Shuchittvan Rastogi vs Commissioner Of Income Tax ...
2013 Latest Caselaw 7029 ALL

HIGH COURT OF JUDICATURE AT ALLAHABAD, LUCKNOW BENCH
 
 

Reserved.
 
Case :- INCOME TAX APPEAL No. - 2 of 2012
 
            Assessment Years 1984-85, 1985-86, 1986-87 & 1987-88
 
Appellant :- Shuchittvan Rastogi
 
Respondent :- Commissioner Of Income Tax Range-1 Income Tax Office & Anr
 
Counsel for Appellant :- Pradeep Agarwal
 
Counsel for Respondent :- D.D. Chopra
 
                                       Along with
 
Case :- INCOME TAX APPEAL No. - 3 of 2012
 
            Assessment Year 1985-86
 
Appellant :- Shuchittvan Rastogi
 
Respondent :- Commissioner Of Income Tax Range-1 Income Tax Office & Anr
 
Counsel for Appellant :- Pradeep Agarwal
 
Counsel for Respondent :- D.D. Chopra
 
                                       Along with
 
Case :- INCOME TAX APPEAL No. - 5 of 2012
 
            Assessment Year 1986-87
 
Appellant :- Shuchittvan Rastogi
 
Respondent :- Commissioner Of Income Tax Lko.And Another
 
Counsel for Appellant :- Pradeep Agrawal
 
Counsel for Respondent :- D.D.Chopra
 
   							
 
Hon'ble Rajiv Sharma,J.

Hon'ble Dr. Satish Chandra,J.

The present appeals have been filed by the appellant-assessee under Section 260A of the Income-tax Act, 1961, against the judgment and order dated 13.07.2005, passed by the Income Tax Appellate Tribunal, in I.T.A.Nos.637, 638 and 639(Alld)/1998, for the assessment years, 1984-85, 1985-86 and 1986-87.

On 14.05.2012, a Coordinate Bench has condoned the delay while allowing C.M.Application No.22415 of 2012 and the appeals have been admitted on the following substantial questions of law:-

(1) Whether the learned Income Tax Appellate Tribunal is justified in concerning the findings of A.O. regarding the assessment orders of all assessment years in question under consideration on the point of limitation available under Section 153 of Income Tax Act, 1961?

(2) Whether the learned Tribunal was justified in excluding the period commencing from 25th February, 1992 (Date of finding of the application before the Settlement Commission under Section 245-C) to the date of receipt of order of Settlement Commission by the Commissioner, Income Tax, i.e. 8.3.1994 for the purposes of limitation within the meaning of Section 153 of the Income Tax Act, 1961?

(3) Whether the learned Tribunal was justified in applying clause (v) of explanation to Section 153 (3) of the Act for extending the period of limitation for completing the assessment even when the application under Section 245-C was not admitted by the Settlement Commission?

(4) Whether time available to the learned Assessing Officer for making the assessment can be extended beyond the period 60 days from 22nd March, 1994 (Date of receipt of the order of Settlement Commission under Section 245-D), when the application was not admitted by the Settlement Commission?

(5) Whether the period of limitation could be extended for the whole period, when application of the appellant remained pending before the Settlement Commission, i.e. for a period of 756 days (i.e. from 25th February, 1992 to 22nd March, 1994) and the period of 848 days was available to the Assessing Officer, for completing the assessment?

(6) Whether Assessment Order dated 8.3.1996 under Section 148 under consideration framed by the learned Assessing Officer is barred by the limitation as held by the Commissioner, Income Tax (Appeal) in its order dated 17.3.1998, since the proviso to Explanation 1 of Section 153 was not considered by the Assessing Authority, which was brought on the statute on 27.9.1991 and notice under Section 148 was issued on 4.12.1991?

(7) Whether the learned Tribunal was justified in recording per verse finding of fact as well as interpretation of Section 153 of the Income Tax Act against the legislative intent?

The brief facts of the case are that on 30.11.1988, a search was conducted under Section 132 (A) of the Act at the business and residential premises of the assessee. During the course of search, various books of account, incriminating documents and assets were found. The department opined that the assessee has not disclosed the correct income in the return filed for the assessment years 1984-85 to 1987-88 and as such a notice under Section 148 of the Act was issued on 14.12.1991 and in view of the provisions of Section 153 of the Income-tax Act, 1961, the assessment was to be completed by 31.03.1994 for all the assessment years under consideration.

