High Court of KeralaDivision Bench2019-01-18Appeals dismissed; remand for limitation to be ...

Nahid Shaffi & Nilofer Hameed v. Income Tax Officer, Kochi and Commissioner of Income Tax, Kochi

Case / Petition Number:ITA Nos. 1349 of 2009; 1350 of 2009; 1351 of 2009; 1353 of 2009

Case Details & Bench

Court: High Court of Kerala
Hon'ble Judges: K. Vinod Chandran
Ashok Menon
Judgment Date: 2019-01-18
Court Decision / Holding: We hence answer the questions of law raised here against the assessee and in favour of the Revenue and reject the appeals. However, we make it clear that the remand order in so far as the limitation is concerned, would be left open for consideration by the First Appellate Authority.
Final Disposition: Appeals dismissed; remand for limitation to be considered by the First Appellate Authority

Parties to the Case

Appellants / Petitioners

Mrs. Nahid Shaffi
Mrs. Nilofer Hameed

Respondents

Income Tax Officer, Kochi, Ward-1(3), Range-2, Kochi
Commissioner of Income Tax, Kochi

Legal Representation & Advocates

Counsels for Petitioners

• Ms. Preetha S. Nair
• Sri Anil D. Nair
• Sri E.K. Nandakumar (Sr.)

Counsels for Respondents

• Sri P.K. Ravindranatha Menon (Sr.)
• Sri Jose Joseph, SC

Case Synopsis & Summary

Two assessees, partners in a firm, challenge assessments arising from their firm’s Settlement Commission order under Section 245D of the Income Tax Act, 1961. The Commission’s order enhanced the partners’ income, but the assessees did not file returns as directed. The Assessing Officer issued notices under Section 148 with sanction under Section 151 and completed assessments under Section 144. The First Appellate Authority (FAA) noted two taken steps under Section 148 and, alternatively, argued that Section 155(1)(C) should govern instead of Section 148. Relying on the Supreme Court decision in Commissioner of Income Tax v. Dalmia Manganese Corporation (236 ITR 46), the FAA ruled in the assessees’ favour on the limitation issue. The Tribunal disagreed, observing that Dalmia Manganese concerned withdrawal of development rebate in a regular assessment and that there was no regular assessment in this case; thus Section 148 was the proper channel and Section 155 applies only to completed assessments of a partner, with the share of the firm under Section 245D(4) not included in the partner’s completed assessment. The High Court agrees with the Tribunal, rejects the appeals, and clarifies that the remand on limitation would be left open for FAA consideration. The decision sustains the Revenue’s position and delineates the proper application of Sec. 148 versus Sec. 155 in this context.

Provisions of Law Cited

Section 245D of the Income Tax Act, 1961Section 148 of the Income Tax Act, 1961Section 151 of the Income Tax Act, 1961Section 144 of the Income Tax Act, 1961Section 155(1)(C) of the Income Tax Act, 1961Section 154 of the Income Tax Act, 1961Section 245D(4) of the Income Tax Act, 1961

Submissions & Arguments

Contentions of Appellants / Petitioners

The appellants contended that two separate Section 148 notices were issued following the Settlement Commission’s order under Sec. 245D; in the absence of a completed regular assessment, they argued that Section 155(1)(C) should govern instead of Section 148. Relying on Commissioner of Income Tax v. Dalmia Manganese Corporation (236 ITR 46), they submitted that the principle of applying the correct statutory mechanism applies, and FAA’s reliance on Dalmia Manganese is misplaced where no regular assessment exists. They sought dismissal of the notices on limitation or, alternatively, remand to the FAA to decide limitation in light of old assessment acts, preserving the right to argument on sub-issues. They claimed Section 148 cannot validly be invoked where there is no completed assessment and that the time-bar must be resolved in their favour.

