IN THE HIGH COURT OF GUJARAT AT AHMEDABAD SPECIAL CIVIL APPLICATION NO. 446 of 2012 FOR APPROVAL AND SIGNATURE:
HONOURABLE MR.JUSTICE VIJAY MANOHAR SAHAI and HONOURABLE MR.JUSTICE N.V.ANJARIA ================================================================
1 Whether Reporters of Local Papers may be allowed to see the judgment ?
2 To be referred to the Reporter or not ?
3 Whether their Lordships wish to see the fair copy of the judgment ?
4 Whether this case involves a substantial question of law as to the interpretation of the constitution of India, 1950 or any order made thereunder ?
5 Whether it is to be circulated to the civil judge ?
================================================================ CHANDULAL C SHAH Petitioner(s) Versus ASSISTANT COMMISSIONER OF INCOME TAX CENTRAL CIRCLE - 7 Respondent(s) ================================================================ Appearance:
MRS SWATI SOPARKAR, ADVOCATE for the Petitioner(s) No. 1 MRS MAUNA M BHATT, ADVOCATE for the Respondent(s) No. 1 NOTICE SERVED for the Respondent(s) No. 1 ================================================================ CORAM: HONOURABLE MR.JUSTICE VIJAY MANOHAR SAHAI and
HONOURABLE MR.JUSTICE N.V.ANJARIA
Date : 26/07/2012 ORAL JUDGMENT (PER : HONOURABLE MR.JUSTICE N.V.ANJARIA)
1. The present petition under Article 226 of the Constitution is filed to quash and set aside the order dated 31.10.2011 of the Assistant Commissioner of Income Tax Circle VII, Ahmedabad, requiring the petitioner to furnish the evidences in support of his claim for refund. It is also prayed to direct the respondent to refund amount of Rs.2,34,200/- with interest. The third prayer is made to quash the recovery proceedings for the alleged outstanding tax of Rs.2,49,628/-.
2. We heard learned Senior Counsel Mr. S.N. Soparkar for Learned advocate Mrs.
Swati Soparkar, assisted by learned advocate Mr. Bandish Soparkar, appearing for the petitioner, as well as Ms. Paurami Sheth, appearing on behalf of the respondent Assistant Commissioner of Income Tax.
3. Rule, Learned advocate for the respondent waives service of Rule. Having regard to the compass of the matter, and with the consent of learned advocates appearing for both the parties, the petition is taken up for final hearing.
4. The basic facts may be noted. In November 1995, a search and seizure operation was carried out at the residential premises of the petitioner under section 132(1) of the Income Tax Act, 1961. In course of that search, certain cash, jewellery and books of accounts as well as documents were found, and seized. The provisions of section 158BC were invoked by the Income Tax Department, and a notice was issued to the petitioner asking him to file a return of income for the block period of 01.04.1985 to 31.03.1995, and the fractional period upto 28.11.1995. The assessee filed the necessary return on 30.10.1996. The Deputy Commissioner of Income Tax undertook the assessment proceedings, and passed the assessment order dated 29.11.1996 under section 158BC read with 143(3) of the Act. Therein, the Assessing Officer made certain addition, requiring the assessee to pay additional tax Rs.5,24,628/-. The petitioner assessee paid the additional tax of Rs.1,60,000/- and Rs.1,15,000/- on 16.01.1997 and 07.07.1997 respectively.
4.1 The assessee preferred appeal before the Appellate Tribunal against the aforesaid assessment order dated 29.11.1996. The appeal came to be partly allowed by order dated 31.01.2005. The Tribunal deleted the addition of Rs.1,93,618/- made by the Assessing Officer, and in the same order, a denovo assessment for Rs.6,12,763/- was directed. By virtue of this order, addition to the extent of Rs.68,000/- only was sustained. As a result, tax to the extent Rs.40,800/- became payable by the petitioner, as against which, the petitioner had already paid Rs.2,75,000/-, as above mentioned. It is the case of the petitioner that, accordingly, he became entitled to refund of Rs.2,34,200/-.
4.2 On 07.12.2005, the Income Tax authorities initiated recovery proceedings, and summons came to be issued to the petitioner under section 131 of the Act to give evidence, and to produce the books of accounts, etc. The petitioner gave reply dated 19.12.2005, objected to the recovery proceedings, and requested the authority to give effect to the order dated 31.01.2005 of the Tribunal, pursuant to which, refund was payable. However, the authorities appeared not to have been convinced, and on 02.07.2009, a notice for penalty under section 221(1) of the Act was issued to the petitioner for non-payment of additional tax of Rs.2,49,628/-. The petitioner by letter dated 6.9.2010, again raised the same demand.
