Income-tax---

----Reassessment--Information that income had escaped assessment-- Limitation---Extension of period of limitation---Effect of Ss. 150 and 153-- Reassessment in consequence of direction of Appellate Authority-- Limitation would not be extended if reassessment were barred on the date of order which was subject-matter of appeal---Observation of Tribunal that particular amount was assessable in assessment year 1977-78 and not in assessment year 1978-79---Observation amounted to direction within the meaning of S.150(2)---Order under appeal, passed in December, 1989-- Assessing Officer had no jurisdiction to issue notice under S.147(b) on that date---Reassessment was barred by limitation---Indian Income Tax Act, 1961; Ss.147, 148, 150 & 153.

A perusal of subsection (1) of section 150 of the Income Tax Act, 1961, makes it clear that a notice under section 148 can be issued at any time in consequence of or to give effect to, any finding or direction contained in an appellate order. Under the deeming, provision contained in Explanation 2 to section 153, an assessment on any income in any assessment year shall be deemed to have been made in consequence of or to give effect to, any finding or direction contained in any order under the Act, if such income has been excluded from the total income of the assessee in another assessment year. Explanation 2 containing the deeming provision in section 153 is applicable for the purpose of section 150 also. However, according to subsection (2) of section 150, the provisions of subsection (1) of that section shall not apply where, by virtue of any other provision limiting the time within which action for assessment or reassessment may be initiated, issuance of notice for such assessment or reassessment is barred on the date of the order, which is the subject-matter of appeal, reference or revision in which the finding or direction is contained. It would, thus, mean that an appellate or revisional authority cannot give a direction for assessment or reassessment which goes to the extent of conferring jurisdiction upon the Assessing Officer if his jurisdiction had ceased due to the bar of limitation. If the issuing of a notice for assessment or reassessment for a particular assessment year had become time-barred at the time of the order, which was the subject-matter of the appeal, the provisions of section 150(1) cannot be invoked for making an assessment or reassessment:

Held, that, in the instant case, the order of the Tribunal dated December 14, 1995, did not permit the assessment of the amount of compensation and interest in the assessment year 1978-79 on the ground that the income was assessable in the assessment year 1977-78. Thus, it was a finding within the meaning of subsection (1) of section 150 read with Explanation 2 below section 153(3). However, the period of four years from the end of the assessment year 1977-78 expired on March 31, 1982. Assessment for the assessment year 1978-79, which was the subject-matter of appeal before the Tribunal, was made in the case of N on March 23, 1989. The appellate order was passed by the Commissioner on December 27, 1989. Thus, the subject-matter of appeal before the Tribunal was the order of the Commissioner, dated December 27, 1989. On the date of the appellate order of the Commissioner, i.e., December 27, 1989, the Assessing Officer had no jurisdiction to issue a notice under section 148 for the assessment year 1977-78 inasmuch as the period of four years had already expired on March 31, 1982. In the case of P, the last assessment order of the assessment year 1978-79 had been passed by the Assessing Officer on January 30, 1989, and the appellate order annulling the assessment was passed by the Commissioner on March 29, 1990. In this case also, the period of limitation for the purpose of reassessment for the assessment year 1977-78 had expired on March 31, 1982. The appellate order of the Commissioner, dated March 29, 1990, was the subject-matter of appeal before the Tribunal. On that date, the Assessing Officer had no jurisdiction to issue a notice to the assessee under section 148 of the Act for the assessment year 1977=78. The notice issued by the Assessing Officer to the petitioners under section 148 of the Act for the assessment year 1977-78 were liable to be quashed inasmuch as they had been issued after the expiry of the period of limitation.

CIT v. G. Viswanatham (1988) 172 ITR 401 (AP) ref.

A.K. Mittal for Petitioner

R.P. Sawhney, Senior Advocate and Rajesh Bindal for Respondent.

JUDGMENT

N.K. AGRAWAL, J.---These are two petitions, raising identical questions and filed under Article 226/227 of the Constitution- for quashing the notice issued by the Assessing Officer under section 148 of the Income Tax Act, 1961 (for short, the "Act").

The petitioner, Nand Kishore, in C.W.P. No.18676 of 1997, received compensation on the acquisition of his land by the State of Haryana. His land had been acquired by the Improvement Trust, Ludhiana, in the year 1972 under the Land Acquisition Act, 1894. An award was announced by the Land Acquisition Collector on September 20, 1974. The possession of land was taken on November, 5, 1976. Compensation amounting to Rs.1,92,246.65 was offered on November 4, 1976. since Nand Kishore was a minor and was also demanding higher compensation, the Land Acquisition Collector, Improvement Trust. Ludhiana, by his order dated November 9, 1976, deposited the amount of compensation in the United Commercial Bank, Civil Lines, Ludhiana.

