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2010 DIGILAW 1108 (MP)

Ashok Anand v. Commissioner of Income Tax I

2010-11-08

ALOK ARADHE, S.R.ALAM

body2010
ORDER S.R. Alam, C.J. 1. This is an appeal under Section 260A of the Income Tax Act, 1961 [hereinafter referred to as 'the Act'] against the order of the learned Income Tax Appellate Tribunal, dated 13-10-2006 passed in I.T.(SS)A No. 50/IND/2003 for the block period 1987-88 to 1997-98. The appeal was admitted by a Bench of this Court vide order dated 5-9-2007 on the following substantial questions of law: (a) Whether the Income Tax Appellate Tribunal is justified by expressing an opinion that the Assessee Appellant was not entitled under law to raise a contention that the notice issued by the assessing officer under Section 143(2) was impermissible because of the proviso attached to the said provision on the ground that such an issue was not raised on the first round of appeal before the CIT(A) was barred by doctrine of merger (wrongly typed as 'and the doctrine of CIT(A)?" (b) Whether in the facts and circumstances of the case it can be held that the order passed by the assessing officer on the first occasion had merged in absolute terms in the order passed by the CIT(A) on the first occasion and further the order passed by the CIT(A) does not tantamount to open remand but a partial remand? 2. The relevant admitted facts, in brief, are that a search was conducted under Section 132 of the Act by the Income Tax Department in the residential premises of the Appellant. Thereafter, a notice dated 10-7-1997 (Annexure-A/1) was issued under Section 158BC of the Act. Pursuant to the aforesaid notice, Assessee furnished block return on 30-9-1997 for the period 1-4-1986 to 5-2-1997 declaring an undisclosed income to the tune of Rs. 29,44,546/. Notice of hearing under Section 143(2) of the Act was issued on 13-01-1998 (Annexure-A/3) which was served on the Appellant on 16-10-1998. Thereafter, assessment was completed ex parte under Section 144 of the Act vide order dated 26-2-1999 (Annexure-A/4). The aforesaid order was set aside by the Commissioner of Income Tax (Appeals) vide order dated 9-02-2001 (Annexure-A/5) for re-framing the assessment proceeding. 3. Thereafter, the assessment was re-framed by the Assessing Officer and an order was passed on 28-3-2002 (Annexure-A/6). Against the aforesaid order, the Assessee once again preferred an appeal whereby vide order dated 26-9-2003 (Annexure-A/11), the Commissioner of Income Tax decided the appeal in favour of the Assessee. 3. Thereafter, the assessment was re-framed by the Assessing Officer and an order was passed on 28-3-2002 (Annexure-A/6). Against the aforesaid order, the Assessee once again preferred an appeal whereby vide order dated 26-9-2003 (Annexure-A/11), the Commissioner of Income Tax decided the appeal in favour of the Assessee. He held that proviso to Section 143(2) of the Act is applicable also to proceedings under Section 158BC of the Act and since statutory notice was not issued within a period of one year as laid down in proviso to Section 143(2) of the Act, the block assessments made by the Assessing Officer were barred by limitation. The Commissioner of Income Tax further held that since entire block assessment has been set aside and has been re-framed from the return stage and since the Commissioner of Income Tax (Appeals) has not adjudicated any of the grounds, therefore, the Appellant has right to raise fresh or additional ground when the assessment has been re-framed afresh. Accordingly, it was held that it is permissible for the Assessee to raise an additional ground with regard to validity of the notice under Section 143(2) of the Act. 4. Being aggrieved by the aforesaid order, the revenue preferred an appeal before the Income Tax Appellate Tribunal. Vide order dated 13-10-2006, the Tribunal allowed the appeal preferred by the revenue. The Income Tax Appellate Tribunal relying on the decision rendered by the Commissioner of Income Tax (Appeals) of ITAT Ahmedabad Bench as well as Chennai Bench and Pune Bench held that the Commissioner of Income Tax (Appeals) was not justified in quashing the assessment orders on the ground that no notice under Section 143(2) of the Act was issued within the prescribed time limit. It was further held that the Commissioner, Income Tax (Appeals) was not justified in holding that the earlier order of assessment dated 26-2-1999 is without jurisdiction. The order dated 26-2-1999 was subject-matter in appeal before the Commissioner of Income Tax (Appeals) which was set aside vide order dated 19-02-2001 and directed the Assessing Officer to re-frame the assessment after giving an opportunity to the Assessee. The assessment order dated 26-02-1999, therefore, merged with the order of CIT, dated 19-02-2001. The order dated 26-2-1999 was subject-matter in appeal before the Commissioner of Income Tax (Appeals) which was set aside vide order dated 19-02-2001 and directed the Assessing Officer to re-frame the assessment after giving an opportunity to the Assessee. The assessment order dated 26-02-1999, therefore, merged with the order of CIT, dated 19-02-2001. The Tribunal further took the view that though the earlier order dated 19-02-2001 was not under challenge by any party before the Tribunal yet by the impugned order the Tribunal virtually set aside the earlier order dated 19-02-2001 by quashing the block assessment order 26-02-1999. 