Pentamedia Graphics Limited Vs ACIT (Madras High Court)
Facts- The order is challenged by the assessee on account of period of limitation under section 153(2) of the Income Tax Act. Assessee argued that the period of limitation, prescribed under Section 153 (2), to pass an order of re-assessment expired on 12.10.2014. However, the impugned order of re-assessment, under Section 143 (3) read with Section 147 of the Act, was passed by the respondent/assessing authority, on 21.10.2014 i.e., beyond the period of limitation and thus, the impugned orders are liable to be set aside.
Conclusion- Held that mere filing of an appeal before the High Court or Hon’ble Supreme Court would not preclude the competent authorities from exercising their powers, which is otherwise conferred under the provisions of the Act. Unless any interim order or otherwise is communicated to the authorities, they are bound to proceed under the provisions of the Act, in the manner known to law and therefore, mere filing of the case before the Hon’ble Supreme Court is not a ground to raise that the petitioner was not afforded with opportunity.
FULL TEXT OF THE JUDGMENT/ORDER OF MADRAS HIGH COURT
The relief sought for in these Writ Petitions are to set aside the orders of assessment dated 21.10.2014 with reference to two Assessment Years 2005-06 and 2006-07. The petitioner is a Company registered under the provisions of the Indian Companies Act, 1956. The petitioner is engaged in the development of computer software and exports the same to various parts of the globe. The petitioner filed return of income and the same was scrutinised and the petitioner submitted all the documents, books of accounts, etc., and the assessing authority, having satisfied, passed the orders of assessment.
2. Surprisingly, the notices under Section 148 was issued for the Assessment Years 2005-06 and 2006-07 on 28.03.2012. The writ petitioner filed W.P.Nos.34985 and 34986 of 2012 and this High Court admitted the Writ Petitions and granted interim stay of all further proceedings on 21.12.2012. The period of limitation, under Section 153 (2) of the Income Tax Act, 1961 (hereinafter referred to as, ‘the Act’), to pass a re-assessment order ended on 31.03.2013. However, on 12.04.2013, the interim stay granted was extended until further orders. Thereafter, the two Writ Petitions filed by the petitioner were dismissed by this Court on 04.07.2014.
3. In this context, the learned counsel for the petitioner made a submission that the period of limitation, prescribed under Section 153 (2), to pass an order of re-assessment expired on 12.10.2014. However, the impugned order of re-assessment, under Section 143 (3) read with Section 147 of the Act, was passed by the respondent/assessing authority, on 21.10.2014 i.e., beyond the period of limitation and thus, the impugned orders are liable to be set aside. The learned counsel for the petitioner states that the Writ Petitions were dismissed on 04.07.2014 and including that, 100 days of stay granted by this Court is to be reckoned. Accordingly, the last date for passing an order of re-assessment falls on 12.10.2014.
4. The learned counsel for the petitioner, in support, relied on Sub Clause (ii), Explanation 1 to Section 153 of the Act, which contemplates “period during which the assessment proceeding is stayed by an order or injunction of any court”. Relying on the said explanation, it is reiterated that the period during which the assessment proceedings is stayed alone is excluded and there is no stipulation that the date of receipt of copy of the order of the Court must be taken into consideration for the purpose of reckoning the period of limitation. In the absence of any specific provision, the learned counsel for the petitioner reiterated that the Sub Clause (ii) to Explanation 1 is to be considered in its straight language and therefore, the last day for passing an order of re-assessment in the present case was 12.10.2014. The learned counsel for the petitioner referred the other provisions of the Income Tax Act, wherein the date of receipt is stipulated. However, under Section 153, there is no such stipulation and therefore, the period of stay means that the date of expiry of stay is to be taken into consideration. As far as the communication of the order is concerned, the learned counsel for the Income Tax Department was very much present while the stay was vacated and he had the knowledge and in normal circumstances, the learned counsel appearing on behalf of the department communicates such orders to the department and thus, the contention that the date of receipt of copy of the order is to be taken is not contemplated under the provisions of the Income Tax Act.
5. In support of the said contention, the learned counsel for the petitioner relied on the judgments of the High Court of Allahabad in the case of Commissioner of Income Tax Vs. DRS. X-ray and Pathology Institute Pvt. Ltd., reported in [2013] 358 ITR 27 (All). The Allahabad High Court held as follows:
“In the present case, the stay was vacated by the High Court on August 26, 2009. The Assessing Officer took the date of vacation of the interim order to be the date, when it was received by him on November 9, 2009, and passed the assessment order on June 22, 2010, which was clearly beyond two years as limitation would restart from August 26, 2009, and ended on April 15, 2010.
