DCIT, CIRCLE - 48, KOLKATA, KOLKATA vs. SANJAY JAISWAL, HOWRAH

SHRI.M.BALAGANESH, AM

These appeals and cross objection of the assessee as well as the revenue arise out of the common order of the Learned CIT(A) in Appeal No. 18/CIT(A)- XXX/Circle-48/2009-10 dated 28.5.2010 for the Asst Year 2004-05 against the order of assessment framed by the Learned AO u/s 143(3) / 254 of the Income Tax Act, 1961 (hereinafter referred to as the ‘Act’).

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2.1. The ground raised by the assesee in his cross objection is as below:-

That the CIT(Appeals) on the facts and in the circumstances of the case should have held that the assessment is barred by limitation of time in terms of section 153(2A) and is a nullity.

2.2. The brief facts of this issue is that the original assessment was completed u/s 143(3) of the Act determining total income of Rs. 47,94,060/-. On first appeal, the assessee was granted partial relief. Both assessee as well as the revenue preferred further appeal before this tribunal and the tribunal vide its order dated 28.9.2007 had restored the two additions made by the Learned AO to the file of the Learned AO for fresh decision. Consequently, the fresh assessment order was passed by the Learned AO on 25.3.2009 repeating the same additions as were made in the original assessment. It was argued by the Learned AR that the fresh assessment pursuant to ITAT ‘s order should have been framed by the Learned AO on or before 31.12.2008 in terms of section 153(2A) of the Act and since the assessment is framed on 25.3.2009, the same is barred by limitation. This plea was also taken by the Learned AR before the assessing officer itself vide his letter dated 18.2.2009. However, the Learned AO did not consider this preliminary objection of the assessee and proceeded to make the same old additions (i) on account of gross profit amounting to Rs.1,19,177/- and (ii) on account of bogus purchases amounting to Rs. 42,81,239/-. The assessee contested the fresh assessment before the Learned CITA both on limitation as well as on merits.

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The preliminary objection raised by the assessee on limitation before the Learned CIT(A) was subjected to remand proceedings by the Learned CIT(A). In the remand proceedings, the Learned AO stated that the tribunal had only restored the assessment to the file of the Assessing Officer and not set aside the same. According to him, restoration has a meaning different from the meaning of the expression ‘set aside’ and hence it is outside the ambit of limitation prescribed in section 153(2A) of the Act. The Learned AO also stated that no fresh assessment was made u/s 143/144 of the Act but the order was passed u/s 254 of the Act by giving effect to the ITAT’s order. It was further mentioned by the Learned AO that time limit u/s 153(2A) of the Act will not apply to a situation where specific directions were given by the Tribunal and assessment itself was not set aside. He stated that the present case of the assessee is covered by the provisions of section 153(3) of the Act where no limitation of time is provided in the statute. The Learned CIT(A) held that the assessment is not barred by limitation but however deleted the additions made in the fresh assessment on merits. Against this order, both assessee as well as the revenue are in appeal before us. The assessee has also raised cross objections before us on the exclusive ground of assessment barred by limitation though the same is also raised as an independent ground in his appeal.

2.3. We first proceed to adjudicate the cross objections of the assessee. The Learned AR argued reiterated the submissions made by him before the lower authorities.

2.4. In response to this, the Learned DR argued that the Tribunal in its first order had not used the ‘set aside’ or ‘cancelled’ and hence the same would not fall u/s 153(2A) of the Act. He argued that it is only restoring back to the file of the Learned AO for verification of comparable cases and sundry creditors. He placed reliance on the decision of the Hon’ble Apex Court in the case of Rajasthan R.S.S. & Ginning Mills Fed. Ltd vs DCIT reported in (2014) 45 taxmann.com 1 (SC) wherein , in the context of carry forward and set off of accumulated losses u/s 72A of the Act in case of

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amalgamation, it was held that – it is clear that the tax statute should be interpreted very strictly as there is no equity in tax matters and nothing can be read which is not in the section.