4.3 Thereafter, the petitioner sent a letter dated 3.6.2011 requesting the respondent to give effect to the order dated 31.1.2005 passed by the Appellate Tribunal. The petitioner wrote yet another letter dated 18.7.2011 to the Chief Commissioner of Income Tax for not getting the refund order. The respondent vide letter dated 31.10.2011, gave reply, and in that, the respondent sought to reconsider the claim of petitioner, and further called upon him to furnish evidence in support of the claim. Through this letter, the respondent is seeking to reconsider the claim of petitioner after inordinate delay of 6 years and 9 months, and that too without any valid notice issued within permissible time limit. On the contrary, the petitioner is now entitled to the refund of Rs.2,34,200/-, since it is not open for the respondent to reconsider the claims of petitioner after inordinate and unexplained delay of 6 years and 9 months. The petitioner objected to the letter dated 31.10.2011 vide reply dated 3.11.2011.
4.4 It was submitted that the authorities were absolutely negligent in their approach in not giving effect of the order of the Appellate Tribunal, even as the petitioner had made repeated requests in writing by letters dated 19.12.2005, 16.07.2009, 07.10.2009 and 23.06.2011, which were kept in cold storage for nearly 7 years. It was submitted that any further proceedings were time barred in view of provisions of section 153(2A) of the Act, which provide for one year period, being limitation for framing a fresh assessment after the Tribunal has passed an order. The period of one year is to be reckoned from the end of the financial year in which the order was received by the Commissioner.
4.5 Learned senior council contended that the letter dated 31.10.2011 was issued by the Income Tax authority after inordinate delay of 6 years and 9 months, and that too without valid notice issued within permissible time limit. According to his submission, the petitioner was, on the contrary, entitled refund. He submitted that the action on part of respondent in not giving effect to the order passed by the Tribunal dated 31.5.2005 for a period of almost 7 years, and by the impugned letter dated 31.10.2011, the respondent seeks to reconsider the additions made by the assessing officer way back before 15 years on 29.11.1996. Learned Senior Council relied upon provision of section.153 of the Act, and submitted that the action proposed under the impugned letter was barred by limitation.
4.6 Learned senior counsel Mr. S.N. Soparkar pointed out and submitted that the is- sue raised in the petition is covered by oral judgment dated 18.06.2012 by a Division Bench of this court in Instruments and Control Company v. Chief Commissioner of Income Tax and others being Special Civil Application No.10330 of 2003.
5. For comprehending the issue and the contention raised in the context, relevant provisions of the Act may be looked into. Section 153 of the Act is about time limit for completion of assessments and reassessments. Sub-section (1) of section 153 provides for limitation for completing assessments under section 143 or section 144. Sub-section (2) thereof provides for limit for completion of assessment, reassessment or re-compu- tation under section 147 of the Act. Sub-section (2A) of section 153 provides for limita-
tion for completing fresh assessment under various sections, including assessment in pursuance of an order besides other under section 254 of the Act.
5.1 Section (2A) of section 153 of the Act is as under :
“Section 153 (2A) : Notwithstanding anything contained in sub-sections (1) 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 under section 146 or in pursuance of an order, under section 250, section 254, section 263 or section 264, setting aside or cancelling an assessment, may be made at any time before the expiry of two years from the end of the financial year in which the order under section 146 cancelling the assessment is passed by the Assessing Officer or the order under section 250 or section 254 is received by the Chief Commissioner or, as the case may be, the order under section 263 or section 264 is passed by the Chief Commissioner or Commissioner.”
5.2 Sub-section (2A) of section 153 was introduced by way of amendment by the Amendment Act, 1970, with effect from 01.04.1971. Correspondingly, the words “sub- ject to the provisions of sub-section (2A)” were also added in sub-section (3) of section 153.
5.3 Sub-section (3) of section 153 of the Act reads as under:
“Section 153(3) : The provisions of sub-sections (1) 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] where a fresh assessment is made under section 146;
[ii] where the assessment, reassessment or recomputation is made on the assess- ee 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 or- der 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.”
5.4 In Chunilal C. Shah (supra), the Division Bench considered the scope, opera- tion and effect of above provisions. The relevant paragraphs from the said judgment are reproduced hereunder.
“It can, thus, be seen that prior to introduction of sub-section (2A) of section 153, the Legislature provided for limitation for completion of assessments under sub-section (1) and sub-section (2) of section 153. Sub-section (3) of section 153, however, provided that the provisions of sub-sections (1) and (2) shall not apply to classes of assessments, reassessments and re-computations provided in clauses (i) to (iii) of sub-section (3) of section 153. Such classes included a case of fresh assessment made under section 146; a case of assessment, reassessment or re-computation 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, as also in case of a firm, where an assessment is made on a partner of the firm in con- sequence of an assessment made on the firm under section 147.”
(Para 17) “Prior to introduction of sub-section (2A) of section 153 of the Act, it may have been open for the revenue to contend that all cases of assessments, reassess- ments or re-computations made in case of the assessee or any person in con- sequence of or to give effect to any finding or direction of the appellate orders passed in consequences mentioned in clause (ii) thereof, would not be governed by the limitation provided in sub-section (1) and sub-section (2) and in such cases, such assessment, reassessment or re-computation, as the case may be, could be completed at any time.”
