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Income Tax Appellate Tribunal, KOLKATA ‘A’ BENCH, KOLKATA
Before: Shri P.M. Jagtap & Shri S.S. Viswanethra Ravi
Per Shri P.M. Jagtap:- This appeal is preferred by the Revenue against the order of ld. Commissioner of Income Tax (Appeals)-I, Kolkata dated 20.09.2010 for the assessment year 2002-03 and the same is being disposed of along with the Cross Objection filed by the assessee being C.O. No. 12/KOL/2011.
The relevant facts of the case giving rise to this appeal as well as the Cross Objection are as follows:- The assessee is a Public Limited Company, which is engaged mainly in the business of manufacture and sale of metallurgical machinery, materials handling and conveying plant and coal washing plant on a Turnkey Contract basis. The return of income for the year under consideration was filed by it on 31.10.2002 declaring total income of Rs.3,66,13,297/-. In the assessment originally completed under section 143(3) read with section 144 of the Act vide order dated 31.03.2005, the total income of the assessee was determined by the Assessing Officer at Rs.8,79,63,595/- after making inter alia trading addition of Rs.5,09,37,980/- by estimating the income of the assessee by applying the higher rate of 4.87%. Against the said order, an appeal was preferred by the assessee before the ld. CIT(Appeals) challenging the action of the Assessing Officer in rejecting the books of account and also disputing the trading addition made by him. During the course of appellate proceeding before the ld. CIT(Appeals), various details and documents were furnished by the assessee. The same were forwarded by the ld. CIT(Appeals) to the Assessing Officer seeking the later’s comments. In the remand report submitted to the ld. CIT(Appeals), the Assessing Officer offered his comments and also suggested for making the following additions:-
I.T.A. No. 98/KOL./2011 Assessment year: 2002-2003 & C.O. No. 12/KOL/2011 (in I.T.A. No. 98/KOL./2011) Assessment Year : 2002-2003 Page 3 of 9 (1) Un-reconciled difference of Rs.27,25,000/- in respect of M/s. National Engineering Industries Limited;
(2) Disallowance on account of labour charges of Rs.61,08,189/- claimed to be paid by the assessee to M/s. Trichy Ramesh Pipe Industry Pvt. Limited;
(3) Disallowance on account of unverifiable payments of Rs.4,30,31,106/- included under the head ‘miscellaneous’.
After considering the entire material available on record before him including the remand report submitted by the Assessing Officer as well as the counter-comments offered by the assessee thereon, the ld. CIT(Appeals) arrived at a conclusion that the Assessing Officer was not justified in rejecting the books of account of the assessee. He accordingly directed the Assessing Officer to accept the return of income filed by the assessee, which was based on the books of account. He also did not agree with any of the additions suggested by the Assessing Officer in his remand report. Accordingly, the appeal filed by the assessee on the main issues was allowed by the ld. CIT(Appeals) vide his impugned order dated 15.05.2006.
Against the order of the ld. CIT(Appeals) dated 15.05.2006, an appeal was preferred by the Revenue before the Tribunal. In the said appeal, the issue relating to the rejection of books of account was raised by the Revenue in Grounds No. 1 to 5, while Grounds No. 6 to 9 involved the issues relating to the additions suggested by the Assessing Officer in the remand report. The Tribunal disposed of the appeal of the Revenue vide its order dated 15.02.2008 passed in ITA No. 1498/KOL/2006, whereby Grounds No. 1 to 5 were rejected being devoid of any merit. Accordingly, the order of the ld. CIT(Appeals) accepting the books of account of the assessee was upheld by the Tribunal. As regards the issues involved in Grounds No. 6 to 9 of the Revenue’s appeal relating to the
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additions suggested by the Assessing Officer in the remand report, the Tribunal found it just and proper to set aside the said issues to the file of the Assessing Officer for deciding the same afresh. The Assessing Officer thereafter passed an order on 31.12.2009 giving effect to the order of the Tribunal dated 15.02.2008 (supra). In the said order, he made the following three additions to the total income of the assessee:- (1) Un-reconciled difference of Rs.27,25,000/- in respect of M/s. National Engineering Industries Limited;
(2) Disallowance on account of labour charges of Rs.61,08,189/- claimed to be paid by the assessee to M/s. Trichy Ramesh Pipe Industry Pvt. Limited;
(3) Disallowance on account of unverifiable payments of Rs.4,30,31,106/- included under the head ‘miscellaneous’.