2.5. We have heard the rival submissions. At the outset, it would be relevant to reproduce the finding portion of the tribunal order in ITA No. 1567/Kol/2007 (assessee appeal) and ITA No. 1430/Kol/2007 (revenue appeal) for Asst Year 2004-05 dated 28.9.2007 to understand the clear language and understanding of the issue :- 6. We have given our careful consideration to the rival submissions made before us and have perused the orders of tax authorities. We have also considered the paper book filed by the ld. Counsel for the assessee. The assessee has disputed the order of authorities below in estimating the gross profit stating that comparable cases relied by the AO were not confronted to it for rebuttal. The assessee has also disputed the order of Id. CIT(A) in confirming the addition of Rs.37,39,701l- on account of cash credit from one M/s. Krishna Trading Co. and has contended that though the assessee made all possible efforts to adduce evidence and explanation before the A.O., the same could not be made as the concerned A.O. was not available in his chamber. We also find that the Id. counsel for the assessee -has prayed for one more opportunity to enable the assessee to explain his case in case of both the grounds raised by him. The Revenue has also stated that the ground raised by it should be restored back to the file of A.O. as the same relates to the connected ground no. 2 of assessee's appeal. We, therefore, after considering the facts and circumstances of the case find that since the comparable cases while estimating the gross profit was not confronted to the assessee and the assessee has asked for one more opportunity to explain his case in support of cash credit from M/s. Krishna Trading Co. for which the Revenue has also asked for restoration of the deletion by the Id. CIT(A).'We, therefore, following the principle of natural justice restore the ground raised by the assessee and Revenue to the file of A.O. to decide the same afresh. Needless to say that the assessee should be given proper and adequate opportunity to explain his case before him. We hold and direct accordingly.”

2.5.1. It would be relevant to reproduce the provisions of section 153(2A) and section 153(3) of the Act at this juncture.

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Section 153 – Time limit for completion of assessments and reassessments (2A) Notwithstanding anything contained in sub-sections (1) [, (1A), (1B)] and (2), in relation to the assessment year commencing on the 1st day of April, 1971, and any subsequent assessment year, an order of fresh assessment in pursuance of an order under section 250 or section 254 or section 263 or section 264, setting aside or cancelling an assessment, may be made at any time before the expiry of one year from the end of the financial year in which the order under section 250 or section 254 is received by the [Principal Chief Commissioner or] Chief Commissioner or [Principal Commissioner or] Commissioner or, as the case may be, the order under section 263 or section 264 is passed by the [ Principal Chief Commissioner or] Chief Commissioner or [Principal Commissioner or] Commissioner: Provided that where the order under section 250 or section 254 is received by the Principal Chief Commissioner or] Chief Commissioner or [Principal Commissioner or] Commissioner or, as the case may be, the order under section 263 or section 264 is passed by the [ Principal Chief Commissioner or] Chief Commissioner or [Principal Commissioner or ] Commissioner, on or after the 1st day of April, 1999 but before the 1st day of April, 2000, such an order of fresh assessment may be made at any time up to the 31st day of March, 2002 :] 93[Provided further that where the order under section 254 is received by the[ Principal Chief Commissioner or] Chief Commissioner or [Principal Commissioner or] Commissioner or, as the case may be, the order under section 263 or section 264 is passed by the [ Principal Commissioner or] Commissioner on or after the 1st day of April, 2005 [ but before the 1st day of April 2011], the provisions of this sub-section shall have effect as if for the words “one year”, the words “nine months” had been substituted:]

(3) The provisions of sub-sections (1) [, (1A), (1B)] and (2) shall not apply to the following classes of assessments, reassessments and recomputations which may, 96[subject to the provisions of sub-section (2A),] be completed at any time— (i) [***] (ii) where the assessment, reassessment or recomputation is made on the assessee or any person in consequence of or to give effect to any finding or direction contained in an order under section 250, 254, 260, 262, 263, or 264 1[or in an order of any court in a proceeding otherwise than by way of appeal or reference under this Act] ; (iii) where, in the case of a firm, an assessment is made on a partner of the firm in consequence of an assessment made on the firm under section 147.

2.5.2. From the aforesaid provisions, if the assessee’s case falls under section 153(2A) of the Act, then the last date for completion of assessment is 31.12.2008 as admittedly,

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the tribunal order has been received by the department on or before 12.12.2007 which is evident from the fact that the first notice was issued by the Learned AO commencing the proceedings pursuant to tribunal’s order on 12.12.2007. He stated that the notice u/s 142(1) and 143(2) of the Act were issued on the assessee on 12.12.2007 calling for certain details pursuant to the order of Tribunal. Hence it can safely be concluded that the tribunal order had been served before 12.12.2007 and hence the time limit for completion of fresh assessment in terms of section 153(2A) of the Act would be 31.12.2008. In such a case, the assessment framed on 25.3.2009 would become barred by limitation. If the assessee’s case falls under section 153(3) of the Act, which does not stipulate any time limit for completion of assessment , then the assessment framed on 25.3.2009 would be in time. Hence the crucial question to be decided herein is as to whether the assessee’s case falls under section 153(2A) or 153(3) of the Act, for which purpose, it would be relevant to decide as to whether the tribunal had set aside the old assessment or merely given a finding or direction to the Learned AO to give effect to the order of the tribunal.

