D.b. Income Tax Appeal v. Rajasthan Vanaspati Products Pvt. Ltd., Bhilwara

REPORTABLE 1 IN THE HIGH COURT OF JUDICATURE FOR RAJASTHAN AT JODHPUR : J U D G M E N T : D.B. INCOME TAX APPEAL NO.46/2005Commissioner of Income Tax, Ajmer Vs. Rajasthan Vanaspati Products Pvt. Ltd., Bhilwara 23[rd] July, 2013 Date of Judgment :: PRESENT HON'BLE MR. JUSTICE NARENDRA KUMAR JAINHON'BLE MR. JUSTICE ARUN BHANSALI Mr. K.K. Bissa, for the appellant.Mr. Anjay Kothari, for the respondent. ---- BY THE COURT: This appeal under Section 260A of the Income Tax Act,1961 ('the Act') has been filed by the Department aggrievedagainst the order dated 10.05.2004 passed by the Income TaxAppellate Tribunal, Jodhpur Bench, Jodhpur ('the Tribunal'),whereby, the appeal filed by the assessee was allowed and itwas held that the assessment framed by the Assessing Officer('AO') on 31.03.1989 was barred by limitation. This Court while admitting the appeal on 24.05.2005framed the following substantial question of law:- “(i) Whether in the facts and circumstances,the Tribunal was justified in holding theassessment framed on 31[st] March, 1989 forthe assessment year 1985-86 was barred byLimitation under Section 153(1)(a) and it wasnot a case governed by Section 153(1)(b)?” The facts in brief may be noticed that a search was conducted under Section 132 of the Act on 24.08.1984; the accounting year of the assessee closed on 31.10.1984 and thedue date for filing return was 30.06.1985; the assessee soughtextension of time for filing the return vide application dated24.06.1985, which was granted till 30.09.1985; the assesseefiled its return of income declaring loss of Rs.6,28,696/- on31.10.1985; the first assessment was framed on 31.03.1989 onan income of Rs.5,50,82,560/-; the assessee challenged thevalidity of the assessment before the Commissioner of IncomeTax (Appeals), Udaipur ['CIT(A)'], which was decided vide orderdated 09.01.1990, though and the ground for challenging thevalidity was rejected, however, the assessment was set aside;the AO framed second assessment vide order dated 10.03.1992on an income of Rs.5,38,14,438/-, which was again set aside bythe CIT(A) vide order dated 28.10.1992; consequently, thirdassessment was framed by AO on 27.03.1995 at an income ofRs.20,62,263/-, which was again challenged by the assesseebefore the CIT(A), who decided the same vide order dated21.08.1995. The assessee approached the Tribunal against theorders of the CIT(A) i.e. 09.01.1990 and 21.08.1995. Before the CIT(A), a preliminary objection was raised bythe assessee that the assessment in question has become barredby limitation and the same was beyond the time available underthe provisions of Section 153(1)(a) of the Act; it was, inter alia,submitted that the so called notice dated 17.03.1988 forinitiating the penalty proceedings under Section 271(1)(c) of theAct was in fact served on one Mr. S.K. Khandelwal on10.03.1989 and not on 17.03.1988 as the said Mr. Khandelwal was not at Jodhpur on that day and, as such, the service of theletter on him on 17.03.1988 was factually incorrect, however,the CIT(A) came to the conclusion that as the acknowledgmentbears the date of 17.03.1988 and there was no material onrecord to show that the notice in connection with the initiation ofconcealment etc. proceedings was not served on 17.03.1988,the plea regarding the assessment being barred by limitationwas negated in view of the provisions of Section 153(1)(b) of theAct. was not at Jodhpur on that day and, as such, the service of theletter on him on 17.03.1988 was factually incorrect, however,the CIT(A) came to the conclusion that as the acknowledgmentbears the date of 17.03.1988 and there was no material onrecord to show that the notice in connection with the initiation ofconcealment etc. proceedings was not served on 17.03.1988,the plea regarding the assessment being barred by limitationwas negated in view of the provisions of Section 153(1)(b) of theAct. Before the Tribunal, the issue was thoroughly re-agitatedby both the parties and the affidavits of Mr. S.K. Khandelwal, Mr.Raj Kumar Garg, Sales Tax Consultant, Mr. U.C. Jain, Counselfrom the assessee's side and affidavit of Mr. Ashwini Kumar, AOfrom the Department’s side were filed; several documents, note-sheets etc. were also filed as part of the paper book and theissue of service of notice under Section 271(1)(c) of the Actdated 17.03.1988 on the same day on Mr. S.K. Khandelwal wascontested. The Tribunal after thoroughly considering and scrutinizingthe