Apart from the fact that the Assessing Officer had sufficient time the Tribunal has held that there is no procedure in the High Court to communicate the order to the party to make it effective. The provisions of the income tax Act for filing of the appeal from the date of service of the order will not be attracted to calculate the period of limitation to complete the assessment.
In the present case, we are not concerned with limitation for any particular act to be performed, but the arrest of the limitation by an interim order passed by the High Court. As soon as the order was vacated, the limitation will restart and will exhaust itself on the period of limitation provided under the Act.”
6.In the case of Commissioner of Income Tax-1, Agra Vs. Chandra Bhan Bansal, reported in [2014] 46 taxmann.com 108 (Allahabad), the High Court of Allahabad held as follows:
“9. The aforesaid writ petitions having been dismissed on 01/8/1995, as per proviso to Explanation 1 to Section 153, the assessment was to be completed by 30/9/1995, but in the present case the assessment was completed on 04/1/1996 i.e. beyond 30/9/1995. The submission of Shri Shambhu Chopra, learned counsel appearing for the Revenue to save the assessment from being beyond the period of limitation is that the period of 60 days is to be computed from the date of communication of the order. He submits that the order of the High Court dated 01/8/1995, dismissing the writ petitions could be received by the office of the ACIT (Investigation) on 18/12/1995. There are two reasons due to which the said submission cannot be accepted. Firstly, the order of the High Court dated 01/8/1995, dismissing the writ petitions was passed in the presence of the learned counsel for the revenue, hence the submission that it was communicated on 18/12/1995 has no relevance, and secondly the provision of Explanation 1 (ii) of Section 153 of the Act, 1961 which is to the following effect:
“Explanation 1- In computing the period of limitation for the purposes of this Section -(i)…………
(ii) the period during which the assessment proceeding is stayed by an order or injunction of any Court, or ……….. shall be excluded”.
10. The above statutory scheme clearly indicates that for computing the period of limitation the period during which the assessment proceedings is stayed shall be excluded. In excluding the above period, the concept of communication of the order of the Court cannot be imported. The exclusion of the period has been provided because of stay or injunction by any Court during which the assessment proceedings are stayed. The intention is clear that when the limitation for assessment has started it can be stayed only by an order or injunction of any Court and as soon as the order or injunction of the Court is vacated, the period of limitation shall restart since after the vacation of the order of the Court, there is no embargo on the authorities to proceed with the assessment. The submission of Shri Shambhu Chopra learned counsel appearing for the Revenue that the limitation will start again only when the order is communicated to the Department thus cannot be accepted. The other reason for not accepting the above submission is also equally potent. Explanation 1 (v) and (vi) to Section 153 of the Act, 1961 are also part of the same statutory scheme. In Explanation 1 (v) and (vi) to Section 153 of the Act, 1961 the statutory scheme provides for computing the period of limitation from the date when the order under sub-section (1) of Section 245D and 245Q is received by the Commissioner. Thus, the legislature has provided for excluding the period from the date of communication of the order where they so intended. The use of concept of communication of receiving the order in the same provision which is absent in Explanation 1 (ii) concerned clearly indicates that for the purposes of Explanation 1 (ii), the communication of the order of the Court vacating the stay order or injunction is not contemplated.”
7. In the case of A.P. Shanmugaraj Vs. Deputy Commissioner of Income Tax, reported in [2020] 424 ITR 347, the Hon’ble Division Bench of the Madras High Court made an observation as under:
“6. On a bare perusal of the provisions of the Act quoted above, it is very clear that the period of limitation prescribed in Section 158BE of the Act excludes the period commencing from the date on which the Assessing Officer directs the Assessee to get his accounts audited viz., the date of the order under Section 142(2A) of the Act. The date of order or direction to get the accounts audited is important and not the date on which such order or direction under Section 142(2A) of the Act is served on the Assessee or received by the Assessee. In the present case, the order under Section 142(2A) of the Act was made by the Assessing Authority on 17.04.2000 directing the Assessee to get the special audit completed and furnished the report on or before 31.07.2000. The difference between these two dates is 105 days. If these 105 days are added to the last date before which the Audit Report was furnished viz., 31.07.2000, the date of assessment will get extended upto 13.11.2000. The assessment for block period in the present case was made by the Assessing Authority admittedly on 13.11.2000 itself and therefore apparently the said assessment is within limitation.
