• Friday, 11 Apr 2025, 11:01:12 am

Income Tax Act, 1961 – Sections 263, 143(3), 147, 153 and 271(1)(c) - The assessee filed its return of income, which was initially processed under Section 143(1). Subsequently, the assessment was reopened under Section 147, and an assessment order was passed under Section 143(3) r.w.s. 147. Later, the Principal Commissioner of Income Tax (PCIT) invoked Section 263, holding that the order was erroneous and prejudicial to the interest of the Revenue due to inadequate inquiry by the Assessing Officer (AO) regarding share capital and share premium. Consequently, the assessment was revised, leading to an addition of Rs. 10.88 crore under Section 68 and other minor disallowances. The assessee challenged the revised order before the CIT(A) and further before the ITAT, raising a legal objection that the reassessment order was barred by limitation, as it was served after the statutory time limit prescribed under Section 153 - Whether the reassessment order passed under Section 263/143(3)/147 was barred by limitation, as it was served on the assessee beyond the prescribed statutory period - Whether the reassessment order, not communicated within the statutory time frame, is null and void in law - Whether the penalty imposed under Section 271(1)(c) was sustainable after quashing of the assessment order – HELD - The reassessment order was barred by limitation and non-est in law, as it was not served within the prescribed time frame under Section 153 - As per Section 153, the assessment order must be served on or before 31.12.2015, but in this case, it was delivered to the assessee on 05.01.2016, which was beyond the prescribed period - The ITAT relied on judicial pronouncements, including PCIT v. Nidan and CIT v. BJN Hotels Ltd., which held that an assessment order is valid only when communicated to the assessee within the limitation period - The Tribunal rejected the Revenue’s argument that minor delays in service were permissible, distinguishing cases like CIT v. Mohammed Meeran Shahul Hameed and Prakash Lal Khandelwal v. CIT as factually inapplicable - The Tribunal emphasized that merely signing or dating the order within the limitation period does not suffice; the order must be dispatched and served within the prescribed time for it to be legally effective - Since the reassessment order was held to be void ab initio, the penalty imposed under Section 271(1)(c) also became unsustainable and was quashed - The ITAT allowed the assessee’s appeal, holding the reassessment order null and void for being time-barred. Consequently, the penalty order under Section 271(1)(c) was also set aside

 

2025-VIL-219-ITAT-KOL

 

IN THE INCOME TAX APPELLATE TRIBUNAL

“C” BENCH KOLKATA

 

ITA Nos. 581& 582/KOL/2022

Assessment Year: 2010-11

 

Date of Hearing: 09.01.2025

Date of Pronouncement: 31.01.2025

 

M/s ROSEWOOD MERCANTILE PVT LTD

 

Vs

 

ITO, WARD 3(2), KOLKATA

 

Assessee by: Shri C. Roy, AR

Revenue by: Shri Praveen Kishore, CIT DR

 

BEFORE

SHRI RAJESH KUMAR, AM

SHRI SONJOY SARMA, JM

 

ORDER

 

Per Rajesh Kumar, AM:

 

These appeals are preferred by the assessee against the order of the National Faceless Appeal Centre, Delhi (hereinafter referred to as the “Ld. CIT(A)”] dated 31.8.2022 for the AY 2010-11.

 

02. At the time of hearing, the assessee raised additional grounds before the Bench which reads as under:-

 

“The order passed by the ld. AO u/s 263/ 143(3)/ 147 of the Act dated 30.12.2015is hereby barred by limitation and may be quashed as ab-initio, void and nullity, ex-facie.

 

The Ld. A.R vehemently argued before us that the issue raised in the additional ground is a purely legal issue and the assessee is well within its right to raise the issue at any appellate stage as no further verification of facts is required qua the said ground from any quarter whatsoever and all the facts are available in the records. Besides the issue goes to the root of the matter and give rise to a pure question of law. The Ld. A.R therefore prayed that the additional ground may be admitted for adjudication. In defense of arguments the Ld. Counsel for the assessee relied on the decisions of Hon’ble Supreme Court in the case of Jute Corporation of India Ltd. Vs CIT in 187 ITR 688 and National Thermal Power Co. Ltd v. CIT [1998] 229 ITR 383 (SC).

