Whether This Case Involves A Substantial Question Of Law As To The Interpretation Of The Constitution Of India Or Any Order Made Thereunder ?Of Law As To The In v. Income Tax Officer

IN THE HIGH COURT OF GUJARAT AT AHMEDABADSPECIAL CIVIL APPLICATION NO. 18479 of 2014WITH SPECIAL CIVIL APPLICATION NO. 18504 of 2014 FOR APPROVAL AND SIGNATURE: HONOURABLE MR.JUSTICE A.J.DESAI andHONOURABLE MR.JUSTICE A.G.URAIZEE ========================================= 1 Whether Reporters of Local Papers may be allowed to see the judgment ?allowed to see the judgment ? 2 To be referred to the Reporter or not ? 3 Whether their Lordships wish to see the fair copy of the judgment ?of the judgment ? 4 Whether this case involves a substantial question of law as to the interpretation of the Constitution of India or any order made thereunder ?of law as to the interpretation of the Constitution of India or any order made thereunder ? =========================================GOMTI FIBERS LTD....Petitioner(s) Versus INCOME TAX OFFICER....Respondent(s)========================================= Appearance: MR B S SOPARKAR, ADVOCATE for the PetitionerMR SUDHIR M MEHTA, ADVOCATE for the Respondent========================================= CORAM: HONOURABLE MR.JUSTICE A.J.DESAIand HONOURABLE MR.JUSTICE A.G.URAIZEE Date : 31/07/2015 COMMON ORAL JUDGMENT (PER : HONOURABLE MR.JUSTICE A.G.URAIZEE) These two petitions are filed under Article 226 of the Constitution of India for the following common substantive prayers: “7.The petitioner, therefore, prays that this Hon'ble Court be pleased to issue a writ of mandamus or a writ in the nature of mandamus or a writ of certiorari or a writ in the nature of certiorari or any other appropriate writ, direction or order and be pleased to : (a)quash and set aside the impugned notice at Annexure-A to the petition;Annexure-A to the petition; (b)Pending the admission, hearing and final disposal of this petition, to stay implementation and operation of the notice at Annexure-A to this petition and stay further proceedings for the A.Y. 2004-05;”of this petition, to stay implementation and operation of the notice at Annexure-A to this petition and stay further proceedings for the A.Y. 2004-05;” The aforesaid prayers are made in the background of the following facts: 2.1The petitioner, a public limited company, incorporated under the provisions of the Companies Act, 1956, filed original return of income on 1[st] November 2004 declaring the total income of Rs.45,240/- under the relevant provisions of the Income-tax Act, 1961 (hereinafter referred as ‘the Act’) for Assessment Year 2004-05, which was processed by the Assessing Officer under Section 143(1) of the Act. 2.2At the same time, the appellate proceedings in respect of the Assessment Year 2003-04 were going on before the Appellate Tribunal being ITA No.3252/Ahd/2008 in which the original return of income was filed on 1[st] November 2004. The issue for the consideration in the appeal proceedings was regarding addition of Rs.7,68,38,132 for making purchases of stock from unaccounted capital. By order dated 21[st] March 2012 the appellate authority set aside the addition of Rs.7,68,132 for making purchases of stock from unaccounted capital. The Appellate Authority, while setting aside the aforesaid addition, made the following observations, which are relevant for the disposal of these two petitions: “In case the entire purchase is found to be bogus, then also, in the present year the addition cannot exceed the amount of Rs.7,40,977, which has been debited to P & L in the present year and the balance can be considered in that year in which the assessee is claiming the consumption of raw-material out of opening sock in that year.” 2.3On 31[st] March 2014, after almost 8 years of filing the return for Academic Year 2004-05, the petitioner received a notice under Section 147 of the Act, issued by the Assessing Officer proposing to reassess the income of the petitioner for the AY 2004-05. “In case the entire purchase is found to be bogus, then also, in the present year the addition cannot exceed the amount of Rs.7,40,977, which has been debited to P & L in the present year and the balance can be considered in that year in which the assessee is claiming the consumption of raw-material out of opening sock in that year.” 2.3On 31[st] March 2014, after almost 8 years of filing the return for Academic Year 2004-05, the petitioner received a notice under Section 147 of the Act, issued by the Assessing Officer proposing to reassess the income of the petitioner for the AY 2004-05. 