M/S. SHREE HANUMAN SUGAR & INDUSTRIES LTD.,KOLKATA vs. ACIT, CENTRAL CIRCLE-XI,KOLKATA, KOLKATA

SHRI S.S.VISWANETHRA RAVI, JM

This appeal of the assessee is arising out of the order of the CIT(A), Central-I, Kolkata in Appeal No. 06/CC-XI/CIT(A),C-I/09-10 dated 04-11-2009 for the assessment year 1998-99 against the order of assessment framed u/s. 143(3)/251/154/154/251/251/154 of the Income-tax Act, 1961 (hereinafter referred to as the ‘Act’).

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charging it to tax without considering the facts that the said order was passed by issue of a defective and invalid notice u/s 154 dt. 16.02.2009 in which the rectification proposed by the A.O was clearly confined I restricted only to the "calculation of tax and interest u/s 115JA" and not to make any assessment of income u/s115JA.

The A.O's order dt. 30.03.2009 making an assessment of income not permissible u/s 154 and even in absence of such proposed action mentioned in the notice u/s 154 being without jurisdiction and passed against an invalid notice u/s 154 and the Ld. CIT(A)'s order confirming such invalid order were wholly unreasonable, uncalled for, bad in law and void abinitio and hence both the orders are liable be quashed/ cancelled.

The invalid proceeding initiated u/s 154 dt. 16.02.2009 and the consequential order passed by the A.O u/s 154 dt. 30.03.2009 on a highly debatable and controversial issue being without jurisdiction and void abinitio and the Ld. CIT(A)'s order in confirming the same are liable to be quashed 1 cancelled.

The actions of the A.O in charging interest and confirmation of the same by the Ld. CIT(A) were wholly unreasonable, uncalled for and bad in law. ITA No.341/Kol/2010-B-JM 2 M/s.Shree Hanuman Sugar & Industries Limited

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depreciation of the earlier years and to rectify the same in order dt:11.01.2005 made u/s 143(3)/251 against the total income computed therein. Considering the rectification petition the A.O allowed set off unabsorbed depreciation of the earlier years by revising the total income at Rs. 8,11,970/- and passed an order dt: 18.02.2005 u/s 143(3)/251/154 and no reference was made therein referring to income u/s 115JA by the A.O.

Tribunal in the case of ACIT vs. Varinder Agro Chemicals Ltd reported in (2007) 107 TTJ (Chd) 842, thereby, to that effect an order dt: 22.05.2008 was passed u/s 143(3)/251/154/154/154/251/251/254 assessing the total income again at Rs. 8,11,970/- as was the same income that as determined under the normal provisions of the Act. The Revenue challenged the order dt.11.04.2008 of B-Bench, Kolkata Tribunal before the Hon’ble High Court Of Calcutta wherein the Hon’ble High Court was pleased to dismiss the same being low tax effect.

In response to the A.O's letter dt. 23.03.2009, the assessee filed a letter dt. 27.03.2009 requesting him to drop the fresh proceeding u/s 154 on the ground that :-

i) The rectification proposed u/s 154 is beyond the time limit of 4 years prescribed in the Act since the mistake proposed to be rectified relates back to the order u/s 143(3) and hence the proceeding so initiated afresh u/s 154 is bad in law.

ii) The Hon'ble ITAT vide its order dt. 11.04.2008 in ITA No. 1718/ Kol/ 2006 has already cancelled the order U/S 154. Since the proceeding ITA No.341/Kol/2010-B-JM 5 M/s.Shree Hanuman Sugar & Industries Limited

earlier initiated u/s 154 has already been cancelled it cannot be subjected to further proceeding u/s 154 as per the provision of sec. 154(1A). Furthermore, the matter is already sub-judiced before the Hon'ble Calcutta High Court.

