect of serving of order on 06.04.2015 but the fact remains that the Revenue could not demonstrate with evidence that the order was prepared and has left office of AO on date of passing of the order, whereas the ld. DR submitted that the above order was prepared and was sent to the Additional/Joint Commissioner of Income Tax for approval before serving on the assessee and the order was passed on 30.03.2015.
We found that this issue of service of the order was dealt by this coordinate bench of the Tribunal in the case of Geetarani Panda & Ors. Vs. ACIT, IT(SS)A Nos.01&02/CTK/2017, dated 05.07.2018, wherein the Tribunal observed as under :-
"19. We have heard the rival submissions, perused the orders of lower authorities and materials available on record. In the instant case, the assessee has raised two legal issues. Firstly, the order of assessment being issued after the statutorily permitted time is barred by limitation. Secondly, no requisite approval as envisaged under the provisions of Section 153D of the Act was obtained and, therefore, the impugned order of assessment is barred in law.
We find force in both the above legal issues raised by the assessee for the reason discussed hereunder.
In the instant case, it is not in dispute that though the impugned order of assessment is dated 31.3.2015 was issued and served manually only on 8.4.2015 on the Authorised Representative of the assessee. This Bench of the Tribunal in the case of M/s. Nidan vs ACIT, (2018) 53 CCH 0046 (Cuttack Tribunal) has held as under: "
4. In all the above seven appeals, the assessee raised a legal ground which is that the orders of assessment passed by the Assessing Officer are barred by limitation.
The facts relating to this issue are that a search and seizure operation was conducted in the case of the assessee on 28.5.2014.
Instrumentation Laboratory India Pvt. Ltd. Vs. DCIT
In pursuance to the said search, order u/s.153A r.w.s 144 of the Act was passed for the assessment years 2009-2010 to 2014-15 and assessment for the assessment year 2015-16 was made u/s.144 of the Act. The said orders of assessment were served upon the assessee on 9.1.2017 though all the orders were dated 30.12.2016.
6. Before the CIT(A), the assessee contended that the aforesaid orders being dispatched on 7.1.2017 are barred by limitation. The CIT(A) observed that as the orders were dated 30.12.2016 and in absence of any material to show that the Assessing Officer revisited these orders after 30.12.2016 upheld the orders and drawn support from the decision of Hon'ble Calcutta High Court in the case of CIT vs. Binani Industries ltd., (2015) 59 taxmann.com 389 (Cal).
Before us, the assessee produced copy of envelope by which the orders of assessment were sent to the assessee by the Assessing Officer and copy of track record of Speed Post to show that the impugned orders of assessment were, in fact, dispatched by the Assessing Officer on 7.1.2017, though the orders were dated 30.12.2016. The assessee contended that as the orders were dispatched after 30.12.2016, therefore, the orders of assessment were barred by limitation. He placed reliance on the decision of Hon'ble Karnataka High Court in the case of CIT vs. B J N Hotels Ld., (2017) 79 taxmann.com 336(Kar).
8. On the other hand, ld D.R. placed reliance on the orders of the CIT(A).
9. Ld D.R. could not explain when the orders were prepared on 30.12.2016 why it could not be dispatched on or before 31.12.2016.
We find that Section 153B(1)(a) reads as under:
"153B (1) Notwithstanding anything contain in section 153, the AO shall make an order of assessment or reassessment - (a) In respect of each assessment year falling within six assessment years [and for the relevant assessment year or years] referred to in clause (b) of sub-section (1) of section 153A, within a period of twenty-one months from the end of the financial year in which the last of the authorisations for search under section 132 or for requisition under section 132A was executed."
A perusal of the above provisions show that the language used by the legislature in the above provision is in negative and the words used are "order of assessment"
Instrumentation Laboratory India Pvt. Ltd. Vs. DCIT and not only "assessment". The word order denotes a command which is to be followed by somebody else. Unless the command is communicated to the person by whom it has to be followed, it does not become an "order".
12. In our considered view, simply determining the total income of an assessee and determining its tax liability on a piece of paper and signing the same may constitute an assessment but only on its communication to the assessee it becomes "order of assessment". Thus, in our considered opinion, to become a legal valid order of assessment, its communication must be within a period of limitation prescribed by the law though the communication may end after the prescribed period of limitation. Our above view derives support from the decision of Hon'ble Karnakata High Court in the case of B J N Hotels Ltd (supra), wherein, it has been held as under:
"That the revenue is neither able to point out from the records that the assessment orders were dispatched on 27.4.2007 nor produced the dispatch register to establish that the orders were complete and effective i.e. it was issued, so as to be beyond the control of the authority concerned within the period of limitation i.e. 29.4.2007. Admittedly, the assessment orders were served on the assessee on 30.4.2007. hence, the assessment orders passed were barred by limitation."