material available on record, affidavits filed by both theparties, after referring to Smt. Savitri Rani Malik v. CIT : (1990)186 ITR 701 (Guwahati) came to the conclusion thus:- “25.In the present case, the Assessing Officerwhile issuing the alleged notice dated 21.3.88 wasnot in a position to know how much income hadbeen concealed by the assessee or as to whetherthere was any concealment of income orfurnishing of inaccurate particulars of income. Inthe instant case, the notice was handed over toShri U.C. Jain, the then counsel for the assesseeon 13.3.89 and the time available for completionof the assessment was upto 31.3.88. Therefore,in view of the ratio laid down by the Hon'blewhile issuing the alleged notice dated 21.3.88 wasnot in a position to know how much income hadbeen concealed by the assessee or as to whetherthere was any concealment of income orfurnishing of inaccurate particulars of income. Inthe instant case, the notice was handed over toShri U.C. Jain, the then counsel for the assesseeon 13.3.89 and the time available for completionof the assessment was upto 31.3.88. Therefore,in view of the ratio laid down by the Hon'ble Guwahati High Court in the aforesaid case, theassessment order for A.Y. 1985-86 passed on31.3.89 was barred by limitation.” The Tribunal thereafter dealing with the issue of limitationfrom another angle held thus:- “27.In the instant case also, at the time ofissuing the notice u/s 271(1)(c) of the I.T. Actdated 21.03.88 there was no order made u/s 143(3) which, in fact, was passed on 31.3.89.Therefore, the show cause notice dated 17.3.88issued by the Assessing Officer on the same date[if at all] could not be treated as assessment u/s143 r/w u/s 271(1)(c) of the I.T. Act for whichthe period of limitation would be 8 years becausethe Assessing Officer did not make assessmentunder those sections and also had not recorded afinding as required u/s 271(1)(c) of the I.T. Actthat the assessee had concealed particulars of hisincome or had deliberately furnished inaccurateparticulars thereof. In view of the above, it cansafely be held that the Assessing Officer was notsure upto 31.3.88 as to whether the assessee hadconcealed his income or furnished inaccurateparticulars of his income because nothing hadbeen mentioned in the alleged show cause noticedated 17.3.188, but only clarification/explanationhas been sought. Therefore, the AssessingOfficer was not in a position to get the benefit of8 years for completing the assessment byinvoking the provisions of Section 153(1)(b) ofthe I.T. Act.” The Tribunal further went on to hold that:- The Tribunal further went on to hold that:- “... it was the duty of the Assessing Officer torecord his satisfaction that the assessee hadconcealed the income or furnished inaccurateparticulars of income. However, the AssessingOfficer neither stated that how much income wasconcealed by the assessee nor that whatparticulars of income had not been furnished bythe assessee. Therefore, the notice dated21.03.88 issued u/s 271(1)(c) of the I.T. Act wasnot a valid notice since there was no satisfactionas regards to the concealment of income orfurnishing of inaccurate particulars of income andconsequently levying penalty u/s 271(1)(c) of theI.T. Act. Therefore, the provisions of Sec. 153(1)(b) were not applicable to the facts of the presentcase.” Though the notice relied upon by the Department is dated17.03.88 but as by the said notice the assessee was called upon toreply by 21.03.88, it appears the Tribunal has taken the date of noticeas 21.03.88. Consequently, as noticed above, the Tribunal came to theconclusion that the assessment framed by the AO on 31.03.1989was barred by limitation and in view of its finding on the issue oflimitation did not give any finding on the remaining groundsraised by the assessee on merits and, consequently, both theappeals were allowed. It was submitted by learned counsel for the Revenue thatthe learned Tribunal has not examined the matter in its entirety,with objectivity and in correct perspective and seriously erred inholding the assessment as barred by limitation and from thematerial available on record, it cannot be said that notice underSection 271(1)(c) of the Act was not issued on 17.03.1988 and,consequently, limitation under Section 153(1)(b) of the Actwould be applicable and the assessment was well withinlimitation. On the other hand, learned counsel for the respondentassessee submitted that the finding recorded by the learnedTribunal is essentially a finding of fact and no question of lawarises for consideration of this Court and, therefore, the appealdeserves to be dismissed on this count alone. We have considered the rival submissions made at the Bar.Provisions of Section 153(1) before the amendment made by the Finance Act, 1989 w.e.f. 01.04.1989 reads as under:- “No order of assessment shall be made u/s 143 orSec. 