2.3By letter dated 29[th] April 2014 the petitioner requested the Assessing Officer to supply a copy of the reasons recorded for reopening the assessment. The Assessing Officer, by letter dated 19[th] May 2014 supplied copy of the reasons, as demanded by the petitioner. Thereafter, the petitioner raised objections dated 25[th] August 2014 against the issuance of the notice dated 31[st] March 2014 inter alia on the ground that the same was ex facie time-barred and without jurisdiction. The respondent, by order dated 11[th] November 2014 disposed of the objections raised by the petitioner without dealing with the contentions raised therein. The petitioner has impugned notice dated 31[st] March, 2014 issued by the respondent in this petition. 3We have heard Mr Bandish S Soparkar, learned advocate for the petitioner and Mr Sudhir Mehta, learned advocate for the respondent. 4Mr Bandish S Soparkar, learned advocate for the petitioner would submit that the impugned notice is without jurisdiction as it is issued almost eight years after filing of the return for the Assessment Year 2003-04 , which was filed on 29.11.2003. It is his further contention that under Section 153(1) of the Act no limitation is provided to reopen assessment if assessment is proposed to be reopened pursuant to an order passed by the appellate authority. It is his further contention that ITAT has not issued any express direction in its order dated 21[st] March 2012 passed in ITA No.2358/Ahd/2008 and therefore there is no clear direction from the ITAT. Therefore, in view of the decision of the Apex -Court in the case of Incometax Officer v. Murlidhar BhagwanDas(1964) 52 ITR 335 (SC) the impugned notice is illegal and without jurisdiction. He would also submit that the reasons recorded for issuance of the notice under Section 147 for reopening of the assessment cannot be improved upon either by substitution, addition or deletion, in view of the judgment of the Bombay High Court in the case of GKN Sinter MetalsLtd. v. Ms Rampriya Raghavan, Assistant Commissioner of -Incometax, Circle 2(1), [2015] 55 taxmann.com 438 (Bombay. 5He has further vehemently submitted that there is no finding by the ITR that the purchase was bogus and coupled with the fact that there is no direction to reopen the assessment of AY 2003-04. In support of his submission, he has relied upon decision of the Bombay High Court in the case of Eskay K’n’IT (India) Limited v Deputy Commissioner ofIncome tax, Central Circle 33, [2015] 54 taxmann.com 22 (Bombay) which deals with the term ‘finding’ and also in the case of Rajinder Nath v. Commissioner of Income Tax, 120 ITR 14 for the term “direction”. -Incometax, Circle 2(1), [2015] 55 taxmann.com 438 (Bombay. 5He has further vehemently submitted that there is no finding by the ITR that the purchase was bogus and coupled with the fact that there is no direction to reopen the assessment of AY 2003-04. In support of his submission, he has relied upon decision of the Bombay High Court in the case of Eskay K’n’IT (India) Limited v Deputy Commissioner ofIncome tax, Central Circle 33, [2015] 54 taxmann.com 22 (Bombay) which deals with the term ‘finding’ and also in the case of Rajinder Nath v. Commissioner of Income Tax, 120 ITR 14 for the term “direction”. 6He has further contended that even if it assumed that there is a finding or direction of an appellate authority, they are required to be confined to the matter in issue in the particular year. In support of this contention, he has relied upon the decision in the case of Bakshish Singh v. Income TaxOfficer, “B” Ward And Another (1974) 93 ITR 178 (Calcutta). It is further argued that the words ‘in consequence of’ or ‘to give effect to’ appearing in Section 153 (1) relate to the order passed by the appellate authority and therefore according to his submissions, these words cannot be understood to mean that as a consequence of the order of the appellate authority. Hence, according to learned advocate, Mr Soparkar, the ITAT has remanded the matter to the Assessing Officer for fresh decision in respect of Assessment Year 2003-04. Mr Soparkar has relied upon decision in the case of Consolidated CoffeeLimited v. Income Tax Officer, (1985) 755 ITR 729, Kerala. Therefore, it is the submission of learned advocate Mr Soparkar for the petitioner that the impugned notice is illegal and without jurisdiction, which may be quashed and set aside. 