2.5.3. We find from the findings given by the tribunal in its order dated 28.9.2007 as reproduced supra, it had not given any direction or finding to the Learned AO to give effect to its order , but instead had set aside the entire assessment to make it afresh by following due process of law for the purpose of examination of some witnesses in line with the principles of natural justice. The Tribunal may indicate certain lines of enquiry or other exercises for conforming to natural justice or conducting the assessment on the right procedure. That does not mean that the Tribunal’s order is not for a fresh assessment. It had effectively asked the Learned AO to make fresh exercise of assessment determining the total income.

2.5.4. It would also be relevant to look at this aspect from the perspective of historical background of this enactment. It would be seen that the legislature from its experience found that the fresh assessment in the cases of orders of setting aside used to be

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completely neglected and to be shelved ad infinitum to gather dust for decades. This caused a mounting backlog as there was no limitation of time for completion of such assessment. This necessitated the introduction of limitation to end this potential mischief. If the Learned AO’s pleading is taken as correct, in that case it would virtually mean that the orders of the Tribunal passed u/s 254 of the Act for the most part if not universally, remain outside the scope of section 153(2A) because rarely the whole assessment order on all its counts come in for challenge before the Tribunal in appeals. All appeals, so to say, relate to some components of the total income assessed out of many. More often than not, it happens that the Tribunal’s order , while asking the Assessing Officer to redo the assessment on those limited scores, may contain guidelines for the fresh assessment to be made. That does not mean that the assessment redone is not a fresh assessment order. Hence the view as canvassed by the Learned AO cannot be tenable in the face of the fact that even nullifying a component or a few components of total income in the assessment order under appeal means nullifying the assessment because any exercise, by the import of section 143(3), for determining the total income of an assessee is assessment. When the same is done a second time pursuant to an appeal order u/s 254 of the Act, is as well a fresh assessment.

2.5.5. We find that the tribunal’s order indicated as a guideline for the proper manner in which the assessment in the case ought to have been made. There was no finding or direction given thereon. The tribunal remitted the assessment for determining afresh the issues raised by the Learned AO in the assessment appealed against. Since there were no other additions or issues in dispute except the two additions ( i.e addition on account of gross profit and bogus purchases) made in the earlier assessment, the order asking for deciding the issues afresh and recomputing the total income repeating the procedure of assessment correctly amounts to a fresh assessment. We hold that the assessment means in the context of the scheme of the Act the determination of the total income to be brought to the charge of tax. The total income is the sole object of the

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whole exercise commencing from assessee’s filing of return and ending with the completion of assessment. Now looking at the impugned issue from this perspective, when the tribunal asked the Learned AO to determine the total income by re-deciding the issues involved in the additions made therein, it implies indisputably a mandate for fresh determination of the total income. When the order of the Tribunal nullifies the total income assessed or determined in the original order of an assessment, it definitely means the setting aside of the original order and a fresh assessment determining the total income. In effect, the tribunal’s order annihilates the earlier assessment as the total income determined by it no more subsists.

2.5.6. The Learned AO by substituting his old order by passing a fresh order on 25.3.2009 had rendered the first order inoperative. The Learned AR argued that the word ‘restore’ means returning the matter for assessment to the point prior to its completion in the first instance. ‘Setting aside’ has also the same effect.

2.5.7. The Learned AR further argued that the Learned Assessing Officer had tried to capitalize on expression ‘direction’ used in section 153(3) of the Act. In this regard, he argued that the words ‘finding and direction’ occur in sub-section (3). He stated that there is a fundamental mistake in depending on sub-section (3). Sub-section (3) deals with a situation altogether different from the situation in an order of the Tribunal requiring the Learned AO to re-determine the total income. He again reiterated that may be, the Tribunal while nullifying a decision of the Learned AO may indicate some procedural guidelines or the needful focus of attention in making such fresh assessment but that cannot be equated with the specialized meaning of the words finding or direction occurring in sub-section (3). We are in agreement with the said arguments of the Learned AR and hold that the said words ‘finding or direction’ in sub-section (3) refers to the situation where the Tribunal’s order has come to a particular finding in relation to some other year or years or in relation to the assessment of another person or persons. It is only in that situation the assessment to

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be made in accordance with such finding or direction is immune from limitation u/s 153(2A) of the Act. But where the direction for re-determining the total income of the assessee is in relation to the grounds of appeal for a particular assessment year before the Tribunal, the case attracts sub-section (2A) and not sub-section (3) of section 153 of the Act. We find that this construction alone matches and harmonizes with the intent behind enacting the limitation u/s 153(2A) of the Act. So if the construction by the Learned AO is taken as correct, then the very purpose of enactment prescribing limitation for completion of assessment u/s 153(2A) of the Act becomes otiose and redundant. By no means, the legislature can be said to have given latitude to the massive piling of such set-aside cases as before.

