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2009 DIGILAW 1094 (KER)

Commissioner Of Income Tax, Cochin v. TCM LTD.

2009-11-17

C.N.RAMACHANDRAN NAIR, V.K.MOHANAN

body2009
Judgment :- Ramachandran Nair, J. The question raised is whether the Tribunal was justified in holding that the revision of respondent's assessment for the year 1979-80 by the Assessing Officer under Section 150 of the Income Tax Act (hereinafter called "the Act") on 24.7.1998 is beyond the period of limitation prescribed under Section 150(2) read with Section 149 of the Act. We have heard Standing Counsel appearing for the appellant and Advocate Sri.S.Arun Raj, appearing for the respondent-assessee. The facts in this case are quite peculiar and unique because the very same income i.e. refund due to the assessee from K.S.E.B., though assessed in 1977-78, was offered for payment of tax by the assessee by voluntarily filing return for the assessment year 1979-80. The Assessing Officer initially took the stand that the amount was assessable on accrual basis based on declaration of eligibility for refund by the Supreme Court in the Electricity Tariff case and therefore, it was assessed for the assessment year 1977-78. However, the assessee contested the assessment for 1977-78 on the ground that refund is assessable only for the assessment year 1979-80. The assessee consistent with their own stand filed return for the assessment year 1979-80, wherein the refund received from KSEB of Rs.5,58,598/- was returned for assessment. However, by the time assessment for 197980 was taken up, the C.I.T. (Appeals) decided the appeal for 1977-78 in favour of the department i.e. by sustaining the assessment of the very same amount for the assessment year 1977-78. This prevented the Assessing Officer from including the very same income in the assessment for 1979-80, even though assessee had returned the income and offered to pay the tax. It is pertinent to note that the assessment for 197980 was completed by the Assessing Officer excluding the income returned by the assessee by stating as follows: "In the return, the assessee has added to the business income of the year, power charges refund of Rs.5,58,598/- for prior years. In the assessment for the assessment year 1977-78 this amount has been included and assessed. That inclusion was disputed by the assessee but then the Commissioner of Income Tax (Appeals) upheld the Department's stand on the assessability in that year of this amount. Hence Rs.5,58,598/- will be excluded in this assessment. In the assessment for the assessment year 1977-78 this amount has been included and assessed. That inclusion was disputed by the assessee but then the Commissioner of Income Tax (Appeals) upheld the Department's stand on the assessability in that year of this amount. Hence Rs.5,58,598/- will be excluded in this assessment. If this amount falls to be excluded from the total income (as a result of the vicissitude in the further proceedings for the assessment year 1977-78), it will be considered for inclusion here." 2. While the assessee pursued appeal against assessment sustained for the assessment year 1977-78 before the Tribunal, they did not challenge the conditional order passed by the Assessing Officer for 1979-80 wherein the Assessing Officer left freedom to himself to revise the assessment to include the very same income based on return filed by the assessee for the assessment year 1979-80 in case assessment of the very same amount for 1977-78 gets cancelled in the course of proceedings under the statute. Ultimately, the assessee's claim for exclusion of the income for the assessment year 1977-78 was upheld by this court in Reference Case decided on 22.5.1998 and the said decision is reported in 237 ITR 821 (TRAVANCORE CHEMICAL AND MFG. CO. LTD. VS. COMMISSIONER OF INCOME-TAX). 3. After this court rendered the judgment on 22.5.1998, the Assessing Officer issued notice under Section 148 to the assessee on 24.7.1998 within the time prescribed under Section 149 with reference to the judgment rendered by this court for the assessment year 1977-78. Even though revised assessment was passed based on the condition stated in the original assessment order and based on the income returned by the assessee, assessee contested the revised assessment on the ground that the same having been passed beyond four years from the end of the year, is time barred under Section 150(2) of the Income Tax Act. The C.I.T.(Appeal) in first appeal dismissed the assessee's contest on limitation by holding that the order of the Tribunal which was the subject matter of reference before this court for the assessment year 1977-78 was the first order dated 30.1.1982, with reference to which, the revision of assessment for 1979-80 was within time. However, the final judgment of this court in the Reference Case was in fact rendered against the Tribunal's revised order (second order) dated 30.12.1992. However, the final judgment of this court in the Reference Case was in fact rendered against the Tribunal's revised order (second order) dated 30.12.1992. Therefore, the assessee filed second appeal against the order of the C.I.T. (Appeal) contending that limitation has to be reckoned with reference to second order ofthe Tribunal. The Tribunal by relying on decision of this court in INCOME-TAX OFFICER VS. HATSU TAKAYANAGI AND OTHERS reported in (2001) 249 ITR 19 and that of the Supreme Court in K.M.SHARMA VS. INCOME TAX OFFICER reported in 254 ITR 772 held that assessment is not tenable under Section 150(1) of the Act as the Officer has not established that the assessment was within time prescribed under subclause (2) of Section 150. It is against this order the Revenue has filed this appeal. 