Contentions of Respondents

The Revenue argued the notices under Section 148 were rightly issued since the Settlement Commission’s order triggered reopening; Section 155 is applicable only to completed partner assessments, and the share of the firm under Sec. 245D(4) is not included in a partner’s completed assessment. The Tribunal’s distinguishing of Dalmia Manganese on facts was correct; the mechanism under Section 148 remains the proper recourse, while limitation issues are to be considered by the FAA on remand.

Cited Precedents (1)

Case Name	Citation	Treatment	Explanation
Commissioner of Income Tax v. Dalmia Manganese Corporation	236 ITR 46 (SC)	Distinguished	The court distinguished this decision since it dealt with withdrawal of development rebate in a regular assessment context; the present case involved no regular assessment, so the principle did not apply.

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Extracted Judgment Text

Exact text extracted from official judgment records.

## **IN THE HIGH COURT OF KERALA AT ERNAKULAM** # **PRESENT** ## **THE HONOURABLE MR.JUSTICE K.VINOD CHANDRAN** **&** **THE HONOURABLE MR. JUSTICE ASHOK MENON** **FRIDAY, THE 18TH DAY OF JANUARY 2019 / 28TH POUSHA, 1940** ## **ITA. No.1349 of 2009** **AGAINST THE ORDER IN ITA NO.1310/2004 OF THE INCOME TAX APPELLATE TRIBUNAL, COCHIN BENCH DATED 30.10.2006** ## **APPELLANT/RESPONDENT:** **MRS.NAHID SHAFFI, NO.15, SARASWATHY, IST FLOOR,, DENA BANK COLONY, GANGA NAGAR, BANGALORE-560 032.** **BY ADVS. SMT.PREETHA S.NAIR SRI.ANIL D. NAIR SRI.E.K.NANDAKUMAR (SR.)** ## **RESPONDENTS/APPELLANT:** **1 INCOME TAX OFFICER KOCHI. WARD-1(3), RNAGE-2, KOCHI.** **2 COMMISSIONER OF INCOME-TAX KOCHI.** **BY ADVS. SRI.P.K.RAVINDRANATHA MENON (SR.) SRI.JOSE JOSEPH, SC, FOR INCOME TAX** **THIS INCOME TAX APPEAL HAVING BEEN FINALLY HEARD ON 18.01.2019, ALONG WITH ITA.1350/2009, ITA.1351/2009, ITA.1353/2009, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:** ITA. No.1349 of 2009 etc. 2 ## **IN THE HIGH COURT OF KERALA AT ERNAKULAM** ## **PRESENT** **THE HONOURABLE MR.JUSTICE K.VINOD CHANDRAN** **&** **THE HONOURABLE MR. JUSTICE ASHOK MENON** **FRIDAY, THE 18TH DAY OF JANUARY 2019 / 28TH POUSHA, 1940** ## **ITA. No.1350 of 2009** **AGAINST THE ORDER IN ITA NO.1311/2004 OF THE INCOME TAX APPELLATE TRIBUNAL, COCHIN BENCH DATED 30.10.2006** ## **APPELLANT/RESPONDENT:** **MRS.NAHID SHAFFI, NO.15, SARASWATHY, IST FLOOR,, DENA BANK COLONY, GANGA NAGAR, BANGALORE-560 032.** **BY ADVS. SRI.E.K.NANDAKUMAR SMT.PREETHA S.NAIR** ## **RESPONDENTS/APPELLANT:** **1 INCOME TAX OFFICER KOCHI. WARD-1(3), RNAGE-2, KOCHI.** **2 COMMISSIONER OF INCOME-TAX KOCHI.** **BY ADVS. SRI.P.K.RAVINDRANATHA MENON (SR.) SRI.JOSE JOSEPH, SC, FOR INCOME TAX** **THIS INCOME TAX APPEAL HAVING BEEN FINALLY HEARD ON 18.01.2019, ALONG WITH ITA.1349/2009, ITA.1351/2009 & ITA.1353/2009, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:** ITA. No.1349 of 2009 etc. 3 # **IN THE HIGH COURT OF KERALA AT ERNAKULAM** # **PRESENT** **THE HONOURABLE MR.JUSTICE K.VINOD CHANDRAN** **&** **THE HONOURABLE MR. JUSTICE ASHOK MENON** **FRIDAY, THE 18TH DAY OF JANUARY 2019 / 28TH POUSHA, 1940** ## **ITA. No.1351 of 2009** **AGAINST THE ORDER IN ITA NO.154/2005 OF THE INCOME TAX APPELLATE TRIBUNAL, COCHIN BENCH DATED 30.10.2006** ## **APPELLANT/RESPONDENT:** **MRS. NILOFER HAMEED S-4, MONARCH RESIDENCE, ST.JOHN'S CHURCH ROAD, BANGALORE.