(Para 18) “The situation, however, must be seen to have undergone a material change upon introduction of sub-section (2A) of section 153 of the Act, which provides inter alia that notwithstanding anything contained in sub-sections (1) 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 under section 146 or in pursuance of an order, under section 250, section 254, section 263 or sec- tion 264, setting aside or cancelling an assessment, may be made at any time be- fore the expiry of two years from the end of the financial year in which the order under section 146 cancelling the assessment is passed by the Assessing Officer or the order under section 250 or section 254 is received by the Chief Commis- sioner or, as the case may be, the order under section 263 or section 264 is passed by the Chief Commissioner or Commissioner, as the case may be. As already noted, while introducing sub-section (2A) in section 153 of the Act, the Legislature simultaneously made a small change in sub-section (3) thereof by adding the words, “subject to the provisions of sub-section (2A)”.
(Para 19) “We may notice that sub-section (2A) uses significantly different language from that used in sub-section (3) of section 153 inasmuch as, sub-section (2A) refers to an order of fresh assessment” in pursuance of an order, under section 250, section 254, section 263 or section 264, setting aside or cancelling an assess- ment, vis-a-vis clause (ii) of sub-section (3) using the expression assessments, reassessments or re-computation made 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 of the Act.”
(Para 20) “Sub-section (2A) of section 153 of the Act, therefore, in our view, would cover the cases where the Assessing Officer is required to pass a fresh order of assess- ment when such fresh assessment is necessitated on account of an order setting aside or cancelling the assessment. In comparison, clause (ii) of sub-section (3) of section 153 would apply where there is a need for an assessment, reassess- ment or re-computation in consequence of or to give effect to any finding or dir- ection contained in an order passed under section 250 etc. Significantly, after 1.4.1971, the provisions of sub-section (3) of section 153 of the Act are made subject to the provisions of section (2A) of section 153 of the Act.”
(Para 21) “Under the circumstances, the class of cases of fresh assessment to be made pur- suant to order under section 250 etc. would fall under section (2A) of section 153 of the Act, and the period of limitation prescribed therein would operate. In those cases where there is no need for a fresh assessment and are not covered under section (2A) of section 153 of the Act, but are covered under clauses (i), (ii) and (iii) of section 153, the limitation prescribed under sub-section (2A) of section 153 would not apply and the expression “assessment, reassessment and re-computation be completed at any time” may enable the revenue to continue the proceedings of assessment even beyond the period prescribed under sub-sec- tions (1) and (2) of section 153 of the Act and would also not be hindered by the prescription of limitation under section (2A) of section 153 of the Act.”
(Para 22)
5.5 In the above case, the Tribunal on an appeal filed by the assessee upheld the as- sessee's contention that the commission was disallowed in case of two agencies placing reliance on statements recorded behind the back of the assessee without affording the cross-examination of such witnesses. It was on this count that the Tribunal remitted the matter to the file of Assessing Officer, with direction to summon those two parties again, and allow the assessee an opportunity to cross-examine them. It was observed, “the case on hand would fall under sub-section (2A) of section 153 of the Act. The Tribunal may not have used the words of “setting aside the assessment”, nevertheless, when it remitted the matter back to the Assessing Officer for sum- moning two witnesses again for cross-examination by the assessee and permit- ted further probe to the Assessing Officer, necessarily it must be understood to have set aside the assessment under challenge. The Tribunal. otherwise in law, could not have remitted the proceedings to the Assessing Officer for fresh con- sideration after summoning two witnesses and carrying out such probe as may be necessary……. 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.”
6. The present case would fall under sub-section (2A) of section 153 of the Act, and that, therefore, the period of limitation for framing fresh assessment after the Tribunal passed the order was of one year from the end of financial year. In the present case, the Tribunal in its order dated 31.1.2005 in ITA No. 5003 of 1996 directed as un- der “Having heard both the sides we appropriate to send back this ground to the file of the Assessing Officer to decide the same afresh in accordance with haw. Sim- ilarly ground No.7 is also required to examine in the light of retrospective amendment in the provisions related to filing of return in block assessment. Un- der the circumstance we send back this matter also to the file of the Assessing Officer to decide the same afresh in accordance with law after providing reason- able opportunity of hearing to the assessee.”
6.1 It was after passage of 6 years and 9 months from the date of above order by the Tribunal that the impugned letter dated 31.10.2011 was issued. Therefore, it was bey- ond the period of limitation under section 153(2A), and thus, the same was impressible in law. Hence, the decision and the ratio in Chunilal C.Shah (supra) would apply.
7. Accordingly, the impugned letter dated 31.10.2011 (Annexure `L’ in the peti- tion) is hereby set aside. The amount of Rs.2,34,200/- is directed to be refunded to the petitioner, being the excess tax refundable. There shall be no recovery for the claimed tax amount of Rs.2,49,628/-. The petition is allowed. Rule is made absolute. No costs.
(V.M.SAHAI, J.) sndevu (N.V.ANJARIA, J.)