In the above decision, Hon'ble High Court follows its one earlier decision and has stated as under:
"An identical issue was before this Court in (D.D. 14.10.2014 in the case of Maharaja Shopping Complex vs DCIT. This court following the judgment of Kerala High Court in the case of Government Wood works vs State of Kerala (1988) 69 STC 62 has held that in the absence of dispatch date made available to the Court from the records, to prove that the order is issued within the prescribed period, order passed by AO is barred by limitation. The said judgment squarely applies to the facts of the present case."
13. To the same effect are the decisions of Hon'ble Kerala High Court, which are in the case of (i) K. Joseph Jacob vs Agricultural Income Tax Officer & another (1991) 190 ITR 464 (Ker) and (ii) Commissioner of Agricultural Income Tax Officer vs. Kappumalai Estate, 234 ITR 187 (Ker).
The Jodhpur Bench of this Tribunal also held similarly in the case of Shanti Lal Godawat and Others vs. ACIT, reported in 126 TTJ (Jd) 135.
Instrumentation Laboratory India Pvt. Ltd. Vs. DCIT
In view of above plethora of judicial precedents, in our considered opinion, the decision of Hon'ble Calcutta High Court relied upon by the CIT(A) in the case of Binani Industries Ltd., (supra) will not deter us as it is a settled position of law that when two divergent views are expressed by two different Hon'ble High Courts, none of which are Hon'ble Jurisdictional High Court, then the view favourable to the assessee should be followed. For this, we derive support from the decision of Hon'ble Supreme Court in the case of CIT vs. Vegetable Products Ltd., 88 ITR 192 (SC).
Coming to the facts of the instant case, it is not in dispute that the last authorisation u/s.132 of the Act was executed on 28.5.2014. Twenty- one months from the end of the financial year 2014-2015 expires on 31.12.2016. Therefore, the orders of assessment in pursuance to the said search for the assessment years 2009-2010 to 2015-2016 were to be made on or before 31.12.2016.
It is not in dispute that the orders of assessment under consideration were dispatched only on 7.1.2017. Hence, in our considered opinion, the said orders of assessment were time barred and consequently, we set aside the same and allow this ground of appeal of the assessee for all the seven years under appeal."
In view of above, as in the instant case, the communication process of the assessment was not initiated admittedly within the prescribed period of limitation, hence it did not become an "order of assessment" within the period of limitation. We, therefore, have no hesitation in holding that the impugned order of assessment is barred by limitation.
In the instant case, the alleged approval letter dated 27.3.2015 of the Addl. CIT, Range-1, Bhubaneswar reads as under:
"Despite a reminder given on 19th March, 2015 to submit the time barring draft assessment orders for approval u/s. 153D on or beforej23i03.2015, the draft orders in M/s. Neelachal Carbo Metalicks Pvt. Ltd. Group of cases has been received in this office only on ill 26th March, 2015 in the afternoon. The draft orders having being submitted only 5 days before final orders are getting barred by limitation,, I have no other option but to accord the approval to the same as the approval is statutorily required u/s. 153D, even though there is no time left for undersigned to ensure that all the points raised in the appraisal report, the appellate proceedings, audit inspection etc. are duly taken into account, and the enquiries and investigations that are required to be made are actually made before finalization of the assessment orders.
Instrumentation Laboratory India Pvt. Ltd. Vs. DCIT
It would have been much better and in the interest of Revenue, if you had submitted the draft orders atleast one month earlier so as to allow the undersigned sometime to go through and analyse the same vis-a-vis the appraisal report and seized records. It also goes without saying that you never cared even to discuss these cases with the undersigned for guidance and line of investigation to be taken. However, despite all this, I have gone through the material available on records and some of the observations, in respect of the following cases are given in subsequent paras."
