Allahabad High Court Judgement

Allahabad High Court Judgement

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JUDGEMENT HEADLINE : Case Falling Under Two Heads U/s 153 Income Tax Act - Time Should Be Excluded For Both.
JUDGEMENT TITLE : C.I.T. Vs. M/S Luxco Electronics On 11/23/2010 By Allahabad High Court
CASE NO : INCOME TAX REFERENCE NO. 189 OF 1987
CORAM : Hon'ble Yatindra Singh,J. And Hon'ble Prakash Krishna,J.

HIGH COURT OF JUDICATURE AT ALLAHABAD

AFR
Court No. - 37


Case :- INCOME TAX REFERENCE No. - 189 Of 1987

Petitioner :- C.I.T.
Respondent :- M/S Luxco Electronics
Petitioner Counsel :- Sri Shambhu Chopra
Respondent Counsel :- Sri R.R. Agarwal,Sri S. Agarwal

Hon'ble Yatindra Singh,J.
Hon'ble Prakash Krishna,J.

1. The Main Question Involved In This Reference Is,
'Whether In Case, Where Two Heads As Contemplated In Explanation-1 To Section 153 (Section 153 Explanation-1) Of The Income Tax Act, 1961 (the Act) Are Present For Excluding The Time Spent During The Period Mentioned Therein, Then Can The Benefit Of Both Or Only Of One Of Them Be Availed Of ?'.
THE FACTS
2. M/s Luxco Electronics, Allahabad (the Assessee) Manufactures And Sells Loudspeaker And Its Electronic Components. It Filed Its Return For The Assessment Year (AY) 1979-80 On 29.8.1979 Before The Income Tax Officer, A Ward, SIC Allahabad (the ITO). He Was The Assessing Officer For The Assessee.

3. The Commissioner Income Tax (the Commissioner) Had Earlier Issued A Notification Dated 16.11.1979 Conferring Concurrent Jurisdiction Under Section 125A Of The Act On The Inspecting Assistant Commissioner Allahabad (IAC), With The ITO.

4. The ITO By Its Order Dated 1.8.1981 Referred The Case For The Special Audit Under Section 142 (2A) Of The Act. The Audit Report Was Received On 16.1.1982.

5. Thereafter, As The Variation On The Income Was To Exceed More Than One Lakh Of Rupees {the Amount Fixed By The Board Under Section 144 B(1) Of The Act}, A Draft Order Was Prepared On 26.8.1982 And Was Served On The Assessee On 27.8.1982.
6. The Assessee Filed His Objections. Thereafter The Draft Order Alongwith Objections Was Sent To The Inspecting Assistant Commissioner (the IAC), Who Issued His Directions On 22.1.1983. Subsequently, The ITO Passed An Assessment Order On 28.1.1983 Assessing The Income Of The Assessee To `5,44,210/-.

7. The Assessee Filed An Appeal. The Commissioner Income Tax (Appeals) (CIT-A) By Its Order Dated 28.6.1983 Held That The Assessment Order Was Not Barred By Time But It Was Set Aside On Other Grounds. He Remanded The Case For Passing A Fresh Assessment Order.

8. Against The Aforesaid Order Of The CIT (Appeals), The Income Tax Department ( The Department) Filed An Appeal Before The Income Tax Appellate Tribunal Allahabad Bench, Allahabad (the Tribunal). The Assessee, Not Only Filed A Cross-objection To The Appeal Filed By The Department, But Also Filed Its Own Appeal.

9. Both The Appeals And The Cross-objection Were Taken Together. The Appeal And Cross-objection Of The Assessee Was Allowed On 28.1.1986 On The Ground That The Assessment Order Was Barred By Time. The Appeal Of The Department Was Dismissed As Infructuous.

10. The Department Filed An Application Under Section 256 (1) Of The Act To Refer Seven Questions For Opinion To The High Court. It Was Partly Allowed On 31.8.1987 And Three Questions Were Referred.

QUESTIONS REFERRED
11. We Have Heard Sri RK Upadhyay For The Department And Sri RR Agrawal, For The Assessee. The Tribunal Has Referred The Following Three Questions For Opinion Of The Court:
(i) Whether, On The Facts And In The Circumstances Of The Case, The Tribunal Was Justified In Holding That The Provisions Of Section 144B Of The Income-tax Act, 1961 Were Not Applicable?
(ii) If Answer To The Aforesaid Question Is In The Affirmative Whether The Draft Assessment Order In That Event Would Become Final Assessment Order?
(iii) Whether, On The Facts And In The Circumstances Of The Case, The Assessment Order Passed By The Income-tax Officer Was Barred By Limitation?

1st QUESTION: SECTION 144B WAS APPLICABLE
12. In This Case, The Tribunal Has Followed Its Own Decision Given By The Special Bench In Saraya Sugar Mills (P) Ltd. Vs ITO (1985) 25 ITJ (All) 196 = (1985) 13 ITD 163 (All).

13. In The Aforesaid Case, The Department Filed An Application To Refer The Questions For Opinion To The High Court. This Application Was Partly Allowed And ITR No. 57 Of 1986 CIT Vs M/s Saraya Sugar MIlls Pvt Ltd (the Saraya Case) Was Sent To This Court.

14. By Our Judgement Delivered Today In The Saraya Case, We Have Answered The Reference. The Questions Have Been Answered In Favour Of The Department And Against The Assessee.

