Ita/370/2011 Of The Commissioner Of Income Tax v. M/S. Astra Zeneca Pharma

IN THE HIGH COURT OF KARNATAKA AT BENGALURUDATED THIS THE 12 DAY OF JUNE 2020|PRESENT THE HON’BLE MR. JUSTICE ALOK ARADHE AND| THE HON’BLE MR. JUSTICE HEMANT CHANDANGOUDAR| LT.A. NO.370 OF ZO1L1 C/WLT.A.NOCO.37 OF 201 I.T.A.NO.370/2011BE!]VWEE 1.|THE COMMISSIONER OF INCOME-TAX LIU JSS TOWERS. BSK III STAGE BANGALORE. 2 |THE JOINT COMISSIONER OF INCOME-TAX| LTDU JSS TOWERS| BSK III STAGE BANGALORE. ... APPELLANTS (By Sri.K.V.ARAVIND, ADV.,) AND: M/S ASTRA ZENECA PHARMA INDIA LTD.P.B.NO.2483OFF BELLARY ROADHEBBALBANGALORE. ... RESPONDENT (By Sri.S.PARTHASARATHI SMT.JINITA CHATTERJEE, ADV.) THIS ITA IS FILED UNDER SECTION 260-A OF I.T. ACT,1961 ARISING OUT F ORDER DATED 31.05.2011 PASSED IN [TANO.1224/BANG/2010 FOR THE ASSESSMENT YEAR 1996-97,|PRAYING THATK THIS HON BLE COURT MAY BE PLEASED TO: (1) FORUMULATE THE SUBSTANTIAL QUESTIONS OF LAW.STATED THEREIN. (1) ALLOW THE APPEAL AND SET ASIDE THE ORDER DATED31.05.7011.PASSEDBY|THE|ITAT,BANGALOREIN|ITANO.1224/BANG/2010 AND CONFIRM THE ORDERR PASSED BY THEJT. COMMISSIIONER OF INCOME TAX, LIU, BANGALORE, IN THE|INTEREST OF JUSTICE AND EQUITY.| I.T.A.NO.3 7/201BE!]VWEE 1.|THE COMMISSIONER OF INCOME-TAX LIU JSS TOWERS. BSK III STAGE BANGALORE. 2 |THE ADDITIONAL COMISSIONER OF INCOME-TAX LTDU JSS TOWERS| BSK III STAGEBANGALORE.BANGALORE. ... APPELLANTS (By Sri.K.V.ARAVIND, ADV.,) AND: M/S ASTRA ZENECA PHARMA INDIA LTD.P.B.NO.2483OFF BELLARY ROADHEBBALBANGALORE. .. RESPONDENT (By Sri.S.PARTHASARATHISMT.JINITA CHATTERJEE, ADV.) THIS ITA IS FILED UNDER SECTION 260-A OF I.T. ACT,1961 ARISING OUT OF ORDER DATED 29.09.2011 PASSED IN [TA|NO.1202/BANG/2010 FOR THE ASSESSMENT YEAR 1996-97,|PRAYING THAT THIS HON'BLE COURT MAY BE PLEASED TO: (1) FORUMULATE THE SUBSTANTIAL QUESTIONS OF LAW.STATED THEREIN. (1) ALLOW THE APPEAL AND SET ASIDE THE ORDER DATED29.09.2011 IN ITA NO.1224/BANG/2010 PASSED BY THE ITAT,|BANGALORE, CONFIRMING THE ORDER OF THE APELLATE|COMMISSINER AND CONFIRM THE ORDER PASSED BY JOINT|COMMISSIONER OF INCOME TAX, LIU, BANGALORE, IN THE]INTEREST OF JUSTICE AND EQUITY. THESE ITAS COMING ON FOR FINAL HEARING, THIS DAY,ALOK ARADHE J.,DELIVERED THE FOLLOWING: COMMON JUDGMENT These appeals under Section 260A of theIncome Tax Act, 1961 (hereinafter referred to as)‘the Act’, for short) have been filed by the revenue.| TheSubject matterOf I.T.A.No.3/70/2011&I.T.A.No.37/2012pertainstO.AssessmentYear1996-97. Since, appeals have been decided by two.different judgments, though they pertain to the.SalNeAssessmentYearancsince,CommMonquestions of law arise for consideration in both the.appeals, they were neard analogously and are being decided by this common judgment. The appeals.were admitted on following substantial questions of. law: (i)Whetner the tribunal was correct [Innoiding tnat the order passed bythe Tribunal dated 31.07.2006 bythe Tribunel dated 31.07.7006 wasunder Section 153(2A) of the Actand therefore barred by limitationand not under Section 153(3) oftheAct,WHIC)NpermittedtheAssessingOfficer|al)extendedperiod, as the original assessmentwas neither set aside in entirety orcancelled and only directed toexamine two items?noiding tnat the order passed bythe Tribunal dated 31.07.2006 bythe Tribunel dated 31.07.7006 wasunder Section 153(2A) of the Actand therefore barred by limitationand not under Section 153(3) oftheAct,WHIC)NpermittedtheAssessingOfficer|al)extendedperiod, as the original assessmentwas neither set aside in entirety orcancelled and only directed toexamine two items? (ii)Whether the Assessing Officer who.passed an order dated 15.12.2009was only giving effect to the orderDasSedDytheTribunaldated31.07.7006 and this order fellwithin Section 153(3) of the Actpassed an order dated 15.12.2009was only giving effect to the orderDasSedDytheTribunaldated31.07.7006 and this order fellwithin Section 153(3) of the Act and not under Section 153(2A) ofthe Act as held by the Tribunal? (ii)Whether the Assessing Officer who.passed an order dated 15.12.2009was only giving effect to the orderDasSedDytheTribunaldated31.07.7006 and this order fellwithin Section 153(3) of the Actpassed an order dated 15.12.2009was only giving effect to the orderDasSedDytheTribunaldated31.07.7006 and this order fellwithin Section 153(3) of the Act and not under Section 153(2A) ofthe Act as held by the Tribunal? 