Against the order of the Assessing Officer dated 31.12.2009 giving effect to the order of the Tribunal, an appeal was again preferred by the assessee before the ld. CIT(Appeals). In the said appeal, the assessee raised a preliminary issue challenging the validity of the order passed by the Assessing Officer on the ground that it was barred by limitation and also disputed the additions made by the Assessing Officer to its total income. After considering the submissions made by the assessee as well as perusing the relevant material available on record, the ld. CIT(Appeals) did not find merit in the preliminary issue raised by the assessee that the order dated 31.12.2009 passed by the Assessing Officer was barred by limitation. According to him, section 153(3)(ii) was applicable in the case of the said order and not section 153(2A) as sought to be contended by the assessee and, therefore, the order passed by the Assessing Officer giving effect to the order of the Tribunal on 31.12.2009 was not barred by limitation. He, however, found merit in the stand of the assessee that all the three additions made by the Assessing Officer to the total income of the assessee in the said order were not sustainable and
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accordingly deleting the same, the ld. CIT(Appeals) allowed the appeal of the assessee partly. Aggrieved by the order of the ld. CIT(Appeals) deleting the said additions, the Revenue has preferred this appeal before the Tribunal, while the assessee has filed a Cross Objection raising the preliminary issue challenging the validity of the order dated 31.12.2009 passed by the Assessing Officer on the ground that the same was barred by limitation.
Since the preliminary issue raised in the Cross Objection of the assessee relates to the validity of the order passed by the Assessing Officer which goes to the root of the matter, we have heard the arguments of both the sides on the said issue first and also perused the relevant material on record. The question, that is relevant in this context to decide the preliminary issue, is whether the provisions of section 153(2A) are applicable in the case of the assessee as claimed by the ld. counsel for the assessee or whether the case of the assessee is governed by the provisions of section 153(3)(ii) of the Act as held by the ld. CIT(Appeals) in his impugned order and further supported by the ld. D.R. at the time of hearing before us. The time limit for completion of assessment and re- assessment is prescribed in section 153 and the provisions of sub-section (2A) thereof read with 2nd proviso thereto and sub-section (3), which are relevant in the present context, are extracted below. Section 153(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 Chief Commissioner or Commissioner or, as the case may be, the order under section 263 or section 264 is passed by the Chief Commissioner or Commissioner :
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Provided further that where the order under section 254 is received by the Chief Commissioner or Commissioner or, as the case may be, the order under section 263 or section 264 is passed by the 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.
Section 153(3): The provisions of sub-sections (1), (1A), (1B) and (2) shall not apply to the following classes of assessments, reassessments and re-computations which may, 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[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.
A comparative study of sub-section (2A) of section 153 read with 2nd proviso thereto and sub-section (3) of section 153 reveals that an order of fresh assessment, inter alia, in pursuance of an order passed by the Tribunal under section 254, setting aside or cancelling an assessment, is required to be made at any time before the expiry of nine months from the end of the financial year in which the order under section 254 is received by the concerned Chief Commissioner or Commissioner whereas sub-section (3) of section 153 provides that where the assessment, reassessment or re-computation is to be made on the assessee or any person in consequence of or to give effect to any finding or direction contained, inter alia, in an order passed by the Tribunal under section 254, same can be completed at any time without there being any time limit specifically prescribed for the
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same. As held by the ld. CIT(Appeals) in his impugned order and further supported by the ld. D.R. at the time of hearing before us, the time limit prescribed of sub-section (2A) of section 153 is applicable only when fresh assessment is required to be made, inter alia, in pursuance of an order passed by the Tribunal under section 254 setting aside or cancelling the earlier assessment as a whole. According to them, when several additions have been made by the Assessing Officer and the appellate authority sets aside some of the issues to the file of the Assessing Officer, that situation would not give rise to “fresh assessment” attracting the provisions of section 153(2A) and in such case, the provisions of section 153(3)(ii) would apply.