7Per contra, Mr Sudhir Mehta, learned advocate for the respondent has stoutly opposed the petition and has submitted that the provisions of Section 153(1) of the Act are very clear and when it is proposed to reopen the assessment in light of the directions given by the appellate authority, the impugned notice cannot be termed as illegal and without jurisdiction. In support of his case, he has relied upon the decision of this Court in the case of Kalyan Ala Barot v. M.H.Rathod,(2010) 328 ITR 521 (Guj) and has urged that the petitions are without merit and they deserve to be dismissed. 8In order to appreciate the contentions of learned advocate, Mr Soparkar that the notices are issued without jurisdiction as it is issued after eight years, it would be necessary to refer to Section 150 of the Income-tax Act, 1961, which runs as under: “150(1)Notwithstanding anything contained in section 149, the notice under assessment or reassessment or recomputation in consequence of or to give effect to any finding or direction contained in an order passed by any authority in any proceeding under this Act by way of appeal, reference or revision or by a Court in any proceeding under any other law. (2)The provisions of sub-section (1) shall not apply in any case where any such assessment, reassessment or recomputation as is referred to in that sub-section relates to an assessment year in respect of which an assessment, reassessment or recomputation could not have been made at the time the order which was the subject-matter of the appeal, reference or revision, as the case may be, was made by reason of any other provision limiting the time within which any action for assessment, reassessment or recomputation may be taken.” (2)The provisions of sub-section (1) shall not apply in any case where any such assessment, reassessment or recomputation as is referred to in that sub-section relates to an assessment year in respect of which an assessment, reassessment or recomputation could not have been made at the time the order which was the subject-matter of the appeal, reference or revision, as the case may be, was made by reason of any other provision limiting the time within which any action for assessment, reassessment or recomputation may be taken.” 9The reading of the aforesaid provisions of Section 150 of the Act makes it vividly clear that the notice under section 148 of the Act can be issued anytime for the purpose of making an assessment or reassessment or recomputation in consequence of or to give effect to any finding or direction contained in an order passed by the appellate authority in appeal. In the case at hand, the respondent authority has sought to reopen the assessment on the basis of the order dated 21[st] March, 2012 passed by Income Tax Appellate Tribunal in ITA No.3252/AHD/2001 and in ITA No.3251/AHD/2001. The relevant part of the order reads as under: “.. In case, the entire purchase is found to be bogus, then also in the present year, the addition cannot exceed the amount of Rs.7,40,977/- which has been debited to P&L in the present year and the balance can be considered in that year in which the assessee is claiming the consumption of raw-material out of opening stock in that year. Since this aspect was not examined by the AO, we set aside order of the learned CIT(A) on this issue and restore entire matter back to the AO for fresh decision in the light of the above discussions after providing adequate opportunity of being heard to the assessee. Ground No.1 is allowed for statistical purpose.” 10Thus, by the aforesaid order of the ITAT, the matter was remanded to the Assessing Officer for a fresh decision, but, as rightly submitted by the learned advocate, Mr Soparkar that no finding is recorded to the effect that the purchase was found to be bogus by the Appellate Tribunal. What the Tribunal has said in the aforesaid order is that in assessment year 2003-04, the addition, in any case, cannot exceed Rs.7,40,977 and thereafter the balance amount can be considered in the year in which the assessee i.e. petitioner claims as consumption of raw-material out of opening stock in that year. We are, therefore, of the opinion that the contention of learned advocate, Mr Soparkar that the notice was issued after eight years and therefore, it is illegal and invalid deserves to be accepted. The decisions of the -Honourable Supreme Court in the case of Incometax Officerv. Murlidhar Bhagwan Das (supra) and Eskay K’n’it (India)Ltd.