In our considered view, the provisions contained in Section 153D as enacted by the Parliament cannot be treated as an empty formality. The provision has certain purpose. It is apparent that the purpose behind the enactment of the above provision in the Statute by the Parliament are two folds. Firstly, the approval of the Senior Authority will ensure that the assessee is not prejudiced by the undue or irrelevant addition or assessment. Secondly, the approval by Senior Authority will also ensure that proper enquiry or investigation are carried out by the Assessing Authority. Thus, the above provision provides for mental application of a Senior Officer of the Department, which in turn, provides safeguard to both i.e. Revenue as well as the assessee. Therefore, this important provision laid down by the legislature cannot be treated as a mere empty formality. The same view was expressed by the Pune Benches of the Tribunal in the case of Akil Gulamali Somji vs ITO, in IT Appeal Nos.455 to 458 (Pune) of 2010 order dated 30.3.2012, wherein, it was held that when the approval was granted without proper application of mind, the order of assessment will be bad in law. The Hon'ble Bombay High Court in the case of CIT-II Vs Shri Akil Gulamali Somji, in Income Tax Appeal (L) No.1416 of 2012 order dated 15.1.2013 concurred with the view of the Tribunal that not following of the provisions of section 153D of the Act will render the related order of assessment void.
In the instant case, we find that the Supervisory Authority has himself admitted that because of reasons stated by him, could not apply his mind and has accorded the approval mechanically to meet the requirements of law as the requirement was merely a formality. The said Supervisory Authority had a duty towards both the assessee as well as the Revenue which was failed to be performed in the instant case.
Further, we find that the approving authority has required the assessing authority to conduct further enquiry in respect of opening cash in hand. The Assessing Authority thereafter has never communicated his findings of the further enquiry to the Supervisory Authority and not taken the approval of justification of his findings.
Instrumentation Laboratory India Pvt. Ltd. Vs. DCIT
Thus, in our considered opinion, alleged approval letter dated 27.3.2015 of the Addl. CIT, Range1, Bhubaneswar does not constitute the approval which is envisaged by the provisions of section 153D of the Act. Thus, following the decision of the Hon'ble Bombay High Court in the case of Akil Gulamali Somji (supra), we hold that the impugned order of assessment is void and bad in law. Therefore, the impugned order of assessment is hereby cancelled and Ground No.2 and Ground No.4 of appeal in case of both the assessees are allowed."
We considering the facts and circumstances of the case and the orders of lower authorities and the judicial precedence and applying the ratio of judgment of above decision in the present case, found that the reassessment order is dated 30.03.2015 and the same was served on 06.04.2015, which is not disputed by the Revenue and which is similar facts of the decision of coordinate bench of the Tribunal in case of Geetarani Panda (supra), where service of order is barred by limitation.
Accordingly, we set aside the orders of lower authorities and allow the additional grounds of appeal of the assessee-Trinadh Chowdary for the assessment year 2004-2005 in IT(SS)A No.44/CTK/2016."
5.3 We have heard both the parties and perused the relevant records especially the documentary evidences filed by the assessee in the Paper Book as mentioned above and the Written Submissions filed by both the parties, especially the Written Submissions of the Ld. CIT(DR) and we are of the considered view that in this case the Assessing Officer has passed the assessment order on 28.03.2013 and according to the evidence of the postal authority which we have reproduced under para no. 5.1 at page no. 14 & 15 of this order. We are also of the view that the assessment order dated 28.03.2013 has been dispatched on 01.04.2013. Therefore, keeping in view of the order dated 27.09.2018 passed by the ITAT, Cuttack Bench in IT(S)A No. 44 to 46/CTK/2016 (AYrs. 2004-05 to 2006-07) & Ors. in the case of Sri Trinadh Chowdary vs. ACIT, Corporate Circle 1(2), Bhubaneswar & Ors. reproduced above, we are of the considered view that assessment in dispute is time barred, hence, respectfully following the ITAT, Cuttack Bench decision in the case of Sri Trinadh Chowdary vs. ACIT (Supra), we set aside the assessment order and allow the ground no. 1 raised by the assessee.
Even in the present case, though in the body of the assessment order, the date of passing of the order has been mentioned as 28/12/2016, the assessment order has been Instrumentation Laboratory India Pvt. Ltd. Vs. DCIT dispatched only on 02/01/2017 as per the postal track consignment produced at Page No. 34 of the Paper Book. Thus, keeping in view of the order of the coordinate bench of the Tribunal in the case of Pankaj Sharma (supra) we are of the considered opinion that the assessment in dispute is time barred and accordingly we set aside the assessment order by allowing the Ground No. 1 of the assessee.
Since, we have decided the Ground No. 1 and set aside the assessment order as the same is time barred, we refrain from adjudicating the other Grounds raised by the assessee.
In the result, the Appeal of the assessee is partly allowed.