In the meantime, on 25.02.1992, the assessee has filed an application under Section 245-C of the Act before the Settlement Commission, New Delhi. The Settlement Commission passed an order under Section 245-D(1) of the Act, as late as 08.03.1994, whereby the application filed by the assessee was rejected. The said order was received by the department on 22.03.1994.

After receiving the order, on 08.03.1996, the A.O. passed the assessment order for all the assessment years under consideration. Being aggrieved by the said assessment orders, the assessee has filed appeals before the first appellate authority and the same were allowed by observing that:-

".....in view of the above, after excluding the period commencing from the date on which the application before the Settlement Commission was made and ending with the date on which the order under sub section (1) of 245-D was received by the Commissioner, the period available with the A.O. was 92 days which is more than the period of 60 days as provided in the aforesaid proviso.

Even if it is argued that the period of 60 days should commence from the date when the order of the Settlement under sub-section (1) of Section 245-D is received by the Commissioner, then also the assessment should have been framed by 21.05.1994 because the period of 60 days has to be calculated.

Finally, the CIT(A) observed that all the assessment orders passed by the A.O. are time barred.

Being aggrieved, the department has filed the appeals before the Tribunal which were allowed whereby the order of CIT(A) was set aside and that of the A.O. was restored. Now having the pain, the assessee has knocked the door of this Court by filing the present appeals.

With this back drop, Sri Pradeep Agarwal, learned counsel for the assessee, at the strength of the written notes, submits that the application was filed before the Settlement Commission on 25.02.1992, but the same was not admitted and it is only on 08.03.1994, the Settlement Commission has rejected the application under Section 245-D(1) which was received by the CIT, Lucknow on 22.03.1994. The reassessment proceedings were supposed to be completed by 31.03.1994, but in the instant cases, it were completed on 08.03.1996. Hence, the same are time barred.

According to the learned counsel, Section 153(2) of the Act provides that no order of re-assessment shall be passed under Section 147 after the expiry of 2 years from the end of the financial year in which the notice under Section 148 was served and in the instant case, a notice was served on the assessee on 04.12.1992 and as such the limitation or the last date for passing the re-assessment orders was upto 31.03.1994 before the expiry of the said date the appellant had filed the application u/s 245-C of the Act before the Settlement Commission, New Delhi relating to the assessment year 1984-85 to 1988-89 on 25.02.1992. The learned Commission on 08.03.1994, has passed its order u/s 245-D(1) of the Act, and rejected the applications. The said order was received by the CIT, Lucknow on 22.03.1994. The sub clause (v) of Explanation (1) to section 153 of the Act provides that in a case where an application filed before the Settlement Commission is rejected, the period commencing from the date on which such application is made and ending with the date on which the order is received from the Commission shall be excluded in computing the period of limitation. There is also a proviso below clause (v) which provides that where immediately after the exclusion of the aforesaid time or period, the period of limitation referred to, among others, in sub section (2) available to the Assessing Officer for making the assessment is less than 60 days, such remaining period shall be extended by 60 days and the aforesaid period of limitation shall be deemed to be extended accordingly.

Similar views were also expressed in the case of Brijlal & others Vs. CIT, (2010) 328 ITR 477 (SC), where it was observed that:-

"....In the case of proceedings before the Settlement Commission, till the Commission decides to admit the case under Section 245-D(1) the proceedings under the normal provisions remain open. But once the Commission admits the case, after being satisfied that the disclosure is full and true, the proceedings commence with the Settlement Commission. In the meantime, the applicant has to pay the additional amount of tax with interest without which the application for settlement would not be maintainable."

Learned counsel also submits that in the case of CIT Vs. Damani Brothers (2003), 257 ITR, 475, it was observed that:-

"....It has to be noted that if an application for settlement is filed under Section 245-C, it is not automatically admitted. Section 245-D deals with the procedure on receipt of an application under section 245-C. Under sub-section (1) thereof, the Commission after following the prescribed procedure can allow the application to be proceeded with or rejected. Only after the Commission allows the petition to be proceeded with, it exercises the power of settlement..."

Lastly, he made a request to restore the order of the CIT(A).