15. In View Of Our Reasons In The Saraya Case, It Cannot Be Said That IAC Allahabad Exercised The Powers Or Performed The Functions Of The ITO, Merely For The Reason That He Was Conferred The Concurrent Jurisdiction.

16. In This Case, Neither Any Order Was Passed By The IAC-Allahabad Assessing The Income Of The Assessee Nor Is There Anything To Indicate That He Exercised The Powers Or Performed The Functions Of The ITO.

17. In View Of Above, It Cannot Be Said That The Case Was Covered By Section 144B (7) Of The Act. The Question Is Answered In Negative, In Favour Of The Department And Against The Assessee.

2nd QUESTION: NOT NECESSARY TO ANSWER
18. We Have Answered Question-1 In Favour Of The Department And Against The Assessee. The Counsel For The Parties Agree That In View Of This, The Answer To The Question-2 Has Becomes Academic And It Is Not Necessary To Express Any Opinion On The Same.

19. Accordingly, We Refrain From Answering It.

3rd QUESTION: ASSESSMENT ORDER-- NOT BARRED BY TIME
20. The Counsel For The Assessee Submits That:
(i)The Limitation For Making Assessment Is Provided In Section 153 (1) (a) (iii) And Is Two Years;
(ii)Five Heads Have Been Indicated In Explanation 1 Of Section 153 Of The Act By (i) To (v) And For Which The Period Mentioned Therein Can Be Excluded, While Calculating Limitation;
(iii) In Between Each Head, The Word 'or' And Not The Word 'and' Is Used;
(iv)This Indicates That Period Can Only Be Excluded As Far As Only Any One Of The Head Is Concerned But Time Spent Under Two Cannot Be Excluded.

21. Section 153 (see Below)1 Of The Act Is Titled As 'Time Limit For Completion Of Assessments And Reassessments'. Sub-section (1) Clause (a) Sub-clause (iii) Of Section 153 {Section 153(1)(a)(iii)} Of The Act Provides Two Years Limitation From The End Of The Assessment Year In Which The Income Was First Assessable For The Assessment Year After 1st Of April 1969. This Case Relates To Assessment Year (AY) 1979-80 And Falls Under This Clause.

22. The Assessment Year 1979-80 Came To An End On 31st March 1980. In View Of Section 153(1)(a)(iii), The Assessment Ought To Have Been Completed By 31.3.1982. The Assessment Order Was Passed On 28.1.1983. It Is Barred By Time Unless It Could Be Saved By Excluding The Time Provided In Section 153 Explanation 1 Of The Act.

23. The ITO Referred The Case For A Special Audit Under Section 142(2A) Of The Act On 1.8.1981. The Audit Report Was Received On 16.1.1982. This Period Was To Be Excluded Under Section 153 Explanation 1(ii) Of The Act.

24. After The Audit Report Was Received, A Draft Order Was Prepared On 26.8.1982 As Variation Was More Than Rupees One Lakh (the Amount Fixed By The Board). It Was Served Upon The Assessee On 27.8.1982. The Assessee Filed Its Objections Against The Same.

25. Subsequently, The Draft Order Alongwith Objections Of The Assessee Were Sent To The IAC, Who Issued Direction On 22.1.1983. Thereafter The Assessment Order Was Passed On 28.1.1983. In View Of Section 153 Explanation 1(v) Of The Act, The Period From 27.8.1982 To 22.1.1983 Was To Be Excluded.

26. There Is No Dispute That In Case The Periods Under Section 153 Explanation 1 (iii) As Well As Section 153 (1) (v) Were Excluded Then The Assessment Order Passed On 28.1.1983 Was Within Time. However, If Time Only Under One Head Was Excluded Then The Assessment Order Was Barred By Time.

27. In Section 153 Explanation 1, The Word 'or' Is Used In Between The Five Heads Merely To Indicate That Even If One Existed In Isolation, Then The Time Was To Be Excluded. This Did Not Mean That If A Case Was Covered Under Two Or More Than Two Heads Mentioned In Section 153 Explanation 1, Then The Period For Only One Of Them Would Be Excluded.

28. The Word 'and' Was Purposely Not Used There. In Case The Word 'and' Was Used Then It Might Had Created Confusion Giving The Impression That The Time Could Only Be Excluded If All The Contingencies Contemplated In The Explanation Were Present. It Is For This Reason That The Word 'or' Was Used.

29. In The Present Case, The Period Falling Under Both The Heads Was Different. They Were Not Overlapping With Each Other And As Such The Period When The Case Was Referred Under Section 142 (2A) Till Receipt Of Audit Report As Well As, When The Draft Order Under Section 144B Was Received By The Assessee (when It Was Served On The Assessee) Till The IAC Issued Direction, Was To Be Excluded.

30. It Is Accepted That In The Event The Period Under Both Heads Was To Be Excluded Then The Assessment Order Would Not Be Barred By Time. In View Of This, The Third Question Is Answered In Negative, In Favour Of The Department And Against The Assessee.
CONCLUSIONS
31. Our Conclusions Are As Follows:
(a)On The Facts And Circumstances Of The Case, The Provisions Of Section 144B Of The Act Were Applicable.
(b)The Assessment Order Was Not Barred By Time;
(c)In View Of Our Answer To The First Question, The Answer To The Second Question Becomes Academic And We Refrain From Answering It;
In View Of Our Conclusions, The Question Number 1 And 3 Are Answered In Negative, In Favour Of The Department And Against The Assessee.

32. Let Our Opinion Be Sent To The Tribunal For Passing The Appropriate Consequential Order.

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