Commissioner Of Income Tax vs Goyal M.G. Gases Pvt. Ltd.
2011 Latest Caselaw 1077 Del

*                IN THE HIGH COURT OF DELHI AT NEW DELHI

+                           I.T.A. No.335/2011

%                      Date of Decision: 23.02.2011

Commissioner of Income Tax                          .... Appellant
                   Through: Ms. Prem Lata Bansal, Sr. Advocate
                            with Mr.Deepak Anand, Advocate

                                 Versus

Goyal M.G. Gases Pvt. Ltd.                                .... Respondent
                   Through: None.

CORAM:
HON'BLE MR. JUSTICE A.K. SIKRI
HON'BLE MR. JUSTICE M.L. MEHTA

1.    Whether reporters of Local papers may be                  No
      allowed to see the judgment?
2.    To be referred to the reporter or not?                    No
3.    Whether the judgment should be reported in                No
      the Digest?


A.K. Sikri, J. (ORAL)

*

1. Before coming to the nature of the impugned order passed by

the Income Tax Appellate Tribunal (hereinafter referred to as

"the Tribunal"), it would be apposite to take note of the backdrop

facts for the reason that the impugned order passed is in the

second round of litigation and the orders which were passed in

the first round of litigation have direct bearing on the issue.

2. The respondent had filed the income tax return for the

assessment year 1999-2000 declaring income of Rs.2.31 crores.

The assessment was completed under Section 143(3) of the

Income Tax Act (hereinafter referred to as "the Act") at an

income of R.3.56 crores. Since additions were made by the

Assessing Officer while passing the assessment order that order

was challenged by the assessee in appeal which was deiced by

CIT(Appeals) on 19.06.2002 granting partial relief to the

assessee. In the meantime, the Commissioner of Income Tax

exercised its jurisdiction under Section 263 of the Act and passed

order on 25.03.2004 opining that the Assessing Officer while

passing the order had not taken into consideration the interest

income of the assessee on mercantile basis. Direction was

accordingly given by the Commissioner in the said order to the

Assessing Officer to recalculate the interest income on

mercantile basis of accounting after obtaining details from the

assessee. It was also directed that consequential order be

passed within a period of three months. This order of the

Commissioner passed under Section 263 of the Act was

challenged by the assessee by filing appeal before the Tribunal.

This appeal came up for hearing on 23.11.2007. The Tribunal

took note of the fact that more than four years have passed

when the Commissioner had given directions under Section 263

of the Act vide order dated 25.03.2004 but consequential order

had not been passed by the Assessing Officer till then. After

verifying this fact from record, which the departmental

representative was directed to produce, the Tribunal held the

view that as substantial time have elapsed and consequential

order was not passed within three months as directed by the

Commissioner, the appeal preferred by the assesses had become

infructuous. In a sense, the Tribunal was of the opinion that

after a lapse of so much time, Assessing Officer was not

competent to pass any consequential order. Though the appeal

was disposed of as infructuous, which was preferred by the

assessee, the Revenue also understood the implication of that

order, namely, it may prevent the Assessing Officer from passing

the consequential order at the stage, therefore, Revenue felt

aggrieved by that order of the Tribunal preferred an appeal

before this Court, i.e., ITA No.1038 of 2008. This appeal was

dismissed vide detailed order dated 10.09.2008. We have

summoned the file of that appeal and find that following

questions of law were raised by the Revenue in the said appeal:

a) Whether ITAT was correct in law in holding that the appeal filed by the assessee had become infructuous, and decision of any ground of appeal would be of academic interest as the Assessing Officer had not passed the consequential order in

pursuance to order passed by Ld. CIT within the limitation period?

b) Whether ITAT was correct in law in holding that the time limit for framing the consequential order in pursuance to direction given by CIT was expired and therefore, appeal had become infructuous.

c) Whether order passed by ITAT is perverse in law and on facts when it did not interpret the provisions of Section 153(3)(ii) of the Act and treated the appeal filed by the assessee as infructuous?

3. However, this Court did not agree with the submissions of the

Revenue and took the view that order of the Tribunal did not call

for any interference. Three reasons were given in support of this

view, which are as under:-

"First of all, the Tribunal has not invoked any statutory provision to set up a statutory bar of limitation for passing a consequential order. Therefore, the submissions made by the learned counsel for the appellant pertaining to the provisions of Section 153(2A) and 153(3)(ii) are of no consequence. This is so because the Tribunal has not referred to these provisions. Secondly, the Tribunal has only gone by the direction given by the Commissioner in his order passed under Section 263 of the said Act. Under Section 263(1) the Commissioner is empowered to call for and examine the record of any proceeding under the Act and if he considers that any order passed by an Assessing Officer is erroneous in so far as it is prejudicial to the interest of the revenue, he may, after giving the assessee an opportunity of being heard and after making or causing to make such enquiry as he deems fit, "pass such order thereon as the circumstances of the case justify", including an order enhancing or modifying the assessment, or cancelling the assessment and directing a fresh assessment. In view of this provision it is clear that the Commissioner may pass any order as the

