Vildirect: IncomeTax-caselaws-1997-VIL-96-ITAT-MUM

1997-VIL-96-ITAT-MUM

Equivalent Citation: 1998 (65) ITD 147

Income Tax Appellate Tribunal MUMBAI

ITA No. 623/Bom/1991

Date: 17.04.1997

AEGIS CHEMICAL IND. LTD.

INCOME-TAX OFFICER

For the Petitioner : D. D. Shah
For the Respondent : A. K. Chahan

BENCH

R. P. Garg (Accountant Member) And I. S. Verma (Judicial Member)

JUDGMENT

I. S. Verma (Judicial Member)

1. This is an appeal by the assessee against the order of the Commissioner of Income-tax (Appeals) dated 1-10-1990. Wherein the following two grounds have been taken :

"On the facts and in the circumstances of the case, the learned CIT (Appeals) erred in not holding that the additional tax is not leviable under section 143(1A) as the appellant has no positive income.

On the facts and in the circumstances of the case, the learned CIT (Appeals) erred in directing the Assessing Officer to issue a notice under section 143(2) after expiry of time limit specified in the said section, and complete regular assessment under section 143(3)."

2. At the time of hearing ground No. 1 was not pressed by the assessee's counsel and, therefore, the same is dismissed as such.

3. As regards ground No. 2, we have heard the learned counsel for the assessee as well as the learned D.R. The assessee's counsel has submitted that in appeal against order under section 154, which was against the ITO's order dated 8-3-1990 passed as a result of assessee's application under section 154 for rectification all the adjustments made while passing the assessee's return under section 143(1A) of Income-tax Act. The CIT (Appeals) was not justified after accepting the assessee's pleas that the adjustments made by the Assessing Officer was debatable and were not covered by his powers available under the provisions of section 143(1A), in instructing the Income-tax Officer to issue notice under section 143(2) for making the assessment under section 143(3). The counsel for the assessee has submitted that the CIT (Appeals) has neither any power nor he had jurisdiction to give such directions, therefore, has requested for quashing the directions of the CIT (Appeals) given in para 7 of his order. The assessee's counsel has further submitted that even if it is assumed that the CIT (Appeals) had power to give such directions then also the directions given by the CIT (Appeals) in the present case is not valid in the eyes of law because as per provision of section 143(2) notice under section 143(2) can be served upon the assessee only within a period of 12 months from the end of the month in which the return was filed and in the present case the period of 12 months had already expired as has been admitted by the CIT (Appeals) also. He, therefore, submitted that directions issued by the CIT (Appeals) after the expiry of limitation period provided as per provision of section 143(2) are bad in law. The learned counsel further submitted that even otherwise, the directions to issue notice under section 143(2) which amounts to directing the Assessing Officer to complete the assessment in a particular manner which is not within his power, and therefore, directions are bad in law on this account also. The learned D.R. on the other hand, supported the order of the CIT (Appeals). Before proceeding to decide the issue before us we would like to narrate some of the facts relating to this appeal. The assessee had filed the return declaring a loss of Rs. 19,91,88,554. The Assessing Officer while processing the return made the following adjustments after invoking his powers under section 143(1A) as a result of which the loss was reduced by a sum of Rs. 1,02,04,033.

The adjustments made are :

(i) Disallowance under section 43B	Rs. 1,01,77,578
(ii) Disallowance under section 6B	Rs. 25,089
(iii) Disallowance of Entertainment expenses	Rs. 1,366
	Rs. 1,02,04,033

4. As a result of the aforesaid adjustments the Assessing Officer charged the additional tax amounting to Rs. 10,71,423. The assessee applied for rectification of the intimation on the ground that the adjustments made by the Assessing Officer were not prima facie inadmissible amount and, therefore, were not covered by the provisions of section 143(1)(a). The assessee also sought adjustments of TDS of Rs. 41,809. The Assessing Officer disposed the assessee's application as per his order dated 8-3-1990 in which the credit for TDS was allowed, but assessee's claim that adjustments made by the Assessing Officer were not prima facie mistake was not considered. When the assessee went in appeal before the CIT (Appeals), the CIT (Appeals) was pleased to accept the assessee's submission and deleted the adjustments made by the Assessing Officer as a result of which the additional tax charged by the Assessing Officer was also cancelled. However, as per para 7 of his order, the CIT (Appeals) directed the Assessing Officer to make regular assessment after issuing a notice under section 143(2) and while giving such directions the CIT (Appeals) observed that time limit for issuing notice under section 143(2) is already over but such limit is not applicable to the assessment to be made in pursuance of directions of the appellate authorities, and, therefore, extended the limitation for issuing notice under section 143(2).