The Assessing Officer, while completing the assessment for the assessment year 1978-79 brought the amount of compensation to tax by his order, dated March 23, 1989. The assessee went in appeal before the Commissioner of Income-tax (Appeals), who, by his order dated December 27, 1989, annulled the assessment on the ground that the amount of compensation received by the petitioner was assessable in the year in which possession of land was taken by the State Government. The Commissioner relied upon the decisions of the Supreme Court while taking the view that title to the land vested in the State Government on the date of possession. Since possession of the land was taken on November 5, 1976, by the Improvement Trust, Ludhiana, the amount of compensation and interest was held to be not assessable in the year 1978-79.

The Revenue, against the order of the Commissioner, went in appeal before the Income-tax Appellate Tribunal, Chandigarh Bench (for short, the "Tribunal"), but did not succeed. The Tribunal, by its order, dated December 14, 1995, upheld the view taken by the Commissioner.

In the case of Smt. Parveen Kumari, legal heir and widow of Hari dm (Petition in C.W.P. No.18644 of 1997), the facts are similar except for the amount of compensation. Her husband, Hari Om, owned certain agricultural land, which was acquired by the Improvement Trust, Ludhiana, in the year 1972. An award was announced by the Land .Acquisition Collector on September 20, 1974. A sum of Rs.53,791.25 was paid on March 20, 1976, and another sum of Rs.96,123.32 was paid to her husband on March 20, 1978. Possession of the land was taken by the Improvement Trust on November 5,. 1976. The petitioner, not being satisfied with the award of the Land Acquisition Collector, filed an application under section 18 of the Land Acquisition Act seeking reference to the Land Acquisition Tribunal. The said Tribunal, by order dated April 23, 1986, enhanced the amount of compensation and also granted interest. The Land Acquisition Collector had divided the land into two blocks, whereas the Land Acquisition Tribunal divided the land into three blocks. The petitioner filed an application for review of the order. The application was allowed by the Tribunal by order dated September 9, 1987. The petitioner filed a petition (C.W.P. No.8997 of 1988) in this Court for further enhancement of compensation. The Improvement Trust, Ludhiana, also filed petitions (C.W.P. Nos.5551 of 1989 and 5547 of 1990) seeking reduction of compensation. .

The Assessing Officer initially assessed the petitioner ex parte under section 144 of the Act, by order dated December 31, 1983. That order was set aside under section 146 of the Act on March 5, 1984. The assessment was again framed under section 143(3) on March 27, 1986. That was also set aside in appeal. A fresh assessment was again made under section 143(3) on January 30, 1989, on the income of Rs.1,24,564. The petitioner went in appeal before the Commissioner of Income-tax (Appeals), who annulled the assessment on March 29, 1990. The Commissioner took the same view as he had taken in the case of Nand Kishore (petitioner in C.W.P. No.18676 of 1997). The Tribunal, on December 14, 1995, in the appeal filed by the Department, upheld the view taken by the Commissioner.

The Tribunal, while deciding the Department's appeal in the case of Nand Kishore, observed in paragraph 9 of the order as under:

"We have carefully considered the submissions of both the sides. We agree with learned counsel for the assessee that the capital gains is exigible in the year in which the possession was taken. The facts in the present case show that the possession was taken by the acquisition authorities on November 5, 1976. The Assessing Officer could have taken proceedings for assessment of the capital gains in the hands of the assessee-firm for the assessment year 1977-78. He, however, took action in the year relevant to the assessment year 1978-79. The case-law relied on by learned counsel for the assessee referred to above supports the case of the assessee that the relevant year for assessing capital gains in respect of compulsory acquisition of lands is the date of possession. We accordingly hold. that the Assessing Officer was not justified in assessing the capital gains in the hands of the assessee for the assessment year 1978-79 and the learned Commissioner of Income-tax (Appeals) was perfectly justified in annulling the assessment for the assessment year 1978 79."

The Income-tax Officer, on the basis of the aforesaid observation recorded by the Tribunal in its appellate order, issued notice to both the petitioners, namely, Nand Kishore and Parveen Kumari, under section 148 of the Act on March 1, 1996, to the file the return of income for the assessment year 1977-78. These notices are under challenge in the present writ petitions.