We are unable to subscribe to the view taken by the ld. CIT(Appeals) in view of the various judicial pronouncements cited by the ld. counsel for the assessee wherein a contrary view is taken on a similar issue, which is in favour of the assessee. In one of such cases decided by the Agra Bench of this Tribunal in the case of Pooran Singh –vs.- ACIT [7 SOT 126], the appellate authority had not set aside the assessment completely but only two issues were sent to the Assessing Officer so that Assessing Officer could determine the income relating to those issues and thereby work out the assessed income of the assessee. In these facts and circumstances of the said case, which are similar to the facts of the present case, it was held by the Tribunal that the provisions of section 153(2A) would apply and the order passed by the Assessing Officer giving effect to the order of the appellate authority beyond the period prescribed in sub-section 153(2A) was barred by limitation. A similar issue had again arose in the case of Standard Meters Mfg. Co. –vs.- Addl. CIT (ITA No. 1665/PN/2007 dated 29.11.2011) cited by the ld. counsel for the assessee and it was held by the Pune Bench of this Tribunal that the
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point of distinction between section 153(3) and 153(2A) is the fact that provisions of section 153(3) are to operate only in a situation where assessment, reassessment, or re-computation is necessary to give effect to any finding or direction contained in an appellate order. In the said case, the Tribunal vide its earlier order dated 28.09.2003 had not given any finding or direction so as to trigger the provisions of section 153(3) of the Act and only one issue was set aside and restored by the Tribunal to the file of the Assessing Officer for consideration afresh in accordance with law. In these facts and circumstances, it was held by the Tribunal that the order passed by the Assessing Officer giving effect to the order of the Tribunal beyond the period specified in section 153(2A) of the Act was not saved because of the extended limitation provided under section 153(3) of the Act. In our opinion, the ratio of the decision of the Coordinate Benches of this Tribunal in the case of Pooran Singh (supra) and Standard Meters Mfg. Co. (supra) is squarely applicable in the present case and respectfully following the same, we hold that the order passed by the Assessing Officer dated 31.12.2009 giving effect to the order of the Tribunal dated 15.02.2008 beyond the period of nine months prescribed in section 153(2A) read with second proviso thereto from the end of the financial year in which the order of the Tribunal was received by the concerned Chief Commissioner or Commissioner is invalid being barred by limitation. Accordingly, we allow the Cross Objection filed by the assessee and cancel the order dated 31.12.2009 passed by the Assessing Officer.
As a result of our decision rendered above while disposing of the Cross Objection filed by the asseessee cancelling the order passed by the Assessing Officer dated 31.12.2009 holding the same to be invalid in the eyes of law being barred by limitation, the issues raised in the appeal
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filed by the assessee relating to the additions made by the Assessing Officer in the said order have become infructuous. We, therefore, do not consider it necessary or expedient to decide the same.
In the result, the Cross Objection of the assessee is allowed, whereas the appeal of the Revenue is dismissed. Order pronounced in the open Court on October 9th, 2015.
Sd/- Sd/-
(S.S. Viswanethra Ravi) (P.M. Jagtap) Judicial Member Accountant Member
Kolkata, the 9th day of October, 2015 Copies to : (1) Deputy Commissioner of Income Tax, Circle-1, Kolkata, Aayakar Bhawan, 7th Floor, P-7, Chowringhee Square, Kolkata-700 069
(2) M/s. McNally Bharat Engineering Co. Limited, 4, Mangoe Lane, Kolkata-700 001
(3) Commissioner of Income-tax (Appeals)- I, Kolkata (4) Commissioner of Income Tax, Kolkata (5) The Departmental Representative (6) Guard File
By order
Assistant Registrar, Income Tax Appellate Tribunal, Kolkata Benches, Kolkata Laha/Sr. P.S.