 

03. The Ld. D.R on the other hand strongly objected to the admission of additional ground for the reason that the same was not adjudicated before the AO or Ld. CIT(A) and is being raised for the first time before this forum. The Ld. D.R therefore prayed that the legal issue may be dismissed or alternatively may be restored to the file of AO/Ld. CIT(A) which the Bench deems fit.

 

04. After hearing the rival contentions and perusing the material on record, we find that the issue raised by the assessee is purely legal issue the facts qua which are available in the records itself and no further verification of facts is required from any quarter whatsoever. We note that the assessee has raised a legal issue that the assessment framed by the ld. AO vide order dated 30.12.2015, is barred by limitation as the order was served on the assessee on 05.01.2016, which is apparently beyond the period of limitation and therefore, we find merit in the contention of the assessee. Since the issue raised before us is purely a legal issue which does not require any further verification of facts and no additional facts are required to be brought on record. Besides, the assessee’s prayers are clearly covered by the decisions of the Hon’ble Apex Court in the case of Jute Corporation of India Ltd. Vs CIT in 187 ITR 688 and National Thermal Power Co. Ltd v. CIT [1998] 229 ITR 383 (SC). The Hon’ble Apex Court has decided in both the cases that the assessee can raise the additional ground at any appellate stage and the appellate authority has to admit the same for adjudication. Considering the facts of the case in the light of the above decisions, we are inclined to admit the additional ground for adjudication.

 

05. The facts in brief are that the assessee filed its return of income on 04.02.2011, declaring total income of Rs. 6,419/-, which was processed u/s 143(1) of the Act. Thereafter, the case of the assessee was reopened u/s 147 of the Act and order u/s 147/143(3) of the Act, was passed on 30.04.2012, assessing total income of Rs. 77,830/-. Thereafter, Pr. Commissioner of Income Tax (in short ‘PCIT’) on perusal of the record observed that assessee has e-filed its return on 04.02.2011, declaring total income of Rs. 6,519/- and the assessee has raised share capital to the tune of Rs. 44,50,000/- and share premium Rs. 10,44,00,000/- by issue of equity shares. The PCIT also noticed that during the reassessment proceedings, the ld. AO issued notice u/s 133(6) of the Act to the 9 out of 20 subscribers and completed the assessment vide order dated 30.04.2012. According to the PCIT, notices u/s 133(6) of the Act were not served through postal services. In reply to notices u/s 133(6) of the Act, all replies were received in the office, which appears to have been prepared by the same person. The PCIT also noted that the assessee company was a newly started company having no record of any worthwhile business nor any reputation and thus there was no justification for issue of equity shares at high share premium. According to the PCIT, the AO has not carried out any through enquiry calling for intervention u/s 263 of the Act as the order passed by the AO is erroneous and prejudicial to the interest to the Revenue. Finally, the order was revised by the ld. PCIT and in the set aside proceedings, the AO, after calling for details and information from the assessee which were not furnished by the assessee, added the amount of share capital and share premium of Rs. 10,88,50,000/- to the income of the assessee besides making other addition of Rs. 18,600/- on account of data processing charges and Rs. 50,814/- on account of subscription and donation debited in the Profit and Loss account.

 

06. The order was in appeal before the ld. CIT (A) and the CIT (A) dismissed the appeal on merit although the legal issue raised before us was taken up before the ld. CIT (A).

