Subhash Chand Goyal vs Deputy Commissioner Of Income ...
1997 Latest Caselaw 250 Del

ORDER

B. S. SALUJA, J.M. :

The assessee is in appeal against consolidated order of CIT (A)-I, Agra, dt. 7th April, 1995, mainly on the ground that the assessment order dt. 30th October, 1992, was beyond the period of limitation as specified in s. 153 of the IT Act and that the benefit of s. 153, Expln. 1(v) cannot be availed of by the AO without giving opportunity to the assessee of being heard.

1.1. These eight appeals involve common grounds relating to limitation and, therefore, the same are being disposed of by this consolidated order for the sake of convenience.

2. It may be mentioned at the outset that these eight appeals were listed for hearing along with other appeals relating to quantum and that after some discussion, the learned counsel for the assessee chose to argue first those eight appeals on the ground of limitation.

3. The brief facts of these cases are that the assessment orders in relation to the years under consideration were made on 30th October, 1992. The assessments for the asst. yrs. 1980-81 to 1987-88 were made under s. 143(3)/148. The assessee moved applications under s. 154 contending that the assessment orders were bad in law and legally not maintainable under s. 153(1) and that the assessment proceedings were legally void and unlawful. The AO, however, did not accept the plea of the assessment and he held in the process that the assessments were completed well within time in view of the provisions of s. 153(3)(v). He, therefore, rejected the applications moved by the assessee under s. 154.

3.1 On first appeal, the learned counsel for the assessee contended that the AO referred to wrong provisions and that there was no cl. (v) in s. 153(3). He also submitted that the assessee had filed settlement petitions before the Settlement Commission, which were subsequently rejected. However, he also mentioned that the AO could not take advantage of the period during which assessees petitions were pending before the Settlement Commission because he had passed the assessment orders before the Settlement Commission gave the decision. The learned CIT(A) considered the submissions and observed that the assessments for all the years under consideration had been made on 30th October, 1992. He also observed that the date of service of notice under s. 148 for the asst. yrs. 1980-81 to 1986-87 was 28th January, 1989, and that in the case of asst. yr. 1987-88 no notice under s. 148 had been issued. He also observed that the limitation period for completing the assessments under s. 153(1) was upto 31st March, 1991 in relation to asst. yrs. 1980-81 to 1986-87 and upto 31st March, 1990 in relation to asst. yr. 1987-88. He also observed that in case the assessee had not moved petitions before the Settlement Commission, the abovementioned contentions could be taken as correct, but as the assessee had filed applications before the Settlement Commission on 31st May, 1988 in relation to asst. yrs. 1986-87 and 1987-88 and on 1st January, 1990 in relation to asst. yrs. 1980-81 to 1986-87 and the Settlement Commission had rejected the said applications on 26th April, 1991, the provisions of s. 153, Expln. 1(v) have been rightly invoked by the AO for computing the period of limitation. The learned CIT(A), therefore, held that the period commencing from the date on which the application was made before the Settlement Commission under s. 245C and ending with the date on which the Commission made an order under s. 245D(1) and the copy of the said order was received by the CIT under sub-s. (2) of that section has to be excluded. He, therefore, held that the assessment orders in relation to the years under consideration were made within the statutory time. The assessee is aggrieved.