2.5.8. It was also argued by the Learned AR from different angle from the aspect of provisions of section 240 of the Act. He stated that Section 240 of the Act in its proviso says that where an assessment is set aside or cancelled, and an order of fresh assessment is directed to be made, the assessee is not entitled to refund of the tax collected on the disputed additions as a sequel to effacement of the first order. In the case before us, the demand raised on the first assessment was collected by the Learned AO by coercive action. The assessee applied for refund consequent to the cancellation of the assessment to be made afresh. The Learned AO did not allow the refund on the strength of the statutory provision in the proviso to section 240 of the Act. He argued that the Learned AO had thus contradicted himself by saying in the remand report that the present assessment is not a case of assessment being set aside. He argued that by Learned AO’s logic, he could not have denied the refund of the tax collected in pursuance of the first order.

2.5.9. We find that the case law relied upon by the Learned DR on the decision of the Hon’ble Apex Court in the case of Rajasthan R.S.S. & Ginning Mills Fed. Ltd vs DCIT reported in (2014) 45 taxmann.com 1 (SC) is not at all applicable to the facts of the instant case. The issue before the Supreme Court was in the context of carry forward

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of losses in case of amalgamation. It held that the taxing statute should be viewed very strictly and no words can be read into the section. We are also in agreement with the said proposition that the taxing statutes are to be viewed very strictly. But in the instant case, there is no question of inserting of words into the section as argued by the Learned DR.

2.5.10. We hold that it makes no sense in distinguishing the restoration of an order from setting aside an order. Thus the Learned CITA is in error by saying that by restoring an assessment , the Tribunal did not set aside the assessment and resultantly the fresh assessment is immune from the limitation u/s 153(2A) of the Act. We find that the Learned AO infact had understood the word ‘restored’ as meaning ‘set aside’ because he withheld the refund of the tax collected before the Tribunal’s order by placing reliance on section 240 of the Act together with its proviso. This act of withholding the refund pending the fresh assessment in the case is concession on the part of the Learned AO that the Tribunal’s order is one setting aside the order for assessment de novo. Thus we find that the Learned AO had self repudiated by stating that the Tribunal had not set aside the order.

2.5.11. We find that the following decisions relied on by the Learned AR are very well placed and which are squarely applicable to the facts of the instant case:-

(a) Decision of Hon’ble Delhi High Court in the case of CIT vs Bhan Textile P Ltd reported in (2008) 300 ITR 176 (Del), wherein it was held that :-

ASSESSMENT – LIMITATION – COMMISSIONER (APPEALS) DIRECTING ASSESSING OFFICER TO PASS AN ORDER UNDER SECTION 144 AND GIVE ASSESSEE OPPORTUNITY TO FILE ITS EVIDENCE – ASSESSMENT MUST BE TAKEN TO HAVE BEEN SET ASIDE – LIMITATION UNDER SECTION 153(2A) APPLIES – NOT A CASE OF ASSESSMENT TO GIVE EFFECT TO FINDING – INCOME TAX ACT, 1961, ss. 144, 153.

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On an appeal against the assessment order passed by the Assessing Officer, the Commissioner (Appeals) restored the matter to the file of the Assessing Officer, so that one more opportunity could be given to the assessee to file evidence and held that ground No. 2 of the appeal was treated as allowed. The Assessing officer issued a notice under section 143(2) of the Income Tax Act, 1961 , for making a fresh assessment. The assessee contended tha the notice was barred by limitation under the provisions of section 153(2A) of the Act. Since the assessee did not co-operate with the Assessing Officer, the assessment, as originally framed, was once again made by the Assessing Officer. The Commissioner (Appeals) held that the case was covered under section 153(3)(ii) of the Act and there was no time limit fixed for making the assessment. The Tribunal held that the provisions of section 153(2A) of the Act were applicable and not section 153(3)(ii) of the Act. On appeal:

Held, dismissing the appeal, that although the operative portion of the order passed by the Commissioner (Appeals) did not specifically say that the order of the Assessing Officer had been set aside or cancelled since ground No. 2 of the appeal filed by the assessee was allowed, by necessary implication, the assessment order was set aside to the extent it did not give the assessee opportunity to place its evidence. Therefore, section 153(2A) was applicable.