 

07. The ld. AR vehemently submitted before us that the order passed by the ld. AO u/s 263/143(3)/147 of the Act dated 30.12.2015, should have been passed and served upon the assessee on or before 31.12.2015, in terms of provision of Section 153 of the Act. However, they said was order served upon the assessee on 05.01.2016, meaning thereby that the assessment framed was hopelessly barred by limitation and is non-est and ex-facie nullity in the eyes of the law. The ld. AR submitted that the order was passed u/s 144 of the Act and the communication was made after 5.01.2016 by speed post. The ld. AR in defense of his argument relied on the decision of Hon'ble Orissa High Court in case of PCIT Vs. Nidan in ITA No.157 of 2018, I.A. No. 7 of 2019. The assessee also relied on the decision of CIT Vs. BJN Hotels Ltd.[2017] 79 taxmann.com 336 (Karnataka). The ld. AR therefore prayed that the assessment framed by the ld. AO may kindly be quashed.

 

08. The ld. DR on the other hand, strongly opposed the arguments of the ld. AR by submitting that the facts qua, the service of order on the assessee are not available before him, and therefore, sometime may be allowed to seek report to this effect from the Assessing Officer. Accordingly, time was granted and thereafter the ld. DR vide letter dated 02.09.2024, filed a clarification submitting therein in Para 3 that the order was passed in this case on 30.12.2015, which was Thursday and 2nd and 3rd January, 2016, were holidays, being Saturday and Sunday and thereafter order was served on the assessee on 5.01.2016, i.e. Tuesday, within 3 days, which is reasonable period for serving of notice. The ld. DR also produced before us, the acknowledgement slip where the date of service was stated as 05.01.2016. In defense of his argument the ld. DR relied on the decision of Hon'ble Supreme Court of India in the case of CIT vs. Mohammed Meeran Shahul Hameed (2021) 131 taxmann.com 94 (SC) & Prakash Lal Khandelwal Vs. CIT [2023] 151 taxmann.com 72 (Jharkhand), and prayed that in view of the ratio laid down in the above decisions, the ld. AO has rightly framed the assessment within the due time though the services was made on 05.01.2016 and the contention and argument of the assessee may kindly be rejected by dismissing the additional ground raised by the assessee.

 

09. In rebuttal, the assessee submitted before the Bench that the case law relied upon by the Department in the case of Mohammed Meeran Shahul Hameed (Supra), was rendered under different facts altogether. The ld. AR submitted that the present case relates to Section 143(3)/144 of the Act and has no action that section 263 of the Act, as relied upon by the Department. In the instant case, the order was dispatched before the limitation period but in the present case in hand, the assessment order was dispatched after the end of limitation period which was admitted by the CIT DR in his communication dated 2.9.2024 is apparent and was served on from the on 5th Jan, 2016, which is clearly barred by limitation period. The ld. AR thereafter referred to the decision of Hon'ble High Court in case of PCIT vs. Nidan (supra) wherein in Para 7, the Hon'ble Court noted that the assessment order becomes an order only when it is in fact communicated to the assessee and therefore, barred by the limitation period. The ld. AR also referred to B J N Hotels Ltd. (supra), wherein the Hon'ble Karnataka High Court as held that the order is to be issued so as to beyond the control of the authority is concerned within the period of limitation. However, apparently, the orders were shown by the assessee after period of limitation and hence, the orders are barred by limitation. The ld. AR also referred to the decision of Kerala High Court in case of Government Wood Works Vs. State of Kerala (1988) 69 STC 62, which was also referred by the Karnataka High Court in B J N Hotels Ltd.(supra), wherein it has been held that in absence of dispatch date made available to the court from the records, to prove that the order is issued within the prescribed period, the order passed by AO is barred by limitation.