4. The learned counsel for the assessee Shri K. R. Manjani submitted that the assessments in relation to all these years were reopened under s. 147 and that there was no dispute with reference to the date of framing of the reassessments on 30th October, 1992. He submitted that as the notice under s. 148 was served on 28th January, 1989, the period of limitation as specified in s. 153(2) will start w.e.f. 1st April, 1989 and that the assessment orders were required to be passed by 31st March, 1991. He further submitted that the assessee had approached the Settlement Commission on 31st May, 1988, 1st January, 1990 and that the Settlement Commission had rejected the said applications on 26th April, 1991. He also submitted that the assessee moved another application before the Settlement Commission on 29th September, 1992 in relation to the years in view of the amendment of s. 245D. In view of the foregoing facts, the learned counsel submitted that the Department was relying on the provisions of Expln. 1(v) below s. 153 in order to defend the assessment orders as having been made within the period of limitation specified in s. 153(1). In this connection, the learned counsel further submitted that the assessee had filed appeals against the assessment order and the ground relating to limitation was not raised in the said appeals in view of the fact that in the meanwhile, the assessee had moved applications under s. 154. He also submitted that the AO had not dealt with this issue in the assessment orders and that he had disposed of this issue in the order under s. 154. The learned counsel argued that it is the right of the assessee to have the assessments made within the time prescribed under law and that before invoking the provisions of Expln. 1(v), the AO should have given an opportunity of being heard to the assessee. He emphasised that, in these cases, the AO did not give any such opportunity and, therefore, he could not have invoked the provisions of Expln. 1(v) so as to make the assessments beyond the normal period of limitation as specified in s. 153(2). He also submitted that when invoking the said provisions, the AO has to do something overt so as to demonstrate his intention to the assessee. In this connection, the learned counsel invited our attention to the application made by the assessee on 30th January, 1989, wherein the AO was requested to keep the assessments in abeyance in view of the assessee moving the Settlement Commission, as the assessee expected that the Settlement Commission will decide soon about the applications filed before it. The assessee had also mentioned that great hardship will be caused if the AO persists in completing the assessments. He submitted that the AO did not give any reply to the assessee with reference to the said application and he did not inform the assessee that he would not keep the assessments in abeyance. In view of this factual position, the learned counsel contended that the AO could not take advantage of the provisions of cl. (v) of the Explanation with reference to the assessments made on 30th October, 1992. The learned counsel took further plea that there was no bar on the AO to proceed with the assessments for the reason that the assessee had gone to the Settlement Commission and, therefore, he could have completed the assessments within the normal period specified in s. 153. He also contended that if the AO wanted to keep the assessments pending he was required to inform the assessee and only then he could have invoked the provisions of Expln. 1(v). The learned counsel also made a reference to the provisions of s. 153(1) (b) as they existed before 1st April, 1987, and submitted that unless a finding of concealment was recorded within the normal period of 4 years available for making the assessments, the extended period of 8 years for completing assessment even in cases of concealment could not be availed of by the AO. In support of this propositions the learned counsel relied on the following decisions, namely :

(i) Vinod Kumar Didwania vs. ITO (1986) 159 ITR 91 (Mad), wherein the Honble Madras High Court before whom a writ petition was filed, held that the remedy provided under the IT Act could not be held to be less efficacious and even on the question of mala fides, if the appellate authority can give the relief, the Court should not interfere.

(ii) Deen Dayal Didwania vs. Union of India & Ors. (1986) 160 ITR 12 (Del), wherein the Honble Delhi High Court has held that there is no bar on the ITO from proceeding with the assessment in any pending case merely because the application for Settlement has been preferred to the Settlement Commission in relation to that case. It has further been observed that the IT Act does not contemplate set off of assessment proceedings during the period when the Settlement Commission is deciding whether to proceed or not to proceed with an application for settlement.

(iii) CIT vs. Surajpal Singh (1991) 188 ITR 297 (SC), wherein it was held that where there is no finding of concealment within 4 years - normal period for making the assessment - there could be no extension of the period of limitation for making the assessment on the ground of concealment.

4.1 In view of the foregoing arguments, the learned counsel concluded that the assessee had raised a legal issue by moving application under s. 154 and that it was a case of mistake apparent from record and that the AO did not decide the said issue. In this connection, the learned counsel relied on the decision of the Honble Supreme Court in the case of M. K. Venkatachalam, ITO & Anr. vs. Bombay Dyeing & Mfg. Co. Ltd. (1958) 34 ITR 143 (SC), wherein the Honble Supreme Court while dealing with the retrospective amendment of s. 18A of the Indian IT Act, 1922, held that the assessment order was inconsistent with the proviso to s. 18A and must be deemed to suffer from a mistake apparent from record and the ITO was, therefore, justified in exercising his power under s. 35 and rectifying the mistake. In the process, the Honble Supreme Court also observed that "A glaring and obvious mistake of law can be rectified under s. 35 as much as a mistake of fact apparent from the record". The learned counsel, therefore, urged that the assessments orders made on 30th October, 1992 may be held to have been made beyond the period of limitation specified in s. 153.