Para 7 of CIT (Appeals) order is reproduced below :

"7. In the circumstances of the case as indicated above, it appears to me that the Assessing Officer should verify each and every item of the claim for deduction aggregating to Rs. 1,02,04,033. It is required to be seen as to whether the assessee company satisfies the conditions for deduction under section 43B in respect of various items. Therefore, he is directed to issue a notice under section 143(2) and make regular assessment after allowing proper opportunity to the appellant company. The proviso to section 143(2) lays down that no notice under this sub-section shall be served on the assessee after the expiry of the financial year in which the return of income is furnished or the expiry of six months from the end of the month in which the return was so furnished, whichever is later. This time limit is already over. But it appears to me that this time limit is applicable only at the stage of the Assessing Officer. Because of this provision, the Assessing Officer cannot issue a notice under section 143(2) in his own beyond this time limit. It appears to me that this time limit is not applicable to the assessment to be made in pursuance of the directions of the appellate authorities. Therefore, I hold that the time limit laid down in the proviso to section 143(2) will not come in the way of the Assessing Officer in making a regular assessment under section 143(3)."

5. After considering the rival submissions, we are of the opinion that for deciding the issue in hand it is necessary to consider the procedure in appeal before the first appellate authority as well as powers and jurisdiction of the CIT (Appeals) as per provision of sections 250 and 251. Provisions of section 250 of the Income-tax Act is reproduced below :

"(1) The Deputy Commissioner (Appeals) or the case may be the Commissioner (Appeals) shall fix a day and place for the hearing of the appeal, and shall give notice of the same to the appellant and to the Assessing Officer against whose order the appeal is preferred.

(2) The following shall have the right to be heard at the hearing of the appeal.

(a) the appellant, either in person or by an authorised representative;

(b) the Assessing Officer either in person or by a representative.

(3) The Deputy Commissioner (Appeals) or as the case may be the Commissioner (Appeals) shall have the power to adjourn the hearing of the appeal from time to time.

(4) The Deputy Commissioner (Appeals) or as the case may be the Commissioner (Appeals) may before disposing of any appeal, make such further inquiry as he thinks fit, or may direct the Assessing Officer to make further inquiry and report the result of the same to the Deputy Commissioner (Appeals) or as the case may be the Commissioner (Appeals).

(5) The Deputy Commissioner (Appeals) or as the case may be the Commissioner (Appeals) may at the hearing of an appeal allow the appellant to go into any ground of appeal not specified in the grounds, of appeal if the Deputy Commissioner (Appeals) or as the case may be the Commissioner (Appeals) is satisfied that the omission of that ground from the form of appeal was not wilful or unreasonable.

(6) The order of the Deputy Commissioner (Appeals) or as the case may be the Commissioner (Appeals) shall communicate the order passed by him to the assessee and to the Chief Commissioner or Commissioner.

(7) On the disposal of the appeal, the Deputy Commissioner (Appeals) or the case may be the Commissioner (Appeals) shall communicate the order passed by him to the assessee and to the Chief Commissioner or Commissioner."