(supra) relied upon by Mr Soparkar fortify the view which we have taken. The Apex Court on the construction of proviso to section 34(3) of the Income-tax Act, 1922, which is analogous to the provisions of Section 150 of the Act, has held as under: “The jurisdiction of the Appellate Tribunal or the Revisional Tribunal, as the provisions indicate, is confined only to the subject-matter which is under appeal or revision. The jurisdiction of the High Court or the Supreme Court under S. 66 or S. 66B, as the case may be, is far more limited and it is confined only to the questions referred to them. Obviously the questions referred by the Tribunal cannot exceed its jurisdiction. It “The jurisdiction of the Appellate Tribunal or the Revisional Tribunal, as the provisions indicate, is confined only to the subject-matter which is under appeal or revision. The jurisdiction of the High Court or the Supreme Court under S. 66 or S. 66B, as the case may be, is far more limited and it is confined only to the questions referred to them. Obviously the questions referred by the Tribunal cannot exceed its jurisdiction. It is, therefore, manifest that assessment or re-assessment made under the said sections or pursuant to the orders or directions made thereunder must necessarily relate to the assessment of the year under review, revision or appeal, as the case may be. It is important to remember that the proviso does not confer any fresh power upon the Income-tax Officer to make assessments in respect of escaped incomes without any time limit. It only lifts the ban of limitation in respect of certain assessments made under certain provisions of the Act and the lifting of the ban cannot be so construed as to increase the jurisdiction of the Tribunals under the relevant section. The lifting of the ban was only to give effect to the orders that may be made by the appellate, revisional or reviewing tribunal within the scope of its jurisdiction. If the intention was to remove the period of limitation in respect of any assessment against any person, the proviso would not have been added as a proviso to sub-s. (3) of S. 34 which deals with completion of an assessment, but would have been added to sub-s. (1) thereof.” 11The above view of the Apex Court is following by the Kerala High Court in the case of Consolidated Coffee Limitedv. Income Tax Officer(supra). 12Learned advocate, Mr Mehta has relied upon the judgment of this Court in the case of Kalyan Ala Barot(supra) to counter the contention of Mr Soparkar that the impugned notice is illegal as having been issued after eight years. The judgment of this Court relied upon by Mr Mehta would have no application to the facts of the case for the simple reason that in consequence of and with a view to give effect to the finding recording by the Commissioner of Income Tax (Appeals) in an appeal for the assessment year 1984-85, the assessing officer has issued notice under section 148 of the Act for income which was exclused from the total income of the assessee for the assessment year 1984-85 whereas, in the present case, by the impugned order, on the basis of the observations made by the Income Tax Appellate Tribunal it is proposed to reopen the assessment of the assessment year 2004-05. 13The sum and substance of the aforesaid discussion is that in the first place we are of the opinion that the ITAT has nowhere in its order recorded the finding that the purchase was bogus. Secondly, the ITAT had remanded the matter to the assessing officer to take a fresh decision in light of the observations made in the order in respect of assessment year 2003-04. In our considered opinion, the ITAT has not given any direction which would have any bearing on the subsequent years in case of the assessment of the assessee for the year 2003-04 is reconsidered upon remand. The contention of Mr Mehta, learned advocate for the respondent that the notice after eight years cannot be said to be invalid or without jurisdiction as it is given under Section 150 of the Act in consequence of and to give effect to the order of the ITAT cannot be accepted in view of the judgment of the Kerala High Court in the case of Consolidated Coffee Limited v. IncomeTax Officer (supra). Therefore, we are of the opinion that the impugned notice needs to be quashed on twin grounds, namely, that it is issued beyond the limitation prescribed under section 149 of the Act and that the impugned notice cannot be said to have bene given in consequence of or to given an effect to any finding or direction given by the ITAT. under section 149 of the Act and that the impugned notice cannot be said to have bene given in consequence of or to given an effect to any finding or direction given by the ITAT. 14In the premises aforesaid, the petitions succeed and are hereby allowed. The impugned notices are hereby quashed and set aside. Rule is made absolute in each of the petitions with no order as to costs. (A.J.DESAI, J.) mohd (A.G.URAIZEE, J.)