I)Patel R.p.(Dr v. Assistant Commissioner Of

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT: THE HONOURABLE MR.JUSTICE A.M.SHAFFIQUE TUESDAY, THE 9TH DAY OF AUGUST 2016/18TH SRAVANA, 1938 WP(C).No. 13854 of 2016 (F) ---------------------------- PETITIONER(S): ------------- SRI.KURIAKOSE SABU KAVUMKAL PURAYIL, ANGADI P.O., RANNY, PAN:ALPPS 1347G. BY ADV. SRI.RAMESH CHERIAN JOHN RESPONDENT(S): -------------- 1. THE COMMISSIONER OF INCOME TAX (APPEALS) FIRST FLOOR, FIRST FLOOR, PUBLIC LIBRARY BUILDING, SASTHRI ROAD, KOTTAYAM-686001. 2. THE DEPUTY COMMISSIONER OF INCOME TAX CIRCLE-I,ENNIKKATTIL ESTATE,THIRUVALLA. CIRCLE-I,ENNIKKATTIL ESTATE,THIRUVALLA. R1 & R2 BY ADV. SRI.P.K.R.MENON,SC, BY ADV. SRI.JOSE JOSEPH, SC, FOR INCOME TAX THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON 09-08-2016, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: bp A.M. SHAFFIQUE, J.===============W.P. (C) No. 13854 of 2016================== Dated this, the 10[th] day of November, 2016 J U D G M E N T This writ petition has been filed challenging Ext.P5 noticeissued by the Commissioner of Income Tax (Appeals) pursuant to anorder passed by the Income Tax Appellate Tribunal, Cochin Bench inITA No.160/2010 in respect of the assessment year 2005-06. 2.The main contention urged by the petitioner is that theTribunal's order (Ext.P3) has been issued as early as on 21/5/2010by which the Commissioner of Income Tax (Appeals) was directed toconsider the claim of the assessee in respect of the rate to beadopted or the quantum of estimation to be made. Petitionersubmits that though the order was served on the petitioner as earlyas on 7/6/2010 and served on the appellate authority on 4/6/2010,no steps were taken within nine months as contemplated underSection 153(2A) of the Income Tax Act, 1961 and therefore theproceedings pursuant to Ext.P5 are barred by limitation. 3.Learned counsel submits that in so far as the appellateauthority had received the order Ext.P3 by 4/6/2010 and no steps -:2:- were taken to hear the appeal and decide the same within ninemonths, the bar of limitation squarely applies and therefore it isnot open for the appellate authority, who exercised the power ofthe assessing authority, to proceed with the appeal in terms ofExt.P5 notice dated 7/1/2016. 4.On the other hand, learned standing counsel appearingfor the respondents submits that Section 153(2A) has noapplication to the facts in issue as the Tribunal has only remittedthe matter back to the Appellate Authority for a rehearing inregard to the estimation to be made and the appellate authorityis not bound by the restriction imposed under Section 153(2A). 5.Heard the learned counsel for the petitioner and thelearned standing counsel appearing for the respondents. 6.Learned counsel for the petitioner places reliance uponthe following judgments:- (i)Patel R.P.(Dr.) v. Assistant Commissioner of Income Tax, Kottayam (2015 (5) KHC 370). This judgment had been delivered by the learned singleJudge of this Court. The issue considered was relating the scopeand effect of Section 153(2A). It was held that even in a case where only one issue has been directed to be considered afresh,the limitation under Section 153(2A) would apply. That was a casein which the Tribunal had remitted the matter back to theassessing officer to reconsider the matter. There is no doubtregarding the proposition in respect of Section 153(2A) if theTribunal had remitted the matter back to the assessing officer toconduct a fresh assessment in the matter. But, here the questionis, whether the aforesaid provision can be made applicable in aninstance where the matter is remitted back to the appellateauthority. Section 153(2A) reads as under:- where only one issue has been directed to be considered afresh,the limitation under Section 153(2A) would apply. That was a casein which the Tribunal had remitted the matter back to theassessing officer to reconsider the matter. There is no doubtregarding the proposition in respect of Section 153(2A) if theTribunal had remitted the matter back to the assessing officer toconduct a fresh assessment in the matter. But, here the questionis, whether the aforesaid provision can be made applicable in aninstance where the matter is remitted back to the appellateauthority. Section 153(2A) reads as under:- “Notwithstanding anything contained in sub-sections (1) (1A), (1B) and 2, in relation to theassessment year commencing on the 1st day ofApril, 1971, and any subsequent assessment year,an order of fresh assessment in pursuance of anorder under Section 250 or Section 254 or Section263 or Section 264, setting aside or cancelling anassessment, may be made at any time before theexpiry of one year from the end of the financialyear in which the order under Section 250 orSection 254 is received by the Chief Commissioneror Commissioner or, as the case may be, the orderunder Section 263 or Section 264 is passed by theChief Commissioner or Commissioner: Provided that where the order under Section 250 or Section 254 is received by the ChiefCommissioner or Commissioner or, as the casemay be, the order under Section 263 or Section264 is passed by the Chief Commissioner orCommissioner, on or after the 1st day of April,1999, but before the 1st day of April, 2000, such anorder of fresh assessment may be made at anytime up to the 31st day of March, 2002: (Provided further that where the order underSection 254 is received by the Chief Commissioneror Commissioner or, as the case may be, the orderunder Section 263 or Section 264 is passed by theCommissioner on or after the 1st day of April, 2005(but before the 1st day of April, 2011), theprovisions of this sub-section shall have effect as iffor thewords “one year”, the words “nine months”had been substituted:)” Learned counsel submits that since the assessment year is with reference the period 2005-06, second proviso applies and theperiod is limited to nine months. 