6. From the aforesaid provisions we have noticed that it is only sub-section (4) which empowers the CIT (Appeals) to make such further inquiry as he thinks fit or may direct the Assessing Officer to make further inquiry and report the result of the same to the CIT (Appeals), while disposing an appeal. But in our opinion these provisions do not empower the CIT (Appeals) to direct the Assessing Officer to make assessment in a particular way or to enlarge the limitation prescribed under the Act because (1) the nature of inquiry to be made by the CIT (Appeals) or the inquiry directed to be made by the Assessing Officer can only be relating to the issues necessary for the disposal of the issue in appeal before the CIT (Appeals) and in the present case the issue being only of non-consideration of assessee's certain plea raised by way of application under section 154 i.e., the CIT (Appeals) was seized of matter covered by section 154 and the adjustments made under section 143(1)(a) but not the issuing of notice under section 143(2) or assessment proceedings under section 143(3). Consequently, inquiry as envisaged in sub-section (4) of section 250 cannot be the proceedings relating to assessment under section 143(3) which are quite different from the inquiry necessary for the disposal of appeal against order under section 154, and (2). After issuing notice under section 143(2) the Assessing Officer is bound to make the assessment under section 143(3) and, therefore, making an assessment can neither be equated to "making of further inquiry" nor to the remand report as contemplated by the provisions of sub-section (4) above. We are, therefore, of the opinion that section 250 of the Income-tax Act do not empower the CIT (Appeals) to make any inquiry or direct the Assessing Officer to make any inquiry relating to the proceedings other than the proceedings before him. These provisions do not empower the CIT (Appeals) to enhance the limitation provided for issuing notice under section 143(2) or to give direction for issuing such notice.

7. We now proceed to examine the powers vested with the CIT (Appeals) by the provisions of section 251 of the Income-tax Act, which is reproduced below :

"(1) In disposing of an appeal, the Deputy Commissioner (Appeals) or as the case may be the Commissioner (Appeals) shall have the following powers :

(a) in an appeal against an order of assessment, he may confirm, reduce, enhance or annual the assessment; or he may set aside the assessment and refer the case back to the Assessing Officer for making a fresh assessment in accordance with the directions given by the Deputy Commissioner (Appeals) or as the case may be, the Commissioner (Appeals) and after making such further inquiry as may be necessary and the Assessing Officer shall thereupon proceed to make such fresh assessment and determine, where necessary the amount of tax payable on the basis of such fresh assessment.

(b) in an appeal against an order imposing a penalty, he may confirm or cancel such order or vary it so as either to enhance or to reduce the penalty.

(c) in any other case, he may pass such orders in the appeal as he thinks fit.

(2) The Deputy Commissioner (Appeals) or as the case may be the Commissioner (Appeals) shall not enhance an assessment or a penalty or reduce the amount of refund unless the appellant has had a reasonable opportunity of showing cause against such enhancement or reduction.

Explanation - In disposing of an appeal, the Deputy Commissioner (Appeals) or as the case may be, the Commissioner (Appeals) may consider and decide any matter arising out of the proceedings in which the order appealed against was passed, not withstanding that such matter was not raised before the Deputy Commissioner (Appeals) or as the case may be the Commissioner (Appeals) by the appellant."

The power available to CIT (Appeals) except as power available in clause (c) of sub-section (1); are amply clear, and therefore, they do not require any analysis. As far as the power available as per sub-clause (c) of sub-section (1) to section 251 is concerned, it requires analysis because its speaks of passing of such order as the CIT (Appeals) thinks fit. After considering the purpose and the language used in sub-clause (c) (supra) as well as the context, we are of the opinion that the provisions clearly shows that the power to pass such order as the CIT (Appeals) thinks fit is restricted only to the subject matter of the appeal/proceedings before him and in the present case the appeal before the CIT (Appeals) being against the assessee under section 154, so according to us, he could pass any order as he thinks fit only relating to the proceedings under section 154 and not with respect to proceedings leading to the issuing of notice under section 143(2) and assessment under section 143(3) because, the latter being assessment proceedings are quite different from the proceedings under section 154. We have arrived at this conclusion due to the following consideration :

(a) From the provisions of section 143(2), which we are going to consider in the later part of the order, it is very much clear that jurisdiction to issue notice under section 143(2) is vested by the legislature only in the Assessing Officer and nobody else. Meaning thereby that none of the Income-tax authorities, except the Assessing Officer has either power to issue the notice under section 143(2) which culminates in framing of that assessment under section 143(3) nor has power to direct the Assessing Officer to issue such notice.