(a) Submissions of Assessee before the CIT-A as under: (v) In the case of your petitioner-company income u/s. 115JA having been declared in the original return filed but in the original Assessment Order u/s. 143(3) dated 30.03.2001, the AO having failed to compute income u/s. 115JA, it will be appreciated by your Honour that the mistake if any in computing the total income u/s 115JA had arisen in the original assessment order dated 30.03.2001 and in this connection reference may kind1y be made to detailed discussion herein above and hence the period of limitation u/s. 154 expired in this case on 31.03.2005 and by no subsequent order such period of limitation can be extended and in this regard we shall again draw your kind attention to the decisions of the Apex and other Courts as discussed in detail in herein above and hence in view of the facts and in the circumstances the entire order u/s. 154 dated 30.03.2009 as barred by limitation and is wholly bad, illegal and void abinitio and in view of the facts and in the circumstances it is liable to be quashed / cancelled

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and in view of the case and in the circumstances it may kindly be held accordingly." .

(b) Finding of the CIT-A is as under:

4: I have carefully considered the submission of the L.d A.r . There is no dispute that in the case under consideration return of Income was filed on 31.11.1998 disclosing NIL income under normal provision and book profit under section 115JA was calculated at Rs. 29,96,795/- and tax was paid accordingly. The assessment was completed u/s 143(3) on 30.03.2001 at total income of Rs.2,22,82,420/-. Since the tax on the normal provision was more than the book profit, tax was held payable accordingly. However after giving effect to the C.I.T (A) order and subsequent rectification order dt.18.02.2005 allowing set-off of the brought forward loss the income under the normal provision reduced to Rs. 8,11,970/- and the tax was charged accordingly. Subsequently the AO realized the mistake that since after the rectification the income returned by the assessee under the MAT provision is more, the tax payable has to be payable u/s. 115JA of the Act. Accordingly the mistake was rectified vide order under section 154 of the Act dt. 28.02.2005 and the tax was charged accordingly. The said order was confirmed by the C.I.T (A) & I.T.A.T. However subsequently the Hon’ble tribunal recalled the order in response to the M.A and held that the order under section 154 was not valid oh technical reason as the specific mistake proposed to be rectified is not specified in the notice. Subsequently fresh proceeding was initiated and the order dt. 18.02:2005 was rectified under section 154 and tax as per MAT provision was charged as per provision of the Act.

under 115JA was a clear mistake in the order of the A.O as he was duty bound to compute tax as per the provision laid down u/s. 115JA of the Act. Considering above the ground no 1 & 2 taken by the appellant is dismissed.”

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2008 of Tribunal not taken into consideration the merits of the case as it was dismissed by the Hon’ble High Court being low tax effect.

AO having issued notice under s.154 only for rectifying mistake in quantifying deduction under s.80-IA, further rectification as regards book profit under s.115JA was not valid.”

income u/s 115JA and it is pertinent note that there was no reference to the provision of sec. 115JA in those orders. The reference came only after the order of B-Bench of Kolkata in ITA 1718/Kol/2006 supra under the guise of the order of Tribunal did not preclude the Respondent Revenue in issuing the notice U/Sec 154 of the Act to rectify the mistake.

“8. To rectify such mistake in the order dated 28-02-2005; a fresh notice u/s. 154 was issued and the case was re-fixed on 18-02-2009. In the said notice it was clearly mentioned that mistake sought to be rectified pertains to "Calculation 'of Tax and Interest U/S 115JA".

To give the assessee one more opportunity of hearing, a letter Dtd. 05-03- 2009 was issued fixing the case for hearing on 13-03-2009. On 09-03- 2009 a letter was received from the assessee. The assessee sought details of such proposed rectification. No one appeared on behalf of the assessee on hearing date.

A fresh letter dtd.23-03-2009 was issued and served upon the assessee in which entire detail and proposition of the department with regard to rectification sought was mentioned.