2[nd] proviso reads as under:- “Provided further that where the order undersection 254 is received by the Principal ChiefCommissioner or Chief Commissioner or PrincipalCommissioner or Commissioner or, as the casemay be, the order under section 263 or section 264is passed by the Principal Commissioner orCommissioner on or after the 1[st] day of April, 2005but before the 1[st] day of April, 2011, the provisions of this sub-section shall have effect as if for thewords “one year”, the words “nine months” hadbeen substituted.” 7. The statutory provision indicates that if a direction has been issued by the appellate authority for a fresh assessment onsetting aside or cancelling an assessment, the limitation providedunder the statute applies. The short question would be (1)whether the Tribunal had set aside or cancelled the assessmentand (2) whether the remittance made to the appellate authoritywould amount to a direction for passing an order of freshassessment. There cannot be any dispute regarding the fact thatif the remittance is to the assessing authority after setting asideor cancelling the assessment, direction can be issued to have afresh assessment, in which event, the period of limitationsquarely applies. But as already stated, the facts in this caseslightly differs from the exact terms of the words used in thestatute in so far as the matter has been remitted back to theappellate authority and that too for the purpose of estimation. 8.The argument of the learned counsel for the petitioneris that the word 'assessment' cannot be given a limited meaning -:6:- 8.The argument of the learned counsel for the petitioneris that the word 'assessment' cannot be given a limited meaning -:6:- whereas it bears a very comprehensive meaning and therefore ifthe appellate authority is directed to make an estimation, it has tobe considered that the direction was to make a fresh assessmentin which event the appellate authority will be exercising thepower of the assessing officer and therefore Section 153(2A) willhave to be applied even in such a situation. 9.Reference is also made to the judgment of the ApexCourt in Kalawati Devi Harlalka v. Commissioner of Income-Tax, West Bengal [1967 (66) ITR 680]. In this judgment, theApex Court considered the scope and effect of Section 297 of the1961 Act especially in the light of the repeal of 1992 Act. Section297(a) of the 1961 Act indicated that where a return of incomehas been filed before the commencement of the Act by anyperson for any assessment year, proceedings for the assessmentof that person for that year may be taken and continued as if theAct had not been passed. A question arose as to whether the saidprovision will apply when the proceedings of assessment waspending before the Commissioner in a revision as contemplatedunder Section 33B of the 1922 Act. In that background, the ApexCourt held that Section 297(2)(a) of the 1961 Act includes within its scope a proceeding under Section 33B of the 1922 Act and theword 'assessment' does have, subject to the context, a very widemeaning. It is further held that the word assessment can bear avery comprehensive meaning. It can comprehend the wholeprocedure for ascertaining and imposing liability upon the taxpayer. It is further held that Section 297 is meant to provide as faras possible for all contingencies which may arise out of the repealof the 1922 Act. It deals with pending appeals, revisions etc. Itdeals with non-completed assessments pending at thecommencement of the 1961 Act and assessment to be made afterthe commencement of the 1961 Act, as a result of returns ofincome filed after the commencement of 1961 Act. 10.Another judgment relied upon is Jute Corporation of India Ltd. v. Commissioner of Income-Tax and another(1991 (187) ITR 688). In this judgment, the Apex Court hadelaborated on the power of the appellate authority. It is held thatappellate authority has all the powers which the original authoritymay have in deciding the question subject to the restrictions oflimitation, if any, prescribed by the statutory provisions. In theabsence of any statutory provision, the appellate authority is -:8:- vested with all the plenary powers which the subordinateauthority may have in the matter. 11.In Commissioner of Income Tax, U.P, Lucknow v. Kanpur Coal Syndicate, Kanpur (1964 (53) ITR 225) also, theApex Court held that the Appellate Assistant Commissioner hasplenary powers in disposing of an appeal and his power iscoterminous with that of the Income Tax Officer. 