5. The learned Senior Counsel appearing for the Assessee-Appellant relying on the decision of the apex Court rendered in Assistant Commissioner Income Tax and Anr. v. Hotel Blue Moon (2010)3 SCC 259 contended that issuance of notice under Section 143(2) of the Act within the prescribed time for the purpose of block assessment under Chapter XIV-B of the Act is mandatory. It was submitted that the Income Tax Appellate Tribunal was not justified in holding that it was impermissible for the Appellant to raise additional ground with regard to validity of notice under Section 143(2) of the Act. Learned Senior Counsel further contended that a question of law can be raised at any stage. Learned Senior Counsel has also assailed the finding recorded by the ITAT in para 16 of the order to the effect that order of assessment dated 26-02-1999 stood merged with the order dated 19-02-2001 and, therefore, the Commissioner Income Tax (Appeals) was not justified in virtually setting aside the order dated 19-02-2001, on the strength of Full Bench decision of this Court rendered in the case of CIT v. K.L. Rajput 1987 164 ITR 197 (MP) wherein it has been held that the order of the Income Tax Officer merges with the appellate order only to the extent it was considered and decided by the appellate authority but the matter which is not covered by the appellate order of the appellate authority are left untouched and to that extent assessment order survives. He has also relied on the decisions rendered in the cases of National Thermal Power Co. Ltd. v. CIT 1998 229 ITR 383; Kanhiram Ramgopal v. CIT 1988 170 ITR 41 (MP); and Alok Paper Industries v. CIT 1983 139 ITR 1064 (MP) in support of his contention. 6. He has also relied on the decisions rendered in the cases of National Thermal Power Co. Ltd. v. CIT 1998 229 ITR 383; Kanhiram Ramgopal v. CIT 1988 170 ITR 41 (MP); and Alok Paper Industries v. CIT 1983 139 ITR 1064 (MP) in support of his contention. 6. Learned Counsel for the revenue, on the other hand, has supported the order passed by the Income Tax Appellate Tribunal. He has fairly stated that in view of law laid down by the Supreme Court in the matter of Assistant Commissioner Income Tax and Anr. v. Hotel Blue Moon (Supra), notice under Section 143(2) of the Act ought to have been issued within a period of one year in respect of block assessment. However, counsel for the revenue has placed reliance on paragraphs 14 and 16 of the order passed by the ITAT and has stated that order is based on cogent reasons and does not call for interference. It is urged by him that it was not permissible for the Petitioner to raise a contention with regard to validity of notice under Section 143(2) of the Act. It was contended by the learned Counsel for revenue that issue with regard to validity of notice was impliedly decided. In support of his contention, learned Counsel has referred to the decisions reported in CIT v. Indian Auto Stores (1981) 129 ITR 554 and CIT v. City Palayacot Co. (1980)122 ITR 430. 7. As stated supra, an order of assessment was passed on 26.02.1999. The aforesaid order of assessment was set aside by the Commissioner of Income Tax (Appeals) vide order dated 19.02.2009. By order dated 19.02.2009, the Commissioner of Income Tax (appeals) directed the As-sessing Officer to examine the case in the light of memoranda, accounts books, different balance sheets and the cash flow statements already on record after providing due opportunity to the Appellant to file the explan-ation towards material gathered by the Assessing Officer and the state-ment recorded in the absence of the Appellant. The order of assessment dated 26.02.1999 was set aside. Thereafter, again an order of assessment was passed on 28.03.2002 which was subject-matter of appeal before the Commissioner of Income Tax (appeals). The aforesaid order was set aside by the Commissioner of Income Tax (Appeals) vide order dated 26.09.2003. The order of assessment dated 26.02.1999 was set aside. Thereafter, again an order of assessment was passed on 28.03.2002 which was subject-matter of appeal before the Commissioner of Income Tax (appeals). The aforesaid order was set aside by the Commissioner of Income Tax (Appeals) vide order dated 26.09.2003. In the Appeal, Counsel for the Assessee raised the issue with regard to validity of notice under Section 143(2) of the Act on the ground that same was not issued within the prescribed time limit. From perusal of paragraph 8.2 of the order passed by the Commissioner of Income Tax (Appeals), we find that it was not disputed before the Commissioner of Income Tax (appeals) that the additional ground which was raised is a legal ground and can be raised at any time if no enquiry on facts was ne-cessary. It is well settled in law that a question of law can be raised at any stage of the proceedings. In view of well settled