Sri KuriaKose Sabu v. Commissioner of Income Tax (Appeals) and Deputy Commissioner of Income Tax, Circle-I, Ennikkattill Estate, Thiruvalla

## **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, PUBLIC LIBRARY BUILDING, SASTHRI ROAD, KOTTAYAM-686001.** ## **2. THE DEPUTY COMMISSIONER OF INCOME TAX** ## **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 notice issued by the Commissioner of Income Tax (Appeals) pursuant to an order passed by the Income Tax Appellate Tribunal, Cochin Bench in ITA No.160/2010 in respect of the assessment year 2005-06. 2. The main contention urged by the petitioner is that the Tribunal's order (Ext.P3) has been issued as early as on 21/5/2010 by which the Commissioner of Income Tax (Appeals) was directed to consider the claim of the assessee in respect of the rate to be adopted or the quantum of estimation to be made. Petitioner submits that though the order was served on the petitioner as early as on 7/6/2010 and served on the appellate authority on 4/6/2010, no steps were taken within nine months as contemplated under Section 153(2A) of the Income Tax Act, 1961 and therefore the proceedings pursuant to Ext.P5 are barred by limitation. 3. Learned counsel submits that in so far as the appellate authority had received the order Ext.P3 by 4/6/2010 and no steps ## W.P(C) No.13854/16 ## -:2:- were taken to hear the appeal and decide the same within nine months, the bar of limitation squarely applies and therefore it is not open for the appellate authority, who exercised the power of the assessing authority, to proceed with the appeal in terms of Ext.P5 notice dated 7/1/2016. 4. On the other hand, learned standing counsel appearing for the respondents submits that Section 153(2A) has no application to the facts in issue as the Tribunal has only remitted the matter back to the Appellate Authority for a rehearing in regard to the estimation to be made and the appellate authority is not bound by the restriction imposed under Section 153(2A). 5. Heard the learned counsel for the petitioner and the learned standing counsel appearing for the respondents. 6. Learned counsel for the petitioner places reliance upon the 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 single Judge of this Court. The issue considered was relating the scope and effect of Section 153(2A). It was held that even in a case W.P(C) No.13854/16 ## -:3:- where only one issue has been directed to be considered afresh, the limitation under Section 153(2A) would apply. That was a case in which the Tribunal had remitted the matter back to the assessing officer to reconsider the matter. There is no doubt regarding the proposition in respect of Section 153(2A) if the Tribunal had remitted the matter back to the assessing officer to conduct a fresh assessment in the matter. But, here the question is, whether the aforesaid provision can be made applicable in an instance where the matter is remitted back to the appellate authority. Section 153(2A) reads as under:- _“Notwithstanding anything contained in subsections (1) (1A), (1B) and 2, in relation to the assessment year commencing on the 1st day of April, 1971, and any subsequent assessment year, an order of fresh assessment in pursuance of an order under Section 250 or Section 254 or Section 263 or Section 264, setting aside or cancelling an assessment, may be made at any time before the expiry of one year from the end of the financial year in which the order under Section 250 or Section 254 is received by the Chief Commissioner or Commissioner or, as the case may be, the order under Section 263 or Section 264 is passed by the Chief Commissioner or Commissioner:_ _Provided that where the order under Section_ ## W.P(C) No.13854/16 ## -:4:- _250 or Section 254 is received by the Chief Commissioner or Commissioner or, as the case may be, the order under Section 263 or Section 264 is passed by the Chief Commissioner or Commissioner, on or after the 1st day of April, 1999, but before the 1st day of April, 2000, such an order of fresh assessment may be made at any time up to the 31st day of March, 2002:_ _(Provided further that where the order under Section 254 is received by the Chief Commissioner or Commissioner or, as the case may be, the order under Section 263 or Section 264 is passed by the Commissioner on or after the 1st day of April, 2005 (but before the 1st day of April, 2011), the provisions of this sub-section shall have effect as if for 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 the period is limited to nine months. 2[nd] proviso reads as under:- _“Provided further that where the order under section 254 is received by the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner or, as the case may be, the order under section 263 or section 264 is passed by the Principal Commissioner or Commissioner on or after the 1[st] day of April, 2005 but before the 1[st] day of April, 2011, the provisions_ W.P(C) No.13854/16 -:5:- _of this sub-section shall have effect as if for the words “one year”, the words “nine months” had been substituted.”_ 7. The statutory provision indicates that if a direction has been issued by the appellate authority for a fresh assessment on setting aside or cancelling an assessment, the limitation provided under the statute applies. The short question would be (1) whether the Tribunal had set aside or cancelled the assessment and (2) whether the remittance made to the appellate authority would amount to a direction for passing an order of fresh assessment. There cannot be any dispute regarding the fact that if the remittance is to the assessing authority after setting aside or cancelling the assessment, direction can be issued to have a fresh assessment, in which event, the period of limitation squarely applies. But as already stated, the facts in this case slightly differs from the exact terms of the words used in the statute in so far as the matter has been remitted back to the appellate authority and that too for the purpose of estimation. 8. The argument of the learned counsel for the petitioner is that the word 'assessment' cannot be given a limited meaning W.P(C) No.13854/16 ## -:6:- whereas it bears a very comprehensive meaning and therefore if the appellate authority is directed to make an estimation, it has to be considered that the direction was to make a fresh assessment in which event the appellate authority will be exercising the power of the assessing officer and therefore Section 153(2A) will have to be applied even in such a situation. 