Shri A. K. Mittal, learned counsel for the petitioners, has argued that the notices under section 148 of the Act issued to the two petitioners are bad in law inasmuch as no assessment could be framed for the assessment year 1977-78 in the case of either of the petitioners as the assessment had become time-barred. It is also argued that section 147 is not attracted at all. The argument put forward by Shri Mittal is two-fold. First, the Tribunal did not give any direction to the Assessing Officer to initiate action for the purposes of reopening the assessment under section 147 of the Act for the assessment year 1977-78. In the absence of any clear direction by the Tribunal, there could not be any presumption that the Assessing Officer proceeded to initiate action under section 147 of the Act in pursuance of the order of the Tribunal. The, second limb of argument of Shri Mittal is that notices for reopening the assessment for the assessment year 1977-78 could not be issued in view the bar of limitation contained in section 150(2) of the Act.

On a perusal of the order of the Tribunal in the case of Nand Kishore, as reproduced above, it is found that the Tribunal has recorded a finding to the effect that the Assessing Officer could have taken proceedings for assessment of the capital gains in the hands of the assessee for the assessment year 1977-78. Since the action had been taken by the Assessing Officer to bring the amount of compensation to tax in the assessment year 1978-79, the assessment was held to be wholly unjustified and uncalled for. Therefore, the assessment made for the assessment year 1978-79 was annulled.

Shri R.P. Sawhney, learned senior counsel for the Department, has argued that the finding recorded by the Tribunal was clear and unambiguous and, in that light, the Assessing Officer was justified in exercising jurisdiction under section 147 of the Act for the purposes of reopening the assessment. Section 150(1) empowers the Assessing Officer to issue a notice under section 148 if it is found that reassessment is necessary in consequence of or to give effect to a finding or direction contained in an order passed by any authority in any proceeding under the Act. The Tribunal, while deciding the Department's appeal for the assessment year 1978-79, had explicity recorded a finding that the amount of compensation and interest was assessable in the preceding assessment year. Therefore, the Assessing Officer rightly exercised jurisdiction under section 147 read with section 150 of the Act.

It would be relevant to read section 150 of the Act:

"150. Provision for cases where assessment is in pursuance of an order on appeal. etc.--(1) Notwithstanding anything contained in section 149, the notice under section 148 may be issued at any time 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 any authority in any proceeding under this Act by way of appeal, reference or revision.

(2) The provisions of subsection (1) shall not apply in any case where any such assessment, reassessment or recomputation as is referred to in that subsection 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."

A perusal of subsection (1) of section 150 leaves no room for doubt that a notice under section 148 can be issued at any time in consequence of or to give effect to any finding or direction contained in an appellate order. An amendment in subsection (1) has been made with effect from April 1, 1989, whereby an order passed by a Court in any proceeding under any other law has also been brought within the scope of the said subsection. However, for the purposes of the assessment year 1977-78, the amendment is not relevant. The question; which arises for consideration is, whether the observation made by the Tribunal in its appellate order, dated December 14, 1995, is in the nature of a finding or direction and, if it was so, whether the Assessing Officer was within his jurisdiction to issue a notice under section 148 so as to give effect to that finding or direction.

Subsection (1) of section 150 removes the bar of limitation enacted in section 149 against the issuance of any notice under section 148. If a notice under section 148 is issued for the purpose of making an assessment, reassessment or recomputation in consequence of or to give effect to any finding or direction contained in an order passed by an authority in any proceeding under the Act by way of appeal, reference or revision, that would not be subject to any bar of limitation. Removal of the bar of limitation in the case of a notice issued under section 148 is confined to items in respect of which the finding or direction is given.

Explanations 2 and 3 to subsection (3) of section 153 of the Act are also relevant as they specify the circumstances where an assessment is deemed to be one made in consequence of or to give effect to any finding or direction contained in an appellate order.

Section 153 provides for the time limit for completion of an assessment or reassessment. In clause (ii) of subsection (3) of section 153, a similar provision has been enacted, as in section 150(1), so as to remove the bar of limitation where assessment, reassessment or recomputation is made in consequence of or to give effect to any finding or direction contained in an order passed in any appeal, reference or revision under the Act. Two other situations have also been specified in subsection (3), where the bar of limitation is not attracted. We are here not concerned with the other situations. Explanations 2 and 3 containing the deeming provisions in respect of an assessment or reassessment which is sought to be made in consequence of or to give effect to any finding or direction contained in an order under the Act read as under:

"Explanation 2.---Where, by an order referred to in clause (ii) of subsection (3), any income is excluded from the total income of the assessee for an assessment year, then, an assessment of such income for another assessment year shall, for the purposes of section 150 and this section, be deemed to be one made in consequence of or to give effect to any finding or direction contained in the said order.