(b) If the power vested in the CIT (Appeals) by virtue of provisions of section 250(4) and section 251(1)(c) is taken as vesting him with the power to direct the Assessing Officer to issue notice under section 143(2) then it will amount to giving him the power to direct the Assessing Officer to make the assessment in a particular way - after amendment to the provisions w.e.f. 1-4-1989 framing of assessment in every case is not necessary; it is only the Assessing Officer who can proceed to frame an assessment under section 143(3) if he considers it necessary or expedient to ensure that the assessee had not understated the income or has not computed excess in loss or has not underpaid the tax in any manner. Meaning thereby that it is exclusively the jurisdiction of the Assessing Officer to decide as to whether the assessment under section 143(3) has to be framed or not; which we are afraid is not available with the CIT (Appeals). We are, therefore, of the opinion that the CIT (Appeals) had no jurisdiction to give directions for issuing a notice under section 143(2) of the Income-tax Act.

8. Coming to the assessee's second plea that even if presuming that the CIT (Appeals) had the power to direct the Assessing Officer to serve upon the assessee a notice under section 143(2) then also the directions having been given after the expiry of the period prescribed for service of notice under section 143(2) are bad in law and ab initio void we would like to consider the provisions of section 143(2) which is reproduced as under :

"Where a return has been made under section 139, or in response to a notice under sub-section (1) of section 142, the Assessing Officer shall, if he considers it necessary or expedient to ensure that the assessee has not understated the income or has not computed excessive loss or has not underpaid the tax in any manner, serve on the assessee a notice requiring him on a date to be specified therein, either to attend his office or to produce, or cause to be produced there, any evidence on which the assessee may rely in support of the return;

Provided that no notice under this sub-section shall be served on the assessee after the expiry of twelve months from the end of the month in which the return is furnished."

From the above provisions the final thing, which is clear, requires no further interpretation of substantiation is that the power to issue notice under section 143(2) is vested absolutely and only with the Assessing Officer and other authority, however high it may be, his power or jurisdiction to issue the notice either itself or to direct the Assessing Officer to issue such a notice. Similarly, from the proviso to this sub-section, which also requires no further interpretation or substantiation, it is clear that notice under this sub-clause cannot be served upon the assessee after the expiry of a period of 12 months from the end of the month in which the return has been furnished and, therefore, notice served upon the assessee after the expiry of the period (supra) shall be bad in law and ab initio void. As the proviso is in the nature of prohibition as is clear from the language "no notice shall be served upon the assessee after the expiry of ........" so it has to be interpreted strictly and no other meaning can be given to it while giving effect to this proviso. As it is well settled law that time bar remedy cannot be revived even by change of law, unless the new law makes provision for such reviving either expressly or by necessary implication, we are unable to accept such plea that an appellate authority can enlarge the limitation or can revive a time bar remedy. This view is supported by the decision of the Hon'ble Supreme Court in the cases of S. C. Prashar v. Vasantsen Dwarkadas [1963] 49 ITR 1, S. S. Gadgil v. Lal & Co. [1964] 53 ITR 231-240, Allahabad High Court in the case of Sardar Inder Singh v. ITO [1969] 72 ITR 349 and Karnataka High Court in the case of P. Vittal Pai v. Agrl. ITO [1976] 104 ITR 794.

9. In view of the above discussion we have no hesitation in holding that not only the notice under section 143(2) issued and served upon the assessee after the expiry of the period prescribed under the proviso (supra) shall be bad in law, but even, the directions issued by CIT (Appeals) before or after the expiry of such period shall also be bad in law. In the result we hold that the CIT (Appeals) had no jurisdiction or power (1) to direct the Assessing Officer to issue notice under section 143(2) for making assessment under section 143(3), (2) to go beyond the subject matter of the proceedings in appeal before him and (3) to enlarge the limitation period for issuing and serving the notice under section 143(2). Consequently, the directions given by the CIT (Appeals) in para No. 7 of his order are declared bad in law and ab initio void and the same are deleted and expunged.

10. In the result, assessee's appeal is allowed.

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