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Commissioner of Income-tax Vs. Goel Brothers - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtAllahabad High Court
Decided On
Case NumberIncome-tax Reference No. 203 of 1978
Judge
Reported in(1982)28CTR(All)274; [1982]135ITR511(All); [1982]10TAXMAN92(All)
ActsIncome Tax Act, 1961 - Sections 147, 148 to 153, 153(3), 250, 254, 260, 262, 263 and 264
AppellantCommissioner of Income-tax
RespondentGoel Brothers
Appellant AdvocateM. Katju, Adv.
Respondent AdvocateS.P. Agrawal, Adv.
Excerpt:
.....section 153 prescribes the time-limit for the completion of an assessment under section 143 or section 144 as well as for the completion of an assessment or reassessment under section 147, the fiction of law created by explns. kanodia brothers clearly indicates that no direction whatsoever was given by the tribunal that the income earned from the business carried on in the name of m/s......to the assessee was barred by time ?'the question relates to the income-tax assessment of m/s. goel brothers for the assessment years 1958-59, 1959-60 and 1960-61. m/s. goel brothers had filed income-tax return for the aforesaid years in the status of a firm. the ito took the view that the business carried on in the name of m/s. goel brothers actually belonged to m/s. kanodia brothers and, consequently, the income returned by m/s. goel brothers was included in the income of kanodia brothers while making their assessments. protective assessments were, however, made on m/s. goel brothers for all these years in the status of an unregistered firm.2. m/s. kanodia brothers as well as m/s. goel brothers filed appeals to the aac. m/s. kanodia brothers pleaded that there was no justification.....
Judgment:

K.N. Seth, J.

1. The Income-tax Appellate Tribunal under Section 256(2) of the I.T. Act, has referred the following question to this court for opinion :

'Whether, on the facts and in the circumstances of the case, the Tribunal was legally justified in holding that the notice issued under Section 148 of the Income-tax Act, 1961, to the assessee was barred by time ?'

The question relates to the income-tax assessment of M/s. Goel Brothers for the assessment years 1958-59, 1959-60 and 1960-61. M/s. Goel Brothers had filed income-tax return for the aforesaid years in the status of a firm. The ITO took the view that the business carried on in the name of M/s. Goel Brothers actually belonged to M/s. Kanodia Brothers and, consequently, the income returned by M/s. Goel Brothers was included in the income of Kanodia Brothers while making their assessments. Protective assessments were, however, made on M/s. Goel Brothers for all these years in the status of an unregistered firm.

2. M/s. Kanodia Brothers as well as M/s. Goel Brothers filed appeals to the AAC. M/s. Kanodia Brothers pleaded that there was no justification for holding that the business carried on by M/s. Goel Brothers was theirs M/s. Goel Brothers claimed that having assessed their income in the hands of M/s. Kanodia Brothers. there was no justification for assessing the same income in their hands. The AAC upheld the finding of the ITO that the business carried on in the name of M/s. Goel Brothers was in fact the business of M/s. Kanodia Brothers. The AAC accepted the contention of M/s. Goel Brothers that there was no justification for assessing the same income again in their hands and accordingly annulled the assessments made on M/s. Goel Brothers for the aforesaid three years.

3. M/s. Kanodia Brothers challenged the order of the AAC before the Tribunal. By its order dated September 29, 1969, the Tribunal held that the income of M/s. Goel Brothers could not be included in the income of M/s. Kanodia Brothers.

4. After the decision of the Tribunal the ITO on July 23, 1973, issued notices under Section 148 of the Act to M/s. Goel Brothers for assessment for the years 1958-59 to 1960-61 on the ground that the income for these years had escaped assessment. The assessee challenged the validity of the assessment proceedings. The objections raised by the assessee were rejected by the ITO taking the view that the proceedings could be initiated at any time and the conditions laid down in the Act for the initiation of proceedings were satisfied. He, accordingly, made fresh assessments for all the three years. On appeal by the assessee, the AAC annulled the assessments made by the ITO. On appeal by the department, the Tribunal held that the noticesissued by the ITO under Section 148 were not saved by limitation and upheld the order of the AAC.

5. It is not disputed that in the present case the reopening of the assessment could be only under Clause (b) of Section 147, It is further not disputed that the initiation of proceedings would be barred by time unless the case is covered by Sub-section (1) of Section 150.

6. Sub-section (1) of Section 150 provides:

'Notwithstanding anything contained in Section 149, the notice under Section 148 may be issued at any time for the purpose of making an assessment or reassessment or recomputation in consequence of or to give effect to any finding or direction contained in an order passed by any authority in any proceeding under this Act, by way of appeal, reference or revision.'