7. The contention of the learned counsel for the Assessee is that the period of exclusion should be computed from the date on which the order under Section 142(2A) of the Act was served upon the Assessee viz., on 20.04.2000 till 31.07.2000 which will give the exclusion period of 102 days only and therefore, the Assessment Order passed on 13.11.2000 will be hit by the bar of limitation. This contention in our considered opinion is misconceived and contrary to the clear and bare language of the provisions of the Act which employed the word “directs the Assessee to get his accounts audited”. These words are in contra distinction to the words employed in Section 142(2A) proviso where the extension of period by 180 days will become effective from the date when the order of extension is received by the Assessee. The proviso to Section 142(2A) quoted above, clearly uses the words “received by the Assessee” and not “directs the Assessee”. This distinction of two different phrases at two different places cannot be intermixed or confused with each other.”
8.The High Court of Madras, in the case of R.V. Sarojini Devi Vs. I.A.C., reported in [2000] 242 ITR 329 (Madras), held as follows:
“Learned counsel for the appellant submitted that the consequence of a proceeding under this Chapter are rather drastic and, therefore, a liberal construction which would enable the parties to the transaction to preserve the property should be adopted. Though the consequence is severe inasmuch as a property which was purchased voluntarily at a time when there was no treat of any acquisition, is sought to be acquired immediately after and by virtue of the sale itself, that is a consequence which the transferee suffers and not the transferor, who has executed and registered the sale deed and has received the consideration. The appellant is the transferor. Having regard to this fact also, it is not possible to agree with the submission that the appellant would be exposed to grave injustice, if she is not allowed to prefer the appeal which admittedly was preferred 26 days after the expiry of the period of limitation.”
9.The High Court of Delhi, in the case of Saheb Ram Om Prakash Marketing (P.) Ltd., Vs. Commissioner of Income Tax, reported in [2017] 398 ITR 292 (Delhi), made an observation as follows:
“19. Even otherwise, the assertion that the Revenue was aware of the order only on 2nd December 2016 does not appear to be correct. The Revenue has been unable to dispute the fact that, on 30th November 2016, a notice was issued by the AO to the Assessee under Section 142 (1) of the Act and this was pursuant to the order passed by this Court on 9th November 2016. Clearly, therefore, on the date that such notice was issued, the AO was aware of the order dated 9th November 2016 of this Court. Also, the order dated 9th November 2016 was passed in the presence of counsel for the Revenue and, therefore, the Revenue clearly was aware of the said order on that date itself.
20. For all of the aforementioned reasons, the Court is unable to accept the plea of the Revenue that, since it became aware of the order of this Court only on 2nd December2016, the period of 60 days in terms of the first proviso to Explanation 1 to Section 153 of the Act should begin to run from that date.”
10. Relying on these judgments, the learned counsel for the petitioner reiterated that the learned counsel appearing on behalf of the Income Tax Department was very much aware and had knowledge about vacating of the interim order by the High Court and they communicate those orders to the Income Tax Department. Thus, the period of limitation is to be reckoned from the actual date of vacating the order of interim stay by the High Court and not from the date on which the order is communicated to the department.
11. The learned Standing Counsel appearing on behalf of the respondents disputed the contentions raised by the petitioner, by stating that the impugned orders of re-assessment were passed within the period of limitation, as contemplated under the Act and the calculation of period of limitation made by the petitioner is not correct. The Income Tax Officials are expected to act only on receipt of the order copy from the High Court and not based on the oral informations provided by the learned counsel or in writing by the learned counsels. The order of the Court, in its letter and spirit, must be understood by the Income Tax Officials for the purpose of its implementation. Therefore, mere vacating the stay order by the Court cannot be a ground to reckon the period of limitation and the date of communication of the order to the department would be appropriate for the purpose of reckoning the period of limitation with reference to Sub Clause (ii) of Explanation 1 to Section 153 of the Act.
12.The learned counsel submitted legal submissions on behalf of the respondent, wherein the sequence of dates and events are narrated and the same are extracted hereunder:
Sequence of Dates and Events