5. The learned Departmental Representative, Shri Pawan Kumar submitted that the very fact that the learned counsel has referred to various provisions and decisions makes it clear that the matter is arguable and that it is not a case of mistake apparent from record. He further submitted that the AO has merely followed the provisions of Expln. 1(v) and he has given a finding that in view of the said provisions the assessment orders have been made well within the period specified in s. 153. He also invited our attention to the proviso to s. 153(2) which specifically makes a provision that where notice under s. 148 was served on or before 31st March, 1987, such assessments, reassessments or recomputations were to be made upto 31st March, 1990. In view of the said provisions the learned Departmental Representative stressed that in the case of the assessee, the notice had been served on 28th January, 1989 and that the provisions of sub-s. (2) will have to be read along with the provisions of Expln. 1(v) and that the said cl. (v) clearly provided that in cases where the application has been made before the Settlement Commission under s. 245C and the same 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 the order under sub-s. (1) of s. 245D is received by the CIT under sub-s. (2) of that section, shall be excluded. The learned Departmental Representative further referred to the proviso below Expln. 1, wherein it is provided that where after excluding the period referred to in cl. (b), the time available with the AO is less than 60 days, such remaining period shall be extended to 60 days and the assessment order can be made within such extended period. He further invited our attention to the order made by the Settlement Commission on 26th April, 1991, and submitted that the Honble High Court of Allahabad had allowed a stay of proceedings under ss. 147/148 for the asst. yrs. 1980-81 to 1986-87 by its order, dt. 22nd February, 1989 and 9th March, 1989. He submitted that the said fact has been mentioned in the said order of the Settlement Commission. He, therefore, submitted that in view of the provisions of Expln. 1(ii), the period from February/March, 1989 to 26th April, 1991 will have to be excluded and accordingly all the assessment orders made on 30th October, 1992, were well within the period of limitation so computed. With reference to the plea of the learned counsel for opportunity to the assessee before invoking the provisions of Expln. 1(v), the learned Departmental Representative submitted that there was no provision in the IT Act, whereby the AO was bound to indicate to the assessee that he was going to invoke particular provisions more so, the provisions of Expln. 1(v) which only clothed the AO with statutory powers to exclude certain period during which the assessee had approached the Settlement Commission and it was seized of the application filed by the assessee. He, therefore, stressed that there was no necessity of giving any opportunity to the assessee in such an eventuality.