Explanation 3.---Where, by an order referred to in clause (ii) of subsection (3), any income is excluded from the total income of the person and held to be the income of another person, then, an assessment of such income on such other person shall, for the purposes of section 150 and this section, be deemed to be one made in consequence of or to give effect to any finding or direction contained in the said order, provided such other person was given an opportunity of being heard before the said order was passed."

The deeming provision in Explanation 2 is relevant to the present case. Under the deeming provision contained in Explanation 2, an assessment of any income in any assessment year shall be deemed to have been made in consequence of or to give effect to any finding or direction contained in any order under the Act if such income has been excluded from the total income of the assessee in another assessment year. As would appear, Explanation 2, containing the deeming provision in section 153, is applicable for the purposes of section 150 also. Viewed in the light of this Explanation, subsection (1.) of section 150 leaves no room for any doubt so far as any finding or direction in any order under the Act is concerned. In other words, if any income has been excluded from the total income of the assessee is an assessment year under any appellate or other order, it would be open to the Assessing Officer to bring the excluded income to assessment in another assessment year.

The order of the Tribunal dated December 14, 1995, did not permit the assessment of the amount of compensation and interest in the assessment year 1978-79 on the ground that the income was assessable in the assessment year 1977-78. Thus, it was a finding within the meaning of subsection (1) of section 150 read with Explanation 2 below section 153(3) of the Act.

A similar matter came up for examination before the Andhra Pradesh High Court in CIT v. V. Viswanatham (1988) 172 ITR 401. In that case, the assessee had secured a decree from a Civil Court. He was held entitled under the decree to a certain amount with interest from the date of the decree. The Assessing Officer brought to tax the sum of Rs.27,340 received by the assessee, by way of interest in the assessment year 1966-67. The Tribunal noticed that the assessee had received under the Civil Court's decree a sum of Rs.48,949 as the amount of capital and also a sum of Rs.62,000 by way of interest at 12 percent. per, annum for a period of 11 years. The assessess's plea was that the interest amount of Rs.62;000 should be spread over and divided between the relevant years and only the proportionate interest amount should be included in the income of the assessment year 1966-67. The Tribunal rejected the argument and held that the entire interest amount of Rs.62,000 had accrued to the assessee, during the previous year relevant to the assessment year under appeal and ought to have been assessed accordingly. However, there was no appeal by the Department before the Tribunal. In the circumstances, the Tribunal merely dismissed the appeal preferred by the assessee. The Income-tax Officer reopened the assessment undo section 147 of the Act with a view to including the balance of the interest amount in the income of the said assessment year. The assessee objected to the reopening of the assessment. It was held by the High Court that the finding recorded by the Tribunal that the entire interest amount of Rs.62,000 had accrued in the assessment year 1966-67 was a finding when the meaning of section 150(1) of the Act.

The finding recorded by the Tribunal in the case in hand, in our opinion, is a finding as envisaged in subsection (1) of section 150 read with Explanation 2 below section 153(3) of the Act. The first plea raised by Shri A.K. Mittal, learned counsel for the petitioner, is, therefore, found to be devoid of any merit. It is held that the Assessing Officer was within his jurisdiction to issue a notice under section 148 of the Act to the petitioners for the purposes of reassessment so as to give effect to the finding contained in the appellate order of the Tribunal.

The second limb of the argument put forward by Shri A.K. Mittal is that under subsection (2) of section 150 of the Act, there is a bar of limitation and, in view of that bar, issuance of notice under section 148 by the Assessing Officer on March 1, 1996, was beyond the period of limitation.

Subsection (2) of section 150 lays down an exception and, where such an exception exists, the provisions of subsection (1) would not be applicable. Subsection (1) of section 150 shall not apply where the notice for reassessment for an assessment year had become barred by limitation at the time when the order, which was the subject-matter of appeal, revision or reference, was passed. Generally, the time limits prescribed in section 149 shall not apply where reassessment proceedings are initiated by a notice to give effect to any finding or direction, under subsection (.1) of section 150 of the Act. But, under subsection (2) of section 150, the period of limitation as laid down in section 149 shall come into play. If the action for assessment or reassessment cannot be initiated for an assessment year on the date of the order, which was a subject-matte of appeal, reference or revision, that would prevent the Assessing Officer from proceeding under section 148 of the Act.