legal position, revenue also did not dispute the aforesaid position and in our view rightly so be-fore the Commissioner of Income Tax (Appeals) that additional ground with regard to validity of the notice under Section 143(2) of the Act could be permitted to be raised for the first time. In this connection, reference may be made to decision of Supreme Court in the case of Jute Corporation of India Ltd. v. CIT 1990 88 CTR 66 as well as in the case of National Thermal Power Company Ltd. v. Commissioner of Income Tax 1998 229 ITR 383 (SC) wherein it has been held that a new plea can be permitted to raised, provided the appellate authority is satis-fied that ground raised was bonafide. It has further been held that the ap-pellate authority should exercise discretion in permitting or not permit-ting the Assessee to raise an additional ground in accordance with law and reason. From perusal of the paragraphs 8 to 8.6 of the order passed by the Commissioner of Income Tax (Appeals) dated 26.09.2003, we find that discretion to permit the Assessee to raise an additional ground has been exercised by him in accordance with law and is based on reasons. The question whether notice under Section 143(2) of the Act was issued with-in prescribed time limit is a question of law and arose for consideration before the Commissioner, Income Tax (Appeals) on admitted facts. The question whether notice under Section 143(2) of the Act was issued with-in prescribed time limit is a question of law and arose for consideration before the Commissioner, Income Tax (Appeals) on admitted facts. Besides that the issue whether or not the notice under Section 143(2) of the Act ought to be issued within a period of one year in respect of block as-sessment is no longer res integra and is concluded by the judgment of the Apex Court rendered in Assistant Commissioner Income Tax and Anr. v. Hotel Blue Moon (supra). Since in the instant case no-tice has not been issued within a period of one year, therefore, the same vitiates the proceedings under Section 158BC of the Act. We, therefore, are of the view that the said issue since goes to the root of the matter was rightly allowed to be raised before the Commissioner, Income Tax (Ap-peals). In view of our preceding analysis, the first substantial question of law formulated by this Court has to be answered in the negative and in favour of the Assessee. 8. Let us now examine the second substantial question of law framed by this Court which is in two parts. First part of the second substantial question of law deals with the question of merger and the second part is with regard to the fact whether the order passed by the Commissioner of Income Tax (Appeals) dated 19.02.2001. was an open remand or partial remand. Full Bnech of this case in the case of Commissioner of Income Tax v. K.L. Rajput (supra) has held that order of the Income Tax Officer merges with the appellate order only to the extent it was considered and decided by the appellate authority but the matter which is not covered by the appellate order of the appellate authority is left untouched and to that extent assessment order survives. From perusal of the order of remand dated 19.02.2001, we find that order passed by the Assessing Of-ficer in the first instance i.e. the order dated 26.02.1999 was set aside. Once an order is set aside, it is wiped of from its existence. See: Shree Chamundi Mopeds Ltd. v. Church of South India Trust Association CIS Cinod Secretariat Madras (1992) 3 SCC 1 . Therefore, in the facts of present case, the question of merger does not arise. Once an order is set aside, it is wiped of from its existence. See: Shree Chamundi Mopeds Ltd. v. Church of South India Trust Association CIS Cinod Secretariat Madras (1992) 3 SCC 1 . Therefore, in the facts of present case, the question of merger does not arise. Apart from this, it is clear from perusal of order dated 26.02.1999 passed by the As-sessing Officer and order dated 19.02.2001 by the Commissioner of In-come tax (Appeals), that both the authorities have not adjudicated issue of validity of notice under Section 143(2) of the Act. Therefore, the first part of the second substantial question of law formulated by this Court has to be answered in the negative. So far as second part of the substan-tial question of law is concerned, from perusal of paragraphs 9 and 10 of the order dated 19.02.2001, it is clear that in paragraph 9, only paramet-ers have been indicated by the Commissioner of Income Tax (Appeals) on the basis of which the Assessing Officer had to re-examine the case. From paragraph 10 of the order passed by the Commissioner of Income Tax (Appeals), it is apparent that order dated 26.02.1999 has been set aside in its entirety. Therefore, we answer second part of the substantial question of law by stating that the order dated 19.02.2001 was an open remand. 9. In view of the above discussions, we are of the view that the order of the Income Tax Appellate Tribunal, dated 13.10.2006 cannot sustain. In the result, the appeal succeeds and is hereby allowed. The order under appeal is accordingly set aside. However, there shall be no order as to costs.