2.For the facility of reference, facts from)ITA No.370/2011 are being referred to. The!assessee iS a manufacturer, seller and trader inpharmaceuticals. The assessee filed the return of)income for Assessment year 1996-97 deciaring thetotal income of Rs.1,96,82,930/-. The return was.processed under Section 143(1A) of the Act and was.rectified under.Section.154OT theAct.ON)27.10.1998. Tne case was selected for scrutiny.|Thereupon notices were issued under Section143(2) and 143(1) to the assessee. The assessingofficer by an order dated 26.03.1999 passed an/order of assessment and inter alia quantified thetotal taxable income at Rs.8,38,38,080/-. 100%Depreciation claimed by the assessee on pollution|control equipment wortn Rs.4,93,00,000/- was disallowed and 80% interest on the amount.advanced to Madnya Pradesh State Electricity Boardto the tune of Rs.40 Lakhs was added. Deduction|Under Section SOI of the Act to the extent ot!Rs.1,17,18,5/70/- was disallowed. Similarly, theprovision for leave encashment as well as claim for|bonus to the tune of Rs.4,36,546/- as well as)Rs.19,/75,555/- respectively was disallowed. ‘3.Being aggrieved tne assessee filed an.appeal before the Commissioner of Income Tax(Appeals).TheCommissionerOT IncomeTax!(Appeals) by order dated 06.05.1999 directed)deletion of notional interest in respect of advance|made to Madhya Pradesn State Electricity Board,|which was added by the assessing officer. Tne!revenue challenged the aforesaid order before theIncome Tax Appellate Tribunal. Tne tribunal Dy an order dated 31.07.2006 set aside tne findings of theassessing officer insofar as it granted the relief withregard to depreciation and notional interest and the)matter was remitted to the assessing officer toconsider the controversy afresn. 4After remand, the assessing officer passedan order on 15.12.2009. The assessing officer|disallowed 100% depreciation on pollution controlequipments amounting to Rs.4,93,00,000/-. The!assessing officer also taxed the notional income on/the amount of loan advanced to Madhya PradesnState Electricity Board. The said order was subjectmatter of challenge before the Commissioner of.Income Tax (Appeals). The Commissioner of IncomeTax (Appeals) by an order dated 30.08.2010 neldthat original order remanding the assessment was_passed only to examine two issues viz., depreciation and notional interest, which would amount to settingaside the entire order of assessment. It was further|neld that since, there was no order to pass a fresn-order of assessment, therefore, the order giving|effect to the findings of the tridDunal was not barredby limitation under Section 153(2A) of the Act.5.The aforesaid order was challenged inappeal by the assessee. Tne Income Tax AppellateTribunal by order dated 31.05.2011 inter alia neldthat from perusal of the order passed by the IncomeTax Appellate Tribunal, it is evident that thedirection issued by the tribunal as to call for'complete information and to pass an appropriate|order. Thus, the direction is not in the naturerequiring positive compliance. It was further heldthat the order passed by the assessing officer is beyond the period of limitation as prescribed under Section 153(2A) of the Act and the order ofassessment is barred by limitation. The tribunal didnot decide the appeal on merits. Being aggrieved,|the revenue is in appeal before us. Section 153(2A) of the Act and the order ofassessment is barred by limitation. The tribunal didnot decide the appeal on merits. Being aggrieved,|the revenue is in appeal before us. 6.Learnecdcounse|.forthe.revenue|submitted that provisions to Section 153 of the Acthave been amended with effect from 01.06.2016.