The case was again fixed on 27-03-2009.0n said date of hearing the assessee filed a letter in the department but no one appeared to explain the contention of the assessee. In it's letter, the assessee without raising any substantial objection has contended that the department has already filed appeal against the ITAT order and that mistake pertained to 143(3) order and which could not be rectified now. However, No substantial point is raised against the proceedings in question and No case law is relied upon by the assessee.

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The above narration would clarify that ample opportunity of hearing has been granted to the assessee. The issue in hand is a neither debatable nor any contention lies against the liability of the assessee to pay taxes as per MAT provisions as per assessee's own admission in its return of income as well as clear cut position of law. The assessee's contention that department has preferred appeal u/s. 260A against the ITAT order in which notice u/s 154 has been held as invalid does not hold any substance as Hon'ble ITAT as not precluded department from issuing a fresh notice to rectify the said mistake.

Total Income as per order Dated 13.02.05 Rs.8,11,970 30% of book profit Rs.99,89,318/- As per return of income filed by the assessee Rs.29,96,795/-

The income as per MAT provisions is at higher side therefore tax is to be payable u/s. 115JA on Rs.29,96,795/-, calculated as under:- Tax on book profit Rs.29,96,795/- @35% Rs. 10,48,878/- Less TDS Rs. 5,31,128/- Assessed Tax- Rs. 5,17,750/- Add Interest u/s. 234B Rs.3,15,797 Interest u/s. 234C Rs. 39,213 Rs. 3,55,010/- Rs. 8,72,760/- Less Refund of A.Y 1999-2000 Rs. 11,620/- Balance payable- Rs. 8,61,140/- Less Tax paid on 17-08-06 Rs.40,000/- 17-08-06 Rs.40,000/- 23-08-06 Rs.40,000/- 04-05-06 Rs.20,000/- 17-05-06 Rs.20,000/- 27-06-06 Rs.40,000/- Rs.2,00,000/- Payable Rs. 6,61,140/-

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30-11-98, but, however, the AO did not make any reference to u/s. 115JA of the Act, except in the notice dt:16-02-2009 for the first time

7.7. And also on Hon'ble Bombay High Court in the case of Ashoka Buildcon Ltd. vs ACIT (2010) 325 ITR 574; 191 Taxman 29 has held as under :- 10. The submission which has been urged on behalf of the Revenue is that when several issues are dealt with in the original order of assessment and only one or more of them are dealt with in the order of reassessment passed after the assessment has been reopened, the remaining issues must be deemed to have been dealt with in the order of reassessment. Hence, it has been urged that the omission of the AD, while making an order of reassessment to deal with those issues under s. 143(3) r/w s. 147 constitutes an error which can be revised in exercise of the jurisdiction under s. 263. The submission cannot be accepted either as a matter of first principle, based on a plain reading of the provisions of ss. 147 and 263, nor is it sustainable in view of the law laid down by the Supreme Court. The Supreme Court has now clearly held in the decision in Alagendran Finance Ltd. (supra) that the doctrine of merger does not apply where the subject-matter of reassessment and of the original order of assessment is not one and the same. In other words, where the assessment is sought to be reopened only one or more specific grounds and the reassessment is confined to one or more of those grounds, the original order of assessment would continue to hold the field, save and except for those grounds on which a reassessment has been made under s. 143(3) r/w s. 147. Consequently, an appeal by the assessee on those grounds on which the original order of assessment was passed and which do not form the subject of reassessment would continue to subsist and would not abate. The order of assessment cannot be regarded as being subsumed within the order of reassessment in ITA No.341/Kol/2010-B-JM Industries Limited 12 M/s.Shree Hanuman Sugar &