 

010. The ld. AR also negated the second contention of the Department that the case law relied upon by the Revenue was qua euploading of the order on the portal and has no application to the present case as does not fall within the ambit of the e-proceeding and so delivered by hand. Finally, the ld. AR submitted

 

011. We have heard the rival contentions and perused the records as placed before us carefully. We observe that the order passed by the ld. AO u/s 263/143(3)/147 of the Act dated 30.12.2015 should have been served upon the assessee on or before 31.12.2015, in terms of provision of Section 153 of the Act. However, the said was order served upon the assessee on 05.01.2016 by hand delivery and the assessee claimed the same to be hopelessly barred by limitation and accordingly non-est and ex-facie nullity in the eyes of law. We have also called for some clarification on the issue from the ld. CT(DR) who filed before us the letter from AO dated 02.09.2024 stating therein that the assessment order was passed on 31.12.2015 whereas the assessment order mention the date of passing the assessment order as 30.12.2015. The AO further mentioned in the order that assessment order the day of passing the order was Thursday and 2nd and 3rd January ,2016 were holidays being Saturday and Sunday and thereafter the order was served on 5th January,2016. Having considered these facts, we are of the considered opinion that order was barred by limitation as it should have served on the assessee on or before 31.12.2015. The case of the assessee is squarely covered by the decision of Hon'ble Orissa High Court in case of PCIT Vs. Nidan in ITA No.157 of 2018, I.A. No. 7 of 2019 and decision of the Karnataka high court in CIT Vs. BJN Hotels Ltd.[2017] 79 taxmann.com 336 (Karnataka). The operative paras in the case of PCIT Vs M/S Nidan (supra) which also discusses the decision of the Hon’ble Karnataka High Court in the case of CIT Vs. BJN Hotels Ltd(supra) in para 8 as under:

 

“3. The facts in brief are that a search was as conducted under Section 132 of the Income Tax Act, 1961 ('Act') in the case of the Respondent Assessee on 20th May, 2014. Pursuant thereto an assessment was completed under Section 153- A read with Section 144 of the Act and an assessment order was passed for the aforementioned AY on 30th December, 2016.

 

4. Relevant to the first question sought to be urged, the facts are that the assessment order dated 30th December 2016, was according to the Assessee, dispatched by the Assessing Officer (AO) by post only on 7th January, 2017 and was received by the Assessee on 9th January 2017. Contending that in terms of Section 153-B of the Act the assessment order has to in fact be communicated to the Assessee on or before 31st December, 2016 and therefore, was time barred, the Assessee assailed the said order before the Commissioner Income Tax (Appeals) [CIT (A)] apart from other grounds. However, the CIT (A) observed that the assessment order was dated 30th December, 2016 and there was no material to show that the AO had revisited the order thereafter.

 

Accordingly, the CIT (A) upheld the order relying on the decision of the Calcutta High Court in Commissioner of Income Tax, Central-1 v. M/s. Binani Industries Ltd. (2015) 59 Taxmann.Com 389 (Cal).

 

5. As far as the present case is concerned, the Respondent Assessee could produce before the ITAT the envelope in which the assessment order was dispatched by the AO by speed post and also produce a copy of the tracking record of speed post which showed that the order was in fact dispatched only on 7th January, 2017 although it was dated 30th December, 2016. Relying on decisions in CIT v. BJN Hotels Ltd. (2017) 79 taxmann.com 336 (Kar); K. Joseph v. Agricultural Income Tax Officer (1991) 190 ITR 464 (Ker) and Commissioner of Agricultural Income Tax Officer v. Kappurmalai Estate 234 ITR 187 (Ker), the ITAT came to the conclusion that the order of assessment had to be made on or before 31st December, 2016 and since it was dispatched only on 7th January, 2017 and delivered to the Assessee on 9th January, 2017 it the time barred.

 

6. Mr. Chimanka, learned counsel for the Revenue places before the Court copies of the judgment of the Calcutta High Court in M/s. Binani Industries Ltd. (supra) as well as an order dated 20th November, 2015 passed by the Supreme Court of India in SLP Civil No.8397 of 2015 filed by the Revenue against the said decision. The Supreme Court dismissed the SLP in limine on the first date of hearing at the stage of admission by a short order. It is accordingly, submitted that the ITAT ought to have followed the decision of the Calcutta High Court in M/s. Binani Industries Ltd. (supra) which favoured the Revenue and not the decisions of Karnataka and Kerala High Courts which were against it.