circumstances of the case justify. In the present case we find that the Commissioner while passing the order under Section 263 has given a specific direction that the Assessing Officer shall pass the consequential orders within a period of three months approximately. This direction would certainly fall within the expression "such order thereon as the circumstances of the case justify" appearing in Section 263(1) of the said Act. It appears that it is in this context that the Tribunal concluded that the time for passing the order had expired. The consequential order had not been passed for over a period of approximately three years and eight months. Thirdly, we are of the view that where no period of limitation is prescribed then, in any event, a reasonable period of limitation ought to be adopted. The non- specification of a period of limitation does mean that the Assessing Officer can wait interminably or for an infinite period before passing the consequential order. And, in the context of the direction given by the Commissioner for passing the consequential orders within three months approximately, a period of three years and eight months is certainly much beyond the reasonable period that could be allowed to the Assessing Officer to pass the consequential order."

4. It is abundantly clear from the reading of the aforesaid order that

this Court categorically held that even if there was no period of

limitation prescribed under Section 153(3)(ii) of the Act,

Assessing Officer was required to pass the order within

reasonable period and non-specification of period of limitation

would not mean that the Assessing Officer can wait for indefinite

period before passing the consequential order.

5. The Assessing Officer, however, passed the consequential order

on 2nd September, 2008 giving effect to the order passed by the

Commissioner under Section 263 of the Act. This order was

passed much after the order passed by the Tribunal but a few

days before the aforesaid order dated 10.09.2008 in ITA

No.1038/2008.

6. Against the order of the Assessing Officer passed on 2nd

September, 2008, the assessee preferred appeal in which

assessee was successful as CIT(Appeal) reversed the aforesaid

order holding that the Assessing Officer was precluded from

passing that order in view of the orders passed by the Tribunal

and the High Court as aforesaid. Revenue's appeal against the

order of the CIT(Appeal) has been dismissed by the Tribunal in

the aforesaid circumstances, against which the present appeal is

preferred.

7. Ms.Bansal, learned senior counsel appearing for the appellant,

raised two-fold submissions, namely, (i) no limitation is provided

under Section 153(3)(ii) of the Act and, therefore, the Assessing

Officer was not precluded from passing the order giving effect to

the directions made by the CIT (Appeals) in its order passed

under Section 263 of the Act. (ii) when this Court had delivered

judgment on 10.09.2008 in ITA No.1038/2008, the Court was not

informed that the Assessing Officer had already passed the

consequential order.

8. Both the submissions of the learned counsel are of no relevance

to the appeal. Insofar as the first contention is concerned, as

per the extracted portion of the judgment dated 10.09.2008

passed in ITA No.1038/2008, it has become abundantly clear that

this issue was specifically dealt and rejected. It is stated at the

cost of repetition that the Court was of the opinion that even

when the aforesaid order does not prescribe definite period of

limitation that would not mean that the Assessing Officer could

wait interminably or for an indefinite period. It was noted that

the period of three years and eight months had expired, which

was certainly "much beyond the reasonable period that can be

allowed to the Assessing Officer to pass the consequential order"

9. Likewise, the second contention would not have any bearing on

the outcome of the issue. The aforesaid observation that more

than reasonable time had expired which can be allowed to the

Assessing Officer to pass the consequential order would still

prevail. As noted above, the Tribunal had held the appeal to be

infructuous on 23.11.2007 taking note of the fact that by that

date no consequential order had been passed. It is this order,

which was upheld by this Court and the period of three years and

eight months, which is mentioned in the order is calculated by

order dated 23.11.2007 because order of the CIT (Appeal) under

Section 263 of the Act was passed on 25.03.2004. Otherwise by

that time, the High Court passed the order, i.e., on 10.09.2008,

period of four years and eight months have elapsed. Admittedly,

the Assessing Officer passed the order much after 23.11.2007.

10. Against the order dated 10.09.2008 passed by this Court, no

action was taken by the Revenue. No appeal was filed. Even no

application for review was filed on the ground that the order had

already been passed by the Assessing Officer. We again

reiterate that this Court had simply upheld the order of the

Tribunal, which was passed on 23.11.2007 and by that order's

date, there was no order of the Assessing Officer.

11. For these reasons, we are of the opinion that no question of law

arises. The appeal is dismissed.

A.K. SIKRI, J.

FEBRUARY 23, 2011                                      M.L. MEHTA, J.
Dev