(b) Decision of the Hon’ble Gujarat High Court in the case of Instruments and Control Co. vs CCIT and Others reported in (2012) 349 ITR 571 (Guj) , wherein it was held that :

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made corresponding disallowance. In essence, thus, the Assessing Officer was required to pass a fresh order of assessment which was necessary on account of an order passed by the Tribunal under section 254 of the Act cancelling the assessment framed by the Assessing Officer. The period of limitation prescribed in section 153(2A) , therefore, would apply. While such an order was served on the Commissioner on August 3, 1994, within a period of two years of the end of such financial year, a fresh order of assessment had to be passed by the Assessing Officer. The same not having been done, in our view, such proceedings have become timebarred. The assessment placed before the Assessing Officer by the Tribunal’s order, therefore, must be treated as having abated. In that view of the matter, the declaration prayed for by the petitioner must be granted.

(c ) Decision of the co-ordinate bench of Agra Tribunal in the case of Pooran Singh vs ACIT reported in (2006) 100 TTJ 1121 (ITAT Agra) dated 30.11.2005 , wherein it was held that :- “12. From the reading of the aforesaid provisions it is clear that the assessment is to be made when it is set aside within 2 years from the end of the financial year in which the order setting aside was received by the CIT or Chief CIT. But in case assessment is made to give effect to any finding or direction contained in the order as given in the section, no time limit is prescribed, i.e., the" effect can be given within any time. In this case from the facts it is clear that the appellate authority has not set aside the assessment completely but two issues were sent to the AO so that the AO can determine the income relating to those issues and thereby work

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out the assessed income of the assessee. Whether this will tantamount to setting aside the assessment relating to those issues. Whenever an assessment is set aside always generally directions and findings are given by the appellate authority . Therefore we cannot hold that the provisions of s. 153 (2A) will not apply to such cases. In our opinion, it is not essential that the word 'set aside' should be written In e order, where the order has been set aside, the order has been set aside must be borne out of the facts and context of the order. The provisions of s. 153(2A) and 153(3) are to be interpreted harmoniously. The word 'set aside' is defined in Webister 3rd New International Dictionary as "to put to one side, to discard, to set apart for a purpose, overrule." Going to the order of the CIT(A) relating to the ground Nos. 7 and 8, we find that the CIT(A) noted that the AO has not given credit of the instalment received by the assessee for working out the total investment made in moneylending business, therefore, he directed the AO to give allowance for the same for working out the total investment an a so directed that for this purpose peak credit should be worked out and allowance must be given for the past savings made by the assessee. For working out the interest income, CIT(A) directed that the rate of 24 per cent should be applied and the business expenditure for earning such income should be deducted for working out the net income from interest. Thus direction was given that the interest income should be worked out only after working out the total investment. These directions are not the ones which can be followed by the AO without calling the assessee and without appreciating the various evidences/documents which are· required for working out instalments received by the assessee, peak credit, computation of total investment working out the expenditure incurred for by the AO by applying its mind. This will also tantamount to restoring the issue to the file of the AO to be decided afresh after giving the hearing to the party and following the direction of the CIT(A) . This also implies that the assessment relating to these issues stand set aside and to be decided afresh in accordance with the directions of the CIT(A).)

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31st Aug., 1995 are barred by limitation as the limitation as laid down under s. 153(2A) will apply to the facts of the case before us. Accordingly, we quash the orders dt. 30th Aug., 1995 passed by the AO for the asst. yrs. 1984-:'85 to 1986-87. Since the orders passed by the AO stand quashed, the other grounds taken by the assesss,e on merit do not survive.

2.5.12. In view of the aforesaid facts and circumstances , findings given thereon and respectfully following the judicial precedents relied upon hereinabove, we have no hesitation to hold that the fresh assessment framed by the Learned AO on 25.3.2009 is barred by limitation in terms of section 153(2A) of the Act. We hold that the fresh assessment dated 25.3.2009 is declared as a nullity. Accordingly , the cross objection of the assessee is allowed . As the assessment has been declared as a nullity, there is no need to address other grounds of the assessee and revenue.

Order pronounced in the Court on 23 .03.2016

Sd/- Sd/- [N.V.Vasudevan ] [ M.Balaganesh ] Judicial Member Accountant Member Dated : 23.03.2016 Copy of the order forwarded to: 1.. The Department: The DCIT, Circle-48, Kolkata. 2 The Assessee: Shri Sanjay Jaiswal 351 Netaji Subhas Road, Howrah 711101. 3 /The CIT, 4.The CIT(A) 5. DR, Kolkata Bench 6. Guard file. True Copy, By order, Asstt Registrar **PRADIP SPS

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