On the other hand, Sri D.D.Chopra, learned counsel for the Department justified the impugned order passed by the Tribunal. At the strength of the written note, he submits that CIT(A) has wrongly allowed the appeals filed by the assessee by wrongly applying the proviso to section 153(3) of the Act as the said proviso is applicable only when the period of limitation is available to the A.O. after excluding the period as mentioned in Explanation 1, is less than 60 days, then the remaining period shall be extended to 60 days for enabling the assessing officer for making an order of assessment.

It is also a submission of learned counsel for the department that in the present cases, the said proviso is not applicable as the total period as per clause (v) of Explanation 1 to Section 153(3), the period of 756 days, if added to from 22.03.1994, the assessment order passed by assessing officer on 08.03.1996, is within the period of limitation and therefore, the order passed by the CIT (Appeals) had rightly been reversed and that of the assessing officer was confirmed. Before the ITAT, the assessee, however, conceded that if the period of 756 days is added to from the date of 22.03.1994, the assessment order dated 08.03.1996 is within time.

Learned counsel for the department further submits that the period of 756 days has to be added to the original period available with the A.O. to enable him to complete assessment. The proviso, which provides that if the remaining period of limitation for completing the assessment is less than 60 days, such remaining period shall be extended by 60 days, will be applicable only when the period available with the A.O. after excluding the period as per Explanation 1 is less than 60 days. In other words, if the period available with the A.O. for completing the assessment/reassessment etc. after excluding the period as per Explanation 1 of the Section 153(3) of the Act is more than 60 days, then proviso, which notionally gives 60 days period to the A.O., will not be applicable.

It is also a submission of the learned counsel that the various case laws relied upon by the assessee in support of his claim that the limitation period can be extended only by 60 days and not by 756 days are not applicable and are distinguishable on facts. In the case of Brij Lal & others Vs. CIT 328 ITR 477 (SC), the Hon'ble Supreme Court has dealt with the issue of levy of interest under Section 234B and in this connection it was held that interest u/s 234B would be payable up to the stage of Section 245D(1) (when the Commission decides to admit the case). The said order does not lays down the law that the assessing officer can proceed under normal provision against the assessee during the period when the application is not admitted by the Commission u/s 245D(1) of the Act. The Hon'ble Supreme Court in the case of CIT vs. Damani Brothers, 259 ITR 475 (SC) also deals with the charging of interest and does not provide for the continuation of proceeding by the assessing officers during the period when the application is not admitted by the Commission u/s 245D(1).

In the light of the above facts and provisions of law it is most humbly submitted by the learned counsel for the Department that the order passed by the ITAT is in accordance with the provisions of the Income Tax Act and does not suffers from any illegality. Lastly, he made a request to dismiss the appeals filed by the appellant-assessee.

We heard both the parties at length and gone through the material available on record.

Undisputed facts in the present case are that the assessee has filed an application u/s 245 (c) of the Act before the Settlement Commission on 25.02.1992 for the assessment years under consideration. The Commission under section 245-D(1) of the Act has rejected the application only on 08.03.1994. The said order was received by the Department on 22.03.1994. In accordance with the Sub-clause (V) to Explanation 1 of Sub-section (3) of Section 153, the period is to be excluded for the purpose of limitation which commenced from the date on which such application is filed and ending with the date on which such order under Sub-section (1) to Section 245D is received by the Commissioner of Income Tax. The assessing officer considered that there was a period of 756 days, which was to be excluded (period commencing from 25.02.1992 to the date of the receipt of the order by the CIT on 22.03.1994). The assessing officer passed assessment order for all the assessment years under consideration on 08.03.1996. The objection raised by the assessee on the ground of limitation was rejected by the assessing officer for the reasons explained in the assessment orders.

The relevant provision of Section 153 of the I.T. Act are reproduce herein below:

Time limit for completion of assessments and re-assessments.

153.[(1) No order of assessment shall be made under section 143 or section 144 at any time after the expiry of-

(2) ..........

(2A) ...........

(3) ...............

(4) ...............

Explanation 1,- In computing the period of limitation for the purposes of this section -

(i) ...............

to (iva) ...............

(v) in a case where an application made before the Income Tax Settlement Commissioner under Section 245C is rejected by it or is not allowed to be proceeded with by it, the period commencing from the date on which such application is made and ending with the date on which such application is made and ending with the date on which the order under sub-section (2) of that section, [or]

(vi) ...............

to (ix) ...............