In order to appreciate the ambit and scope of the aforesaid provisions it would be necessary to refer to Sub-section (3) of Section 153. The relevant parts of that provision are I

'153. (3)The provisions of Sub-sections (1) and (2) shall not apply tothe following classes of assessments, reassessments and recomputationswhich may, subject to the provisions of Sub-section (2A), be completed atany time...

(ii) where the assessment, reassessment or recomputation is made on the assessee or any person in consequence of or to give effect to any finding or direction contained in an order under Section 250, 254, 260, 262, 263 or 264 or in an order of any court in a proceeding otherwise than by way of appeal or reference under this Act;... Explanation 3.--Where, by an order referred to in Clause (ii) of subsection (3), any income is excluded from the total income of one person and held to be the income of another person, then, an assessment of such income on such other person shall, for the purposes of Section 150 and this section, be deemed to be one made in consequence of or to give effect to any finding or direction contained in the said order, provided such other person was given an opportunity of being heard before the said order was passed.'

Section 149 provides the time-limit for notice under Section 148. In cases falling under Clause (b) of Section 147 no notice under Section 148 can be issued after the expiry of four years from the end of the relevant assessment year. Sub-section (1) of Section 150 is an exception to Section 149 for the purpose of making an assessment or reassessment or recomputation in consequence of or to give effect to any finding or direction contained in an order passed in appeal, reference or revision under the Act. It is only where the assessment or reassessment or recomputation has to be done in consequence of or to give effect to any finding or direction contained in an order passed inappeal, reference or revision that benefit can be had of the provision of Section 150(1).

7. Exercise of power under Section 147 is subject to the provisions of Sections 148 to 153. Section 150 relates to the issuance of a notice under Section 148. Section 153 prescribes the time-limit for the completion of an assessment and reassessment. Sub-section (3)(ii) of Section 153 provides that no time-limit applies for the completion of an assessment or reassessment or recomputation if it is made on the assessee or any person in consequence of or to give effect to any finding or direction contained in an order under Sections 250, 254, 260, 262, 263 and 264 or in an order of any court in proceedings otherwise than by way of an appeal or reference under the Act. Explanations 2 and 3 to Section 153 deem certain assessments to be made in consequence of or to give effect to a finding or direction. Since Section 153 prescribes the time-limit for the completion of an assessment under Section 143 or Section 144 as well as for the completion of an assessment or reassessment under Section 147, the fiction of law created by Explns. 2 and 3 to Section 153 is attracted for the purposes of Section 150(1) also.

8. For the revenue, it was contended that since the Tribunal in its order dated September 29, 1969, held that the income of M/s. Goel Brothers could not be included in the income of M/s. Kanodia Brothers and since it was in consequence of or to give effect to the order of the Tribunal passed in the case of M/s. Kanodia Brothers that notices under Section 148 were issued to M/s. Goel Brothers. that could have been done at any time in view of Section 150(1) of the Act and there were no fetters on the power of the ITO to bring the income of M/s. Goel Brothers to tax. We find no merit in the contention. Admittedly, when the Tribunal decided the appeal of M/s. Kanodia Brothers no opportunity of being heard, as contemplated by Expln. 3 to Section 153, was given to M/s. Goel Brothers before the order was passed by the Tribunal. A perusal of the order of the Tribunal dated September 29, 1969, passed in the case of M/s. Kanodia Brothers clearly indicates that no direction whatsoever was given by the Tribunal that the income earned from the business carried on in the name of M/s. Goel Brothers should be assessed in the hands of M/s. Goel Brothers. The only view expressed by the Tribunal was that no inference of benami could be drawn from the facts and circumstances on the record and the income of M/s. Goel Brothers could not, therefore, be included in the computation of the income of M/s. Kanodia Brothers. While disposing of the appeal there was neither any occasion for the Tribunal to consider nor could it be legally held in the absence of M/s. Goel Brothers that the income in question should be assessed in the hands of M/s. Goel Brothers. Consequently, the department could not successfully claim that the notices to M/s. Goel Brotherswere issued in consequence of or to give effect to any finding or direction contained in the Tribunal's order.

9. As noted earlier, the AAC while disposing of the appeal of M/s. Goel Brothers. annulled the assessment made on M/s. Goel Brothers as a protective measure. The department did not take any step to keep these assessments alive. Section 150(1) not being applicable to the case, proceedings initiated by the issuance of a notice under Section 148 of the Act were incompetent being barred by time. Similar view was taken in a recent decision of this court in I.T.R. No. 884 of 1976, Gupta Traders v. CIT decided on December 15, 1981 : [1982]135ITR504(All) .

10. In the result, the question referred is answered in the affirmative, against the department and in favour of the assessee. The assessee is entitled to costs which are assessed at Rs. 250.


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