9. Reference is also made to the judgment of the Apex Court in _**Kalawati Devi Harlalka v. Commissioner of IncomeTax, West Bengal**_ [1967 (66) ITR 680]. In this judgment, the Apex Court considered the scope and effect of Section 297 of the 1961 Act especially in the light of the repeal of 1992 Act. Section 297(a) of the 1961 Act indicated that where a return of income has been filed before the commencement of the Act by any person for any assessment year, proceedings for the assessment of that person for that year may be taken and continued as if the Act had not been passed. A question arose as to whether the said provision will apply when the proceedings of assessment was pending before the Commissioner in a revision as contemplated under Section 33B of the 1922 Act. In that background, the Apex Court held that Section 297(2)(a) of the 1961 Act includes within W.P(C) No.13854/16 ## -:7:- its scope a proceeding under Section 33B of the 1922 Act and the word 'assessment' does have, subject to the context, a very wide meaning. It is further held that the word assessment can bear a very comprehensive meaning. It can comprehend the whole procedure for ascertaining and imposing liability upon the tax payer. It is further held that Section 297 is meant to provide as far as possible for all contingencies which may arise out of the repeal of the 1922 Act. It deals with pending appeals, revisions etc. It deals with non-completed assessments pending at the commencement of the 1961 Act and assessment to be made after the commencement of the 1961 Act, as a result of returns of income 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 had elaborated on the power of the appellate authority. It is held that appellate authority has all the powers which the original authority may have in deciding the question subject to the restrictions of limitation, if any, prescribed by the statutory provisions. In the absence of any statutory provision, the appellate authority is ## W.P(C) No.13854/16 -:8:- vested with all the plenary powers which the subordinate authority may have in the matter. 11. In _**Commissioner of Income Tax, U.P, Lucknow v. Kanpur Coal Syndicate, Kanpur**_ (1964 (53) ITR 225) also, the Apex Court held that the Appellate Assistant Commissioner has plenary powers in disposing of an appeal and his power is coterminous with that of the Income Tax Officer. 12. On the other hand, learned standing counsel appearing for the respondents placed reliance on the judgment in _**Commissioner of Income Tax v. Nirbheram Daluram**_ (1997 (224) ITR 610) wherein the Apex Court while considering the question regarding the powers of the Appellate Assistant Commissioner while dealing with appeals against orders of Assessing 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 wide plenary powers and its power cannot be confined to the powers mentioned in Section 251 alone. 13. Having regard to the aforesaid submissions made on either side, the short question to be considered is regarding the W.P(C) No.13854/16 -:9:- applicability of Section 153(2A) to the present facts of the case. 14. There is no dispute regarding the fact that the Tribunal had remitted the matter to the Appellate Authority. Perusal of the Tribunal's order at Ext.P3 would show that the issue projected was regarding the disclosure of net profit. It is observed that the assessee has in comparative or equivalent terms, disclosed a net profit of 7% as against 4.42% considered as disclosed by it by the Revenue estimating it at 8%. It is further indicated that the same at once validates the net profit rate of 8% estimated by the Revenue while on the other hand impels the adoption of profit as disclosed. The difference between the two being marginal, it would be appropriate to adopt the latter subject to other incidental facts. The order at para 5.22, which is relevant, reads as under:- _“5.22 Under the given facts and circumstances, we therefore, only consider it fit to restore the matter back to the file of the Id. CIT(A) to allow an opportunity to the assessee to substantiate its case on the rate to be adopted or the quantum of estimation with reference to the said Statement or other materials. This is as we have found the said Statement as crucial and relevant for enabling proper estimation, and consequently, assessment_ ## W.P(C) No.13854/16 ## -:10:- _of the profits for the year, and which would require its examination, including as to its authentication and verification, with reference to our foregoing observations. This is also in view of the fact that the Revenue authorities, as afore-stated, have not furnished any basis for the estimation as made, which, there is no gainsayng, is a matter of correct appreciation of facts, subject to judicial review. The adoption of the correct profit/income is a matter separate from the rejection of the accounts and, warrants proper adjudication, which we find as absent in the instant case, with both the parties not satisfying their respective duties in the matter. The Id. CIT (A) shall cause such inquiry and consequent report in the matter from the AO as he deems relevant for the purpose. We decide accordingly.”_ 15. Perusal of the above order by itself would show that the Tribunal never intended the matter to be remitted for a fresh assessment whereas direction was issued to the appellate authority to give an opportunity to substantiate his case on the rate to be adopted or the quantum of compensation with reference to the said statement or other materials. Further observations made in the order also indicates that the Tribunal directed the appellate authority to conduct such enquiry and obtain consequent report in the matter from the assessing officer W.P(C) No.13854/16 ## -:11:- as he deems relevant for the purpose. 16. Reading of Ext.P3 order would indicate that the Tribunal has not set aside or cancelled the assessment order. An opportunity was given to the petitioner to substantiate his contention on merits and, if found necessary, the appellate authority was entitled to exercise the appellate powers to decide accordingly. Therefore, this is not a case in which the Tribunal had called upon fresh assessment order to be passed whereas the contention of the petitioner in regard to the estimation was to be considered and the appeal to be decided. No doubt, while exercising the power, Commissioner (Appeals) can exercise the power as contemplated under Section 251(1)(a) by confirming, reducing, enhancing or annulling the assessment. 17. Taking into account all the factual aspects involved in the matter, I do not think that this is an instance where a notice issued by the appellate authority can be set aside on the ground of limitation as contemplated under 153(2A). In the result, petitioner is not entitled for any relief as sought for in the writ petition. The appellate authority is entitled to proceed further pursuant to Ext.P5. Since there was a stay of W.P(C) No.13854/16 **==> picture [27 x 9] intentionally omitted <==** further proceedings pursuant to Ext.P5, the appellate authority shall issue fresh notice to the petitioner and take further steps in accordance with law. Writ petition is dismissed. Sd/- **A.M. SHAFFIQUE, JUDGE** Rp11/11/2016 //True Copy// P.S to Judge