Provided that where immediately after the exclusion of the aforesaid time or period, the period of limitation referred to in sub-sections (1), [(1A), (1B),] [(2), (2A) and (4)] available to the assessing officer for making an order of assessment, reassessment or recomputation, as the case may be, is less than sixty days, such remaining period shall be extended to sixty days, such remaining period shall be extended to sixty days and the aforesaid period of limitation shall be deemed to be extended accordingly:]

Minimum period of 60 days for completion of assessment and reassessment- the Finance (No.2) Act, 1991 has inserted a proviso to Explanation 1 to the section with effect from 27 September, 1991. The newly inserted provision provides that where immediately after the exclusion of the time or period mentioned in clauses (I) to (v) of the Explanation 1 to the section, the remaining period of limitation referred to in sub-sections (1), (2) and (2A) for completing assessments or reassessments, etc is less than 60 days, such remaining period shall be extended to 60 days and the aforesaid period of limitation shall be deemed to be extended accordingly.

Further, it may be mentioned that Section 245-D (1) provides that on receipt of an application under section 245C, the Settlement Commission shall call for a report from the Commissioner and on the basis of the material contained in such report and having regard to the nature and circumstances of the case or the complexity of the investigation involved therein, the Settlement Commission, shall, where it is possible, by order, reject the application or allow the application to be proceeded with or within a period of one year from the end of the month in which such application was made under section 245-C of the Act. It is provided therein that an application shall not be rejected under this sub-section unless an opportunity has been given to the applicant of being heard. It has also been provided that the Commissioner shall furnish the report within a period of forty-five-days of the receipt of communication from the Settlement Commission.

Chapter XIV of the Income Tax Act, 1961 comprises of Section 140-A on wards and prescribed the procedure of the assessment while Section 153 of the said chapter deal with the time limit for completion of assessment and re-assessments, whereas Chapter XIX-A pertains to settlement of cases by the Settlement Commission and on going through the provisions of the aforesaid chapter one has to keep in mind the return filed before the income tax authorities would be in respect of disclosed income, whereas the application before the Commission is in respect of undisclosed income and, therefore, the situation is different until the Commission decides to proceed with the matter. Thus, the income tax authorities are, free to proceed in the prescribed manner till the commission decides to proceed with the application for settlement.

On further perusal of the provisions pertaining to Chapter 19-A, it will be evident that the filing of an application for settlement by the assessee is an unilateral act and the department may not be aware of the same. An application for settlement filed under Section 245-C of the Act is not automatically admitted, but under Section 245-D (1), the Settlement Commission, after following the procedure prescribed, can either allow the application to be proceeded with or reject it. Only after it allows the application to be proceeded with, the Commission exercises the power of settlement. Before the Commission decides to proceed with the petition, it can not complete assessment in respect of a return which is pending before the Assessing Officer; nor can it even act as an appellate or revisional authority. Thus, the income tax authority are, therefore, free to proceed in the prescribed manner while dealing with the assessment and re-assessment of the cases pending before them till the Commission decides to proceed with the application for settlement and it is only after the commission allows the petition to be proceeded with, it exercises the power of settlement.

In the instant case, simply by filing an application under Section 245-C before the Settlement Commission, the provisions of Chapter XIX-A dealing with the settlement of cases does not debar the Assessing Authority from any further investigation or inquiries. Thus, the Assessing Authority is at liberty to proceed and continue with the assessment proceedings pending before him till the date of submitting the report by the Commission under Section 1 (A) of Section 245-D and may be, even beyond.

In the light of the above discussions and by considering the totality of the facts and circumstances of the case, the contention of the assessee appears to be germane and correct insofar as after excluding the period commencing from the date on which the application before the Settlement Commission was made and ending with the date on which the order under sub-section (1) of 245 D was received by the Commissioner, the period available with the Assessing Authority was 92 days, which is more than the period of 60 days as provided in the aforesaid proviso. Therefore, we are of the view that the First Appellate Authority has rightly came to the conclusion that all the four assessments framed by the Assessing Authority are barred by limitation and as such, the same were cancelled.

In view of above, the answer to the substantial question of law is against the department and in favour of the assessee. Therefore, we allow all these appeals. The order dated 13.7.2005 passed by the Income Tax Appellate Tribunal is hereby set-aside. The assessment framed under Section 148 on 8.3.1996 is barred by limitation under Section 153 of the Act.

Order Date:- 20.11. 2013

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