|However, the pre amended Section would apply to.the fact situation of the case. It Is further submittedthat the provisions of Section 153(2A) would apply ifan order passed under Section 254 or Section 263.or Section 264 is either set aside or Is canceled andqa direction for fresh assessment is issued. It jisfurther submitted that the order of remand in the)instant case, was not an open remand but was a.limitedremand.and|therefore, thelimitationprescribed under Section 153(2A) of the Act did not apply to fact situation of the case. However, theaforesaid aspect of the matter has not beenappreciated by the tribunal. It is further submittedtnat it ougnt to nave been appreciated that theorder was passed by the tribunal to give effect to itsfinding and therefore, the provisions of Section|153(3)(ii) apply to the facts of tne case. It Is also|urged that In case wnere no limitation Is prescribed, four years time nas been held to be a reasonable|time. In support of aforesaid submissions, relianceNas been placed by learned counsel on the decisions|In.@RIKHABDASJHAVERCHANDVS,COMMISSINOER OF INCOME-TAX’, 2001 249ITR 774 BOM, BASU DISTRIBUTORS (P.) LTD.VS. INCOME-TAX OFFICER, WARD 2(3), NEWDELHI’, (2007) 159 TAXMAN 410 (DELHI,"COMMISSIONER OF INCOME-TAX VS. BHAN|TEXTILE (P.) LTD., (2008) s0O0 ITR 176) (DELHI), "INSTRUMENTS AND CONTROL CO. VS.CHIEF COMMISSIONER OF INCOME TAX-1 & 2’,(2012)25TAXMANN,.COW16(GUJARAT ),"NOKIA.INDIA.(P.)LTD,VS,DEPUTYCOMMISSIONER OF INCOME-TAX., (2018) 407ITR 20 (DELHI),489"GE T& DINDIA LTD. VS.DEPUTYCOMMISSTONEROFINCOME-TAX’,(2019) 105 TAXMANN.COM 286 (MADRAS). J.On the other hand, learned counsel for)the revenue submitted that from perusal of tneorder of the tribunal it is evident that it is open.remand though not specifically stated to be so in theorder. It Is submitted that the matter has been)remitted for consideration afresh and therefore, the)tribunal.nasrigntly|neldthat.theorderOT assessment has Deen passed beyond the period otflimitation. Alternatively it is submitted tnat in case,| this court does not agree with the submissions madeon behalf of the assessee on the issue of limitation,the matter may be remitted to the tribunal fordecision afresh in accordance with law as It has not.dealt with the controversy on merits. In Support ofaforesaid submissions reliance has been placed on.the decisions in °DEPUTY COMMISSIONER OF.INCOME TAX & ORS, VS, SANJAY JAISWAL & ORS.'’, (2016) 158 ITD O397 (KOLKATAand.‘COMMISSTONER OF INCOME TAX VS. PAUL|NOEL RODRIGUES, (2015) 231 TAXMAN 0811(KARNATAKA). 8.|We have considered the submissions|made on poth the sides and have perused therecord. Before proceeding further, it is apposite totake note of the relevant extract of Section 153 of. the Act as it existed at the relevant point of time. The relevant extract reads as under: 153.Time_ limit for completion ofassessment and reassessment: y.xxxxxxn” (2A)Notwithstanding|anytningcontained in sub-sections (1) and (2), inrelationtotheassessmentYearcommencing on tne 1[St]day of April,|1971, and any subsequent assessment.year, an order of fresh assessment underSection 146 or in pursuance of an order,under Section 250, Section 254, Section2635 or Section 264, setting aside orcanceling an assessment, maybe made atany time before the expiry of two yearsfrom the end of the financial year inwhich the order under Section 146.canceling the assessment is passed bythe assessing officer or the order underSection 250 or Section 254 is received bythe Chief Commissioner or Commissioneror, as the case may be, the order under Section 2635 or Section 264 is passed bythe Chief Commissioner or Commissioner. y.xxxxxxn” (2A)Notwithstanding|anytningcontained in sub-sections (1) and (2), inrelationtotheassessmentYearcommencing on tne 1[St]day of April,|1971, and any subsequent assessment.year, an order of fresh assessment underSection 146 or in pursuance of an order,under Section 250, Section 254, Section2635 or Section 264, setting aside orcanceling an assessment, maybe made atany time before the expiry of two yearsfrom the end of the financial year inwhich the order under Section 146.canceling the assessment is passed bythe assessing officer or the order underSection 250 or Section 254 is received bythe Chief Commissioner or Commissioneror, as the case may be, the order under Section 2635 or Section 264 is passed bythe Chief Commissioner or Commissioner. 