respect of those items which do not form part of the order of reassessment. Where a reassessment has been made pursuant to a notice under s. 148, the order of reassessment prevails in respect of those items which form part of reassessment. On items which do not form part of the reassessment, the original assessment continues to hold the field. When the AD reopens an assessment on a particular issue, it is open to him to make a reassessment on that issue as well as in respect of other issues which subsequently come to his notice during the course of the proceedings under s. 147. The submission of the Revenue is that by not passing an order of reassessment in respect of other independent issues, the order of the AO can be construed to be erroneous and to be prejudicial to the interest of the Revenue within the meaning of s. 263. The submission cannot be accepted in the facts of the present case. The substantive part of s. 147 as well as Expln. 3 enables the AD to assess or reassess income chargeable to tax which he has reason to believe had escaped assessment and other income which has escaped assessment and which comes to his notice subsequently in the course of the proceedings under the section. There is nothing on the record of the present case to indicate that there was any other income which had come to the notice of the AD as having escaped assessment in the course of the proceedings under s. 147 and when he passed the order of reassessment. The CIT, when he exercised his jurisdiction under s. 263, in the facts of the present case, was under a bar of limitation since limitation would begin to run from the date on which the original order of assessment was passed. We must however clarify that the bar of Limitation in this case arises because the revisional jurisdiction under s. 263 is sought to be exercised in respect of issues which did not form the subject-matter of the reassessment proceedings under s. 143(3) r/w s. 147. In respect of those issues, limitation would commence with reference to the original order of assessment. If the exercise of the revisional jurisdiction under s. 263 was to be in respect of issues which formed the subject-matter of the reassessment, after the original assessment was reopened, the commencement of limitation would be with reference to the order of reassessment. The present case does not fall in that category. "

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7.8. Keeping in view of the above decisions, we are of the view that the mistake, if any, is occurring in the original assessment order passed u/s. 143(3) of the Act dated 29.03.1995 and though AO has passed subsequent rectification orders he has not made any corrections on the said issue but he resorted to rectify the mistake while passing the subsequent order passed u/s 251/154/154/143(3) of the IT Act. Under these circumstances we are of the view that AO is duty bound to make the rectification order within four years from the end of the financial year i.e. 1994-95. Since AO has passed rectification order u/s 154 on 10.03.2000 is barred by limitation as it is beyond four years from the original assessment order dated 29.03.1995. Therefore, we quash the orders of lower authorities, keeping in view of the provisions of section 154 (7) by treating the same as barred by limitation.” 20. In the present case, limitation would begin to run from the date i.e 30-03- 2001 on which the original order of assessment was passed U/S 143(3) of the Act for the reason the jurisdiction under s. 154 is sought to be exercised in respect of issues which did not form the subject-matter of the rectification proceedings under s. 154 dt. 11.01.2005 and 18.02.2005 and the AO also failed to make any reference of Sec 115JA in the notice dt:23-02-2005 issued sought to rectify the order dt:28-02-2005, but, however, made computation under book profit U/S 115JA of the Act for the first time vide Sec 154 notice dt:16-02-2009. As stated above AO has passed subsequent rectification orders and he has not made any reference on the said issue but he resorted to rectify the mistake while passing the subsequent order passed u/s 143(3)/251/154/154/251/251/154 of the Act. We find that from the end of the financial year i.e. 1997-98 the AO is bound to make the rectification order within four years and in this case the AO has passed rectification order u/s 154 on 30-03-2009 is barred by limitation as it is beyond four years from the original assessment order dated 30.03.2001. Therefore, we are of the opinion that the impugned order dt:30-03-2009 passed by the AO is held to be invalid by treating the same as barred by limitation.

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Order is pronounced in the open court on 08 - 06-2016

Sd/- Sd/- M.Balaganesh S.S.Viswanethra Ravi Accountant member Judicial Member Dated : 08 - 06-2016

**PRADIP(Sr.P.S.) Copy of the order forwarded to: 1. Appellant-Shree Hanuman Sugar & Industries Ltd C/O M/s. Salarpuria Jajodia & Co 7, C.R Avenue, Kolkata-72. 2 Respondent –The ACIT,CC-XI, Kol/ ITO W 3(1), Dwarli House 8/2 Esplanade East, Kol-69. 3. The CIT(A) concerned 4. The CIT concerned