144 at any time after-(a)expiry of(i)four years from the end of the A.Y. inwhich the income was first assessable,where such A.Y. is an A.Y. commencing onor before the 01[st] day of April, 1967;Sec. 144 at any time after-(a)expiry of(i)four years from the end of the A.Y. inwhich the income was first assessable,where such A.Y. is an A.Y. commencing onor before the 01[st] day of April, 1967; (ii)three years from the end of the A.Y.in which the income was first assessable,where such A.Y. is the A.Y. commencing onthe 1[st] day of April, 1968;in which the income was first assessable,where such A.Y. is the A.Y. commencing onthe 1[st] day of April, 1968; (iii)two years from the end ofassessment year in which the income wasfirst assessable; where such A.Y. is an A.Y.commencing on or after the 1[st] day of April,1969; orassessment year in which the income wasfirst assessable; where such A.Y. is an A.Y.commencing on or after the 1[st] day of April,1969; or (b)the expiry of eight year from the end of theA.Y. in which the income was first assessable, incase falling withing clause (c) of sub-section (1) ofSection 271.”A.Y. in which the income was first assessable, incase falling withing clause (c) of sub-section (1) ofSection 271.” (iii)two years from the end ofassessment year in which the income wasfirst assessable; where such A.Y. is an A.Y.commencing on or after the 1[st] day of April,1969; orassessment year in which the income wasfirst assessable; where such A.Y. is an A.Y.commencing on or after the 1[st] day of April,1969; or (b)the expiry of eight year from the end of theA.Y. in which the income was first assessable, incase falling withing clause (c) of sub-section (1) ofSection 271.”A.Y. in which the income was first assessable, incase falling withing clause (c) of sub-section (1) ofSection 271.” From the above provisions, it would be clear that theassessment can be completed within two years from the end ofAssessment Year (‘A.Y.’), in which, the income was firstassessable where such A.Y. is an A.Y. commencing on or after01[st] day of April, 1969 and the time for completing theassessment was eight years from the end of A.Y. in case fallingwithin Clause (c) of Sub-section (1) of Section 271 of the Act. In the present case, the A.Y. was 1985-86, therefore, theassessment could have been completed before 31.03.1988 if theprovisions of Section 153(1)(a) of the Act were applicable andthe same could be completed within the extended period if theprovisions of Section 153(1)(b) of the Act were applicable. TheAO taking benefit of the issuance of notice dated 17.03.1988under Section 271(1)(c) of the Act framed the assessment on31.03.1989, which was upheld by the CIT(A), however, on thelearned Tribunal coming to the conclusion that notice underSection 271(1)(c) of the Act was not served on the assessee on 17.03.1988 as claimed by the department found the assessmentto be barred by limitation under Section 153(1)(a) of the Act. Having gone through the detailed and exhaustivediscussion undertaking by the learned Tribunal on the issuerelating to the service of notice on the assessee on 17.03.1988as claimed by the department and in view of the reasonsrecorded by it for reaching the conclusion that the notice underSection 271(1)(c) of the Act was handed over to the counsel on13.03.1989, and by then, the time available for completion ofassessment was already over on 31.03.1988 and that thedepartment was not entitled for extended period of limitationunder Section 153(1)(b) of the Act, we find no reason tointerfere with the said finding. The learned counsel for the appellant has failed to pointout any perversity either in the findings recorded by the learnedTribunal or from the original record, which was summoned bythis Court, requiring interference from this Court. In that view of the matter, the order passed by theTribunal does not call for any interference and the questionframed by this Court is therefore, answered against the Revenueand in favour of the assessee. Consequently, there is no substance in the appeal and thesame is, therefore, dismissed. No costs. (ARUN BHANSALI),J. (NARENDRA KUMAR JAIN),J.