** **BY ADVS. SMT.PREETHA S.NAIR SRI.ANIL D. NAIR SRI.E.K.NANDAKUMAR (SR.) SRI.JOSE JOSEPH, SC, FOR INCOME TAX** ## **RESPONDENTS/APPELLANT:** **1 INCOME TAX KOCHI WARD-2(3), RANGE-2, KOCHI.** **2 COMMISSIONER OF INCOME-TAX KOCHI.** **BY ADV. SRI.P.K.RAVINDRANATHA MENON (SR.)** **THIS INCOME TAX APPEAL HAVING BEEN FINALLY HEARD ON 18.01.2019, ALONG WITH ITA.1349/2009, ITA.1350/2009 & ITA.1353/2009, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:** ITA. No.1349 of 2009 etc. 4 **IN THE HIGH COURT OF KERALA AT ERNAKULAM** # **PRESENT** **THE HONOURABLE MR.JUSTICE K.VINOD CHANDRAN** **&** **THE HONOURABLE MR. JUSTICE ASHOK MENON** **FRIDAY, THE 18TH DAY OF JANUARY 2019 / 28TH POUSHA, 1940** ## **ITA. No.1353 of 2009** **AGAINST THE ORDER IN ITA NO.153/2005 OF THE INCOME TAX APPELLATE TRIBUNAL, COCHIN BENCH DATED 30.10.2006** ## **APPELLANT/APPELLANT:** **MRS. NILOFER HAMEED S-4, MONARCH RESIDENCE, ST.JOHN'S CHURCH ROAD, BANGALORE.** **BY ADVS. SMT.PREETHA S.NAIR SRI.ANIL D. NAIR SRI.E.K.NANDAKUMAR (SR.)** ## **RESPONDENTS/RESPONDENTS:** **1 INCOME TAX OFFICER WARD-2(3), RANGE-2, KOCHI. 2 COMMISSIONER OF INCOME-TAX KOCHI.** **BY ADVS. SRI.P.K.RAVINDRANATHA MENON (SR.) SRI.JOSE JOSEPH, SC, FOR INCOME TAX** **THIS INCOME TAX APPEAL HAVING BEEN FINALLY HEARD ON 18.01.2019, ALONG WITH ITA.1349/2009, ITA.1350/2009 & ITA.1351/2009, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:** ITA. No.1349 of 2009 etc. 5 ## **JUDGMENT** ## **K. Vinod Chandran, J.** **Two assessees, who are partners of a firm, are before us in the above two appeals arising from the assessment years 1986-1987 and 19881999. The short facts required for consideration of the appeals are that the firm, in which the appellants were partners, was before the Settlement Commission, who had passed an order under Section 245D of the Income Tax Act, 1961 [for brevity, 'the Act']. The order passed by the Settlement Commission resulted in enhancement of the income of the partners. The partners did not file any return pursuant to the order passed by the Settlement Commission. In such circumstances, the Assessing Officer issued notice to the partners under Section 148 of the Act, with sanction obtained under Section 151 and assessment completed under Section 144.** **2. The proceedings were completed after affording the assessee with an opportunity,** ITA. No.1349 of 2009 etc. 6 **which was not availed of. We find from the assessment order that the assessee's had appeared before the Assessing Officer and sought adjournment, but then did not subsequently appear. The Assessing Officer took the income of the assessee as found by the Settlement Commission and completed the assessment. The ground raised in first appeal was that there were two notices issued under Section 148 and the assessment was barred by limitation. However, before the First Appellate Authority, this was not urged and an additional ground was raised. The ground so raised was that the Assessing Officer ought to have proceeded under Section 155(1)(C) of the Act and not under Section 148. The First Appellate Authority found in favour of the assessee relying on a decision of the Hon'ble Supreme Court in** _**Commissioner of Income Tax v. Dalmia Manganese Corporation [236 ITR 46 (SC)].