12.On the other hand, learned standing counsel appearingfor the respondents placed reliance on the judgment inCommissioner of Income Tax v. Nirbheram Daluram (1997(224) ITR 610) wherein the Apex Court while considering thequestion regarding the powers of the Appellate AssistantCommissioner while dealing with appeals against orders ofAssessing Officer under Section 251 of the Income Tax Act, 1961,after referring to various judgments including Jute Corporation of India (supra) held that the appellate authority has wideplenary powers and its power cannot be confined to the powersmentioned in Section 251 alone. 13.Having regard to the aforesaid submissions made oneither side, the short question to be considered is regarding the -:9:- applicability of Section 153(2A) to the present facts of the case. of India (supra) held that the appellate authority has wideplenary powers and its power cannot be confined to the powersmentioned in Section 251 alone. 13.Having regard to the aforesaid submissions made oneither side, the short question to be considered is regarding the -:9:- applicability of Section 153(2A) to the present facts of the case. 14.There is no dispute regarding the fact that the Tribunalhad remitted the matter to the Appellate Authority. Perusal of theTribunal's order at Ext.P3 would show that the issue projectedwas regarding the disclosure of net profit. It is observed that theassessee has in comparative or equivalent terms, disclosed a netprofit of 7% as against 4.42% considered as disclosed by it by theRevenue estimating it at 8%. It is further indicated that the sameat once validates the net profit rate of 8% estimated by theRevenue while on the other hand impels the adoption of profit asdisclosed. The difference between the two being marginal, itwould be appropriate to adopt the latter subject to otherincidental facts. The order at para 5.22, which is relevant, readsas under:- “5.22 Under the given facts and circumstances, wetherefore, only consider it fit to restore the matterback to the file of the Id. CIT(A) to allow anopportunity to the assessee to substantiate its caseon the rate to be adopted or the quantum ofestimation with reference to the said Statement orother materials. This is as we have found the saidStatement as crucial and relevant for enablingproper estimation, and consequently, assessment of the profits for the year, and which would requireits examination, including as to its authenticationand verification, with reference to our foregoingobservations. This is also in view of the fact thatthe Revenue authorities, as afore-stated, have notfurnished any basis for the estimation as made,which, there is no gainsayng, is a matter of correctappreciation of facts, subject to judicial review. Theadoption of the correct profit/income is a matterseparate from the rejection of the accounts and,warrants proper adjudication, which we find asabsent in the instant case, with both the parties notsatisfying their respective duties in the matter. TheId. CIT (A) shall cause such inquiry and consequentreport in the matter from the AO as he deemsrelevant for the purpose. We decide accordingly.” 15.Perusal of the above order by itself would show thatthe Tribunal never intended the matter to be remitted for a freshassessment whereas direction was issued to the appellateauthority to give an opportunity to substantiate his case on therate to be adopted or the quantum of compensation withreference to the said statement or other materials. Furtherobservations made in the order also indicates that the Tribunaldirected the appellate authority to conduct such enquiry andobtain consequent report in the matter from the assessing officer as he deems relevant for the purpose. 16.Reading of Ext.P3 order would indicate that theTribunal has not set aside or cancelled the assessment order. Anopportunity was given to the petitioner to substantiate hiscontention on merits and, if found necessary, the appellateauthority was entitled to exercise the appellate powers to decideaccordingly. Therefore, this is not a case in which the Tribunal hadcalled upon fresh assessment order to be passed whereas thecontention of the petitioner in regard to the estimation was to beconsidered and the appeal to be decided. No doubt, whileexercising the power, Commissioner (Appeals) can exercise thepower as contemplated under Section 251(1)(a) by confirming,reducing, enhancing or annulling the assessment. 17.Taking into account all the factual aspects involved inthe matter, I do not think that this is an instance where a noticeissued by the appellate authority can be set aside on the groundof limitation as contemplated under 153(2A). 17.Taking into account all the factual aspects involved inthe matter, I do not think that this is an instance where a noticeissued by the appellate authority can be set aside on the groundof limitation as contemplated under 153(2A). In the result, petitioner is not entitled for any relief assought for in the writ petition. The appellate authority is entitledto proceed further pursuant to Ext.P5. Since there was a stay of W.P(C) No.13854/16 -:12:- further proceedings pursuant to Ext.P5, the appellate authorityshall issue fresh notice to the petitioner and take further steps inaccordance with law. Writ petition is dismissed. Rp11/11/2016 Sd/- A.M. SHAFFIQUE, JUDGE //True Copy// P.S to Judge