6. We have carefully considered the rival submissions on this issue and have also perused the orders of the tax authorities and other relevant record to which our attention was invited during the course of hearing. We have also seen the case law relied upon by the learned counsel and perused the provisions of s. 153. We feel that in view of the proviso to sub-s. (2) of s. 153, that sub-section is applicable with reference to the period of completion of assessment during the years under consideration. Under the said provisions of sub-s. (2) in case of reassessment to be made under s. 147, the order has to be made within a period of 2 years from the end of the financial year in which the notice under s. 148 was served. In the present cases it is not in dispute that the notice under s. 148 in relation to asst. yrs. 1980-81 to 1986-87 was served on the assessee on 28th January, 1989 and that the period of limitation for making assessments in relation to those years will, therefore, run from 1st April, 1989 to 31st March, 1991. It is further observed that in relation to the asst. yr. 1987-88 no notice under s. 148 had been issued and, therefore, the provisions of sub-s. (2) will not apply in relation to that year. The provisions of s. 153(1) (b) will apply in relation to asst. yr. 1987-88 and the assessment in that case was required to be completed by 31st March, 1990. Further the provisions of Expln. 1 prescribes the method of computing the period of limitation for the purposes of s. 153, cl. (v) of Expln. 1 specifically provides that in computing the period of limitation for the purposes of s. 153, in a case where an application made before the Settlement Commission under s. 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 the order under sub-s. (1) of s. 245D is received by the CIT under sub-s. (2) of that section, shall be excluded. The proviso to cl. (v) further enables the AO to make an order within a period of 60 days where the period for making the assessment or reassessment after excluding the period referred to in cl. (v) is less than 60 days. We, therefore, feel that the AO is competent and is statutorily empowered to make an order of assessment or reassessment after excluding the period referred to in Expln. 1(v), i.e., during which the application of the assessee is before the Settlement Commission. We have carefully considered the plea of the learned counsel that before invoking the provisions of Expln. 1(v) the AO ought to have given the assessee an opportunity of being heard, but we find no force in this plea in view of the clear provisions of Expln. 1(v), which leave hardly any choice with the AO. The learned counsel has relied heavily, in this connection, on the decision of the Honble Delhi High Court in the case of Deen Dayal Didwania vs. Union of India (supra). We have carefully gone through the said judgment and it is observed that in the said case the appellant had made a prayer that a direction may be issued to the ITO, Central Circle-III, Madras not to proceed with the case and it was urged that s. 245D of the Act contemplates a report being received from the CIT on the basis of which the Settlement Commission can decide whether to proceed with the application or reject the same. The Honble High Court observed that the Settlement Commission has discretion to proceed with the application or to reject the same and they did not see how they could interfere, but the High Court expressed the hope that the Settlement Commission can decide the application soon. In that context, the Honble Delhi High Court examined the provisions of the IT Act and observed that "we have examined the provisions of the Act and do not find that there is any bar on the ITO from proceeding with the assessment of any pending case". The Honble High Court further noted that the appellant had relied on the provisions of first Expln. to s. 153(3) which provides that certain periods have to be excluded in computing the limitation period for completing an assessment proceeding. The Honble High Court referred to the provisions of cl. (v) and observed that the period calculated from the date of submission of the application to the date when the rejection of the same is received by the CIT is to be excluded from the period of limitation. The Honble High Court incidentally further observed that the assessment order or orders if passed will be no impediment to the Settlement Commission in exercising its powers if it decides to exercise them and that, on the other hand, if the Settlement Commission decided not to proceed with the application, there is a distinct possibility of the Department not being able to utilise the taxes in the circumstances of the case. We also feel that the decision of the Honble Supreme Court in the case of CIT vs. Surajpal Singh (supra) as relied upon by the learned counsel is distinguishable on facts and that the ratio of the said decision with reference to extension of the period of limitation in cases of concealment is of no help to the assessee.

6.1 In view of the foregoing, now we have to compute the period of limitation available to the AO under the provisions of s. 153(1) read with the provisions of Expln. 1(v). It is observed that the assessee had filed the application in relation to asst. yrs. 1980-81 to 1986-87 on 1st January, 1990 and that the said application was rejected on 26th April, 1991. Therefore, the period of one year 3 months and 25 days will have to be excluded and after such exclusion the time available with the AO for framing assessments was upto 25th July, 1992. The assessment orders have, however, been made on 30th October, 1992. The date of receipt of the order of Settlement Commission by the CIT(A) is not mentioned by either party. Therefore even if the proviso to Expln. 1(v) is invoked the period gets extended only upto 25th September, 1992. Thus, the assessment orders in relation to the asst. yrs. 1980-81 to 1986-87 are clearly beyond the period of limitation and same are set aside. In relation to the asst. yr. 1987-88, it is observed that the assessee had filed the application with the Settlement Commission on 31st May, 1988, i.e., on the next day after filing of the revised return for that year on 30th May, 1988. The said application was rejected by the Settlement Commission on 26th April, 1991. Thus, in terms of the provisions of Expln. 1(v), a period of 2 years 10 months and 25 days will have to be excluded. The normal period for making the assessment for asst. yr. 1987-88 was upto 31st March, 1990 and if we add the period of 2 years 10 months and 25 days the time available with the AO for framing assessment in relation to asst. yr. 1987-88 will be beyond 31st October, 1992, the date on which the assessment has been made. Thus, the assessment for the asst. yr. 1987-88 is in order and the orders of the learned CIT(A) do not call for any interference in relation to that year.

7. In the result, while appeals for asst. yrs. 1980-81 to 1986-87 are allowed, the appeal for asst. yr. 1987-88 is dismissed.