**_ **3. The Tribunal found that the subject** ITA. No.1349 of 2009 etc. 7 **matter in** _**Dalmia Manganese Corporation**_ **[supra] was relating to the withdrawal of development rebate allowed by the Assessing Officer in the regular assessment order. Subsequently, proceedings were taken under Section 154 of the Act for rectification of the assessment. The Hon'ble Supreme Court found that when there is a specific provision in so far as re-opening of assessment, there could be no resort made to a general provision for rectification.** **4. The Tribunal found that the dictum does not apply in the present case, when there was no regular assessment made. Resort could only be had to Section 148, since Section 155 applies only in the case of a completed assessment of a partner and the share of the income of the firm as found in an order passed under Section 245D(4)[clause (c) of Section 155(1)] is not included in the partners completed assessment. We do not think any interference can be made to the order of the Tribunal, since the question** ITA. No.1349 of 2009 etc. 8 **has been answered perfectly in tune with the law. We hence answer the questions of law raised here against the assessee and in favour of the Revenue and reject the appeals. However, we make it clear that the remand order in so far as the limitation is concerned, would be left open for consideration by the First Appellate Authority.** **Sd/-** **K. VINOD CHANDRAN** **JUDGE Sd/ASHOK MENON JUDGE** sp/22/01/19 ITA. No.1349 of 2009 etc. 9 ## **APPENDIX OF ITA 1349/2009** **PETITIONER'S EXHIBITS:** **ANNEXURE A-A TRUE COPY OF THE ASSESSMENT ORDER DATED 07.10.1997. ANNEXURE B-A TRUE COPY OF THE ORDER OF THE CIT (APPEALS). DATED 21.09.2004. ANNEXURE C-A TRUE COPY OF THE COMMON ORDER OF THE INCOME TAX APPELLATE TRIBUNAL DATED 30.10.2006.** ITA. No.1349 of 2009 etc. 10 ## **APPENDIX OF ITA 1350/2009** **PETITIONER'S EXHIBITS:** **ANNEXURE A A TRUE COPY OF THE ASSESSMENT ORDER DATED 07.10.1997. ANNEXURE B A TRUE COPY OF THE ORDER OF THE CIT (APPEALS) DATED 21.09.2004. ANNEXURE C A TRUE COPY OF THE COMMON ORDER OF THE INCOME TAX APPELLATE TRIBUNAL DATED 30.10.2006.** ITA. No.1349 of 2009 etc. 11 ## **APPENDIX OF ITA 1351/2009** **PETITIONER'S EXHIBITS:** **ANNEXURE-A** **A TRUE COPY OF THE ASSESSMENT ORDER.** **ANNEXURE-B** **A TRUE COPY OF ORDER OF THE CIT (APPEALS) DATED 15/10/2004.** **ANNEXURE-C** **TRUE COPY OF THE COMMON ORDER OF INCOME TAX APPELLATE TRIBUNAL DATED 30/10/2006** ITA. No.1349 of 2009 etc. 12 ## **APPENDIX OF ITA 1353/2009** **PETITIONER'S EXHIBITS:** **ANNEXURE A A TRUE COPY OF THE ASSESSMENT ORDER DATED 07.10.1997.** **ANNEXURE B A TRUE COPY OF THE ORDER OF THE CIT (APPEALS) DATED 15.10.2004.** **ANNEXURE C A TRUE COPY OF THE COMMON ORDER OF THE INCOME TAX APPELLATE TRIBUNAL DATED 30.10.06**