 

7. As rightly noted by the ITAT the requirement under Section 153B (1) is for the AO to make the assessment order within a period of twenty-one months from the end of the financial year in which the last of the authorization for the search under Section 132 of the Act was executed. In the present case, there is no doubt that the last date by which the assessment had to be made was 31st December, 2016. As further rightly noticed Section 153B (1) uses the expression "order of assessment" and not merely 'assessment'. Therefore, the assessment order becomes an order only when in fact it is communicated and therefore the communication of the order had to be prior to the end of the limitation period. In BJN Hotels Ltd. (supra) the Karnataka High Court, held as under:

 

"That the revenue is neither able to point out from the records that the assessment orders were dispatched on 27.4.2007 nor produced the dispatched register to establish that the orders were complete and effective i.e. it was issued, so as to be beyond the control of the authority concerned within the period of limitation i.e. 29.4.2007. Admittedly, the assessment orders were served on the assessee on 30.4.2007, hence, the assessment orders passed were barred by limitation."

 

8. In the same judgment in BJN Hotels Ltd. (supra), the Karnataka High Court noted:

 

"An identical issue was before this Court in ITA No.832/2008 (D.D. 14.10.2014 in the case of Maharaja Shopping Complex vs DCIT. This courts following the judgment of Kerala High Court in the case of Government Wood Works vs State of Kerala (1988) 69 STC 62 has held that in the absence of dispatch date made available to the Court from the records, to prove that the order is issued within the prescribed period, order passed by AO is barred by limitation. The said judgment squarely applies to the facts of the present case."

 

9. On the other hand, the facts in the decision of the Calcutta High Court in M/s. Binani Industries Ltd. (supra) did not involve dispatch of the assessment order by post at all. The judgment reveals that the assessment order was passed on 31st March, 2005, the last date by which had to be made and the Authorised Representative (AR) of the Assessee visited the office of the Department and collected it on 13th April, 2005. When confronted the CIT produced records which 'did not contain the dispatch register'. The Calcutta High Court then concluded that from the oral evidence of the CIT that the Department had "not made any attempt to dispatch the order for service on the assessee." It further observed "there is no indication that the Assessing Officer revisited the order after 31.3.2005. The probability of the order being made and ready to be collected by the representative of the assessee as on 1.4.2005 cannot also be ruled out."

 

10. The above facts in M/s. Binani Industries Ltd. (supra) are therefore clearly distinguishable from the case at hand were the postal records clearly show that the dispatch of the assessment was made by speed post only on 7th January, 2017 and was delivered to the Assessee only on 9th January, 2017. Therefore, notwithstanding that the Supreme Court may have the dismissed the SLP filed by the Assessee against the decision of the Calcutta High Court in M/s. Binani Industries Ltd. (supra) in limine, the said decision is not of assistance to the Revenue as far as the present case is concerned.

 

11. Consequently, the Court is satisfied that no error has been committed by the ITAT in allowing the Assessee's appeal. This Court is, therefore, not persuaded to frame the questions of law as urged by the Revenue.

 

12. The appeal is accordingly dismissed.”

 

012. We have also perused the decision relied by the ld. DR in CIT vs. Mohammed Meeran Shahul Hameed (2021) 131 taxmann.com 94 (SC) and Prakash Lal Khandelwal Vs. CIT [2023] 151 taxmann.com 72 (Jharkhand) and find that they are distinguishable on facts and are not applicable as discussed above. Considering these facts and circumstances and the decision of the Hon’ble Orissa High Court as discussed above, we hold that the assessment order is barred by limitation and is accordingly quashed as nullity and non-est. The appeal of the assessee is allowed on legal issue.

 

013. The issue raised in ITA No.582/Kol/2022 by the assessee is against the imposition of penalty u/s 271(1)© of the Act. Since we have quashed the assessment order passed by the AO, therefore the penalty order being consequential to assessment order and is also quashed.

 

014. In the result, the appeals of the assessee are allowed.

 

Order pronounced in the open court on 31.01.2025.

 

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