4. During hearing Standing Counsel referred to the original assessment order passed by the Assessing Officer for 1979-80 which is extracted above and contended that the officer had in fact made the original assessment itself conditional and as and when the assessment for 1977-78 got finalised by judgment of this court in the Reference Case, the Assessing Officer was free to revise the assessment by applying limitation under Section 149 with reference to the judgment of this court. Counsel appearing for the respondent-assessee on the other hand relying on decision of this court and that of the Supreme Court abovereferred contended that limitation for revision of assessment under Section 149 should be reckoned with reference to the date of second order of the Tribunal against which reference was taken to this court by the assessee. Even though the interpretation placed on sub-section (2) of Section 150 by the assessee's counsel is tenable, we are of the view that limitation has no application in this particular case because the original assessment itself was a conditional order passed by the officer reserving right to revise it after the assessment for 1977-78 attains finality. It is seen that assessee themselves offered the income for tax for the assessment year 1979-80 and inspite of inclusion of the amount in the return filed by the assessee, the officer could not assess the same because he had already assessed the very same amount for 1977-78, though contested by the assessee in appeal. It is seen that assessee themselves offered the income for tax for the assessment year 1979-80 and inspite of inclusion of the amount in the return filed by the assessee, the officer could not assess the same because he had already assessed the very same amount for 1977-78, though contested by the assessee in appeal. In fact it is obvious from the observation of the officer in the original assessment that as on the date of completion of regular assessment for 1979-80, the assessment of the very same amount for the assessment year 1977-78 was sustained in appeal by the first appellate authority. Therefore, if the assessee's return was to be accepted and the amount was included in the original assessment for 1979-80, then it would have resulted in double assessment leading to multiplicity of litigation necessitating the assessee to file appeal against the assessment for 1979-80 also as their contention was that the income is to be assessed for 1979-80 and not for 1977-78. We are of the view that the assessee cannot be permitted to contest the liability on technical ground of limitation after offering the income for assessment in the return filed for the year 1979-80. It is to be noted that the original assessment for 1979-80 was a conditional order passed by the Assessing Officer which require modification depending upon the result of proceedings that were pending against the assessment for 1977-78. When the High Court in the Reference Case upheld the assessee's claim that the income is not assessable for the assessment year 1977-78, then the right reserved by the Assessing Officer in the original assessment completed for 1979-80 could be exercised by him within the time limit provided for rectification of assessment under Section 154. Even though counsel appearing for the assessee contended that time limit for rectification of mistake is four years from the date of order sought to be revised, we are of the view that limitation in this case has to be considered with reference to the original assessment which was a conditional order made subject to the finality of assessment for 1977-78. In fact, by incorporating the condition abovestated in the original assessment for 1979-80, the Assessing Officer has made the assessment of this amount for the year 1977-78 also as part of this order. In fact, by incorporating the condition abovestated in the original assessment for 1979-80, the Assessing Officer has made the assessment of this amount for the year 1977-78 also as part of this order. Therefore, once the assessment of the very same amount for 1977-78 is ultimately cancelled by this court in the Reference Case, the exclusion of the amount in the original assessment for 1979-80 becomes a mistake by virtue of the condition imposed by the Assessing Officer. In other words, the original assessment for 1979-80 on this issue gets finalised only when this court decided the Reference Case for the year 1977-78. Therefore, in our view, the original assessment for 1979-80 becomes a mistaken order on account of operation of judgment of this court with regard to the assessment of the very same amount of refund of excess power charges from KSEB for the assessment year 1977-78. We, therefore, hold that within four years from the date of judgment of this court in the Reference Case for 1977-78, the Assessing Officer is entitled to revise the assessment for 1979-80 by virtue of the right reserved for revision of assessment in the original assessment which is extracted above. Consequently we allow the departmental appeal by reversing the order of the Tribunal and by restoring the revised assessment sustained in first appeal.