3. The provisions of sub-Sections|(1) and (2) shall not apply to thefollowingclasses Of|assessments., reassessmnents and|recomputationswhich may, subject to the provisions ofsub-Section (2A), be completed at anytime- (1) XXXXXx| (il)where theassessment,reassessment or recomputation is madeon the assessee or any person inconsequence of or to give effect to anyfinding or direction contained in an orderunder Section 250, 254, 260, 262, 263.and 264 or in an order of any court in aproceeding otherwise than by way ofappeal or reference under this Act. OQ.Thus it is evident that if a matter falls.under Section 153(2A) of the Act, the fresh order of|assessment has to be passed within the prescribed period of two years, whereas, under Section 153(3) of the Act, the assessment, reassessment or.recomputation nas to be made on the assessee or)any person in consequence, or to give effect to any|finding or direction contained in an order under|Section 250, 254, 260,262, 263 and 264 or in anorder of any court in a proceeding otherwise than byway Of appeal or reference under this Act, for whichno period of limitation is prescribed. However, it istrite law that even when no limitation is prescribed,the Act has to be performed within a reasonabletime. | 10. In view of aforesaid well settled legalposition, we may advert to the facts of the case. The)tribunal in para 12 of the order nas held as follows: We nave perused the submissions ofthe assessee, the paper book etc. from.whicn itt could not derived whetner the assessee has received from MPSEB anamount to the extent of 85% of the costof the equipment. Therefore, obviously,the Commissioner of Income Tax (A) hasaccepted the arguments of the assesseeOf|Itsfacevalue.Thevariouscircumstances as existing in tne instantcase go to raise a lot of doubt in theentire transaction. However, one aspect.that Is absent [In the [Instant case is thenquiry from the State Electricity Boardwith reference to the sale Invoice raised.on tne assessee, the lease agreemententered into with the assessee paymentof 20% of Rs.4.93 Crores to the assesseeand the answer to the question whetherthe assessee received 85% of Rs.4.93.Crores or not. We are therefore, of the.VICWthatthematterrequires reexamination atthelevelOf|theassessing officer. The decisions of thespecialBench(supra)andthejurisdictional High Court (supra) wouldhave to pe examined with reference to. the facts of that case and whether thefatsOf|theCaASCareIdentica]OFTotherwise. Likewise, the decision of theOrissa Hign Court (supra) would alsonave to be examined in parallel with thefacts of the case of the assessee. 11. From perusal of para 12 of the order it isevident that the order of remand has been issued)with a view to give effect to the findings of the|tribunal and neither the order of assessment has.been set aside nor the assessing officer has been.directed to carry out fresn assessment. In otherwords, the order passed by the tribunal is a remandon a limited issue as indicated in para 12 of the|order. Therefore, the provisions of Section 153(3) of the Act apply to the fact situation of the case andthe tribunal therefore, committed an error of law in.holding that the order passed by the Commissioner| of Income Tax (Appeals) was passed under Section.153(2A) of the Act. 11. From perusal of para 12 of the order it isevident that the order of remand has been issued)with a view to give effect to the findings of the|tribunal and neither the order of assessment has.been set aside nor the assessing officer has been.directed to carry out fresn assessment. In otherwords, the order passed by the tribunal is a remandon a limited issue as indicated in para 12 of the|order. Therefore, the provisions of Section 153(3) of the Act apply to the fact situation of the case andthe tribunal therefore, committed an error of law in.holding that the order passed by the Commissioner| of Income Tax (Appeals) was passed under Section.153(2A) of the Act. 12. In view of the preceding analysis, thesubstantial questions of law framed by bench of this|court are answered in favour of revenue and against|assessee. In the result, the order passed by thetribunal.dated29.09.7011.and|order|dated31.05.2011 passed by the tribunal are hereby.quashed and the matter is remitted to the tribunal to decide the same on merits. In the result, the appeals are allowed. Sd/-JUDGE.Sd/-—JUDGE.