According to subsection (2) of section 150, the provisions of subsection (-1) of that section shall not apply where, by virtue of any other provision limiting the time within which action for assessment or reassessment may be initiated, issuance of notice for such assessment or reassessment is barred on the date of the order, which is the subject-matter of appeal, reference or revision, in which the finding or direction is contained. It would, thus, mean that an appellate or revisional authority cannot give a direction for assessment or reassessment which goes to the extent of conferring jurisdiction upon the Assessing Officer if his jurisdiction had ceased due to the bar of limitation. If the issuing of a notice for assessment or reassessment for a particular assessment year had become time-barred at the time of the order, which was, the subject-matter of the appeal, the provisions of section 150(1) cannot be invoked to the aid of the Revenue for making an assessment or reassessment.

In CIT v. G. Viswanatham (1988) 172 ITR 401, the Andhra Preadesh High Court also examined the provisions of subsection (2) of section 150 of the Act and held that an action for reassessment was barred by time if such action could not be initiated at the time when the order, which was the subject-matter of appeal, was made.

Section 149 specifies the various time limits for issuing a notice under section 148 of the Act. Prior to the amendment effective from April 1, 1989, limitation of four years from the end of the relevant assessment year was provided in a case which fell under clause (b) of section 147 of the Act. Since this is a case where clause (b) of section 147 is attracted,, the relevant provisions in section 149(1)(b) will have to be seen, which read as under:

"149. Time limit for notice.--(1) No notice under section 148 shall be issued ....

(b) in cases falling under clause (b) of section 147, at any time after the expiry of four years from the end of the relevant assessment year."

In the light of the aforesaid provision specifying the period of limitation as four years from the end of the relevant assessment year, the case of the assessee for the purposes of issuance of notice from reassessment for the assessment year 1977-78 is found to be barred by limitation. The period of four years from .the end of the assessment year 1977-78 expired on March 31, 1982. The assessment for the assessment year 1978-79, which was the subject-matter of appeal before the Tribunal, was made in the case of Nand Kishore on March 23, 1989. The appellate order was passed by the Commissioner on December 27, 1989. Thus, the subject-matter of appeal before the Tribunal was the order of the Commissioner, dated December 27, 1989. On the date of the appellate order of the Commissioner, i.e., December 27, 1989, the Assessing Officer had no jurisdiction to issue a notice under section 148 for the assessment year 1977-78 inasmuch as the period of four years had already expired on March 31, 1982.

In the case of Parveen Kumari the last assessment order for the assessment year 1978-79 had been passed by the Assessing Officer on January 30, 1989, and the appellate order annulling the assessment was passed by the Commissioner on March 29, 1990. In this case also, the period of limitation for the purposes of reassessment for the assessment year 1977-78 had expired on March 31, 1982. The appellate order of the Commissioner, dated March 29, 1990, was the subject-matter of appeal before the Tribunal. On that date, the Assessing Officer had no jurisdiction to issue a notice to the assessee under section 148 of the Act for the assessment year 1977-78.

In the light of the provisions contained in subsection (2) of section 150, it cannot be said that the notices issued by the Assessing Officer to the petitioner under section 148 of the Act on March 1, 1996, were within the period of limitation. Even if it is assumed that the order of the assessment was the subject-matter of appeal before the Tribunal, that would also not help the Revenue. The orders of assessment in the cases of both the assessees for the assessment year 1978-79 were passed on January 30, 1989. Thus, the relevant date on which the period of limitation must be available is January 30, 1989. However, subsection (2) of section 150 refers to the subject-matter of the appeal, reference or revision. In that light, it is actually the appellate order of the Commissioner which can be said to be the subject- matter of appeal before the Tribunal, In that view of the matter, the order of the Commissioner, dated March 29, 1990, is the order which was the subject-matter of appeal before the Tribunal. The period of limitation should have been available on the date of the appellate order of the Commissioner. Since the notices under section 148 have been issued by the Assessing Officer to both the petitioners on March 1, 1996, these notices are beyond the period of limitation as laid down in section 149(1)(b) read with section 150(2) of the Act.

As a result of the above discussion, both the writ petitions are allowed. The notices issued by the Assessing Officer to the petitioners under section 148 of the Act for the assessment year 1977-78 are quashed inasmuch as they have been issued after the expiry of the period of limitation. No order as to costs.

M.B.A./19/FC

Petition allowed.