MSK Project (India) JV Ltd. Vs ACIT (ITAT Ahmedabad)
Conclusion: The computation of income by AO giving effect to CIT’s direction was an assessment order which was appealable. The order passed by CIT(A), therefore, holding the assessment order to be not appealable was incorrect in law. It was deemed fit to restore the issue back to AO to verify the facts of the case and thereafter pass an order in accordance with the directions of CIT in his order passed u/s 263.
Held: Assessee’s return was selected for scrutiny, wherein AO accepted the returned income. CIT noted error in the assessment order which was prejudicial to the interest of the revenue. He noted that the assessee had not accounted for the amount receivable by it from the Government of Rajasthan as per the Arbitral Tribunal Award in respect of loss of toll collection in connection with construction of Bharatpur bye pass road. Accordingly, a show-cause notice was issued to assessee u/s 263 and the order passed by CIT directing AO to pass a fresh assessment order taxing the award on accrual basis in accordance with the Mercantile System of Accounting. Thereafter, the order giving effect to the order of the CIT passed u/s 263 was passed by AO the very next day, added the amount of arbitral award to the income of the assessee.CIT(A) dismissed the assessee’s appeal holding it was non-maintainable since the order passed by AO was simply to give effect to the findings of the CIT and, as per the CIT(A), no appeal lay against such appeal effect order passed by the AO. Assessee had pleaded before CIT that since the award had been contested by the Government of Rajasthan, therefore, until it attained finality the assessee had no right to receive the same. Therefore, it had not offered to tax and also believed the same to be taxable only on the award attaining finality. It was held that the order passed by AO, therefore, was not a simple order giving effect to the order of CIT. He was required to examine the facts of the case and apply the law as laid down in CIT Vs. Gajapathy Naidu to it while subjecting the arbitral amount to tax. The findings of the CIT(A), therefore, that the order of AO was to give effect to the findings of the lCIT and, therefore, not appealable was incorrect. Assessee was well within his rights to have filed an appeal against this order passed by AO. Even otherwise, it had been held in the case of Kalyan Kumar Ray Vs. CIT, [1991] 191 ITR 634 (SC), that an assessment order comprised the detailed order passed by the AO as well as the computation of income done by him. Therefore, for all purposes, the computation of income by AO giving effect to CIT’s direction was an assessment order which was appealable. The order passed by the CIT(A),therefore, holding the assessment order to be not appealable was incorrect in law. Having held so, it was deemed fit to restore the issue back to AO to verify the facts of the case and thereafter pass an order in accordance with the directions of CIT in his order passed u/s 263.
FULL TEXT OF THE ORDER OF ITAT AHMEDABAD
Present appeal has been filed by the assessee against order of the learned Commissioner of Income-tax (Appeals)-III, Baroda [hereinafter referred to as “CIT(A)” for short] dated 09.08.2012 passed under Section 250(6) of the Income-tax Act, 1961 [hereinafter referred to as “the Act” for short], for the Assessment Year (AY) 2005-06.
2. The grounds raised by the assessee are as under:-
“TI. Ld. CIT (A) erred in law and on facts to hold that no appeal lies against order giving effect to findings of CIT in order passed u/s 263 of the Act.
2. Ld. CIT (A) erred in law and on facts dismissing appeal challenging addition of Rs.9,90,00,052/- whereas Supreme Court awarding Rs. 26.34 lakhs only means that the appellant was not required to account income as per arbitral award on the mercantile basis.
3. CIT (A) erred in law and on facts confirming order giving effect without giving adequate opportunity to the appellant to present documentary evidence that no such income accrued to the appellant.
4. Levy of interest u/s 234B of the Act is not justified.”
3. The appeal is stated to be barred by limitation by 2359 days. The ld. CIT(A)’s order, against which the present appeal has been filed before us, was passed on 09.08.2012. The assesse was required to file appeal before us within 60 days, i.e. by 08.10.2012. However, the present appeal has been filed before us on 26.03.2019, resulting in delay in filing of the appeal by 2359 days.
4. The ld. Counsel for the assessee has filed an application in writing seeking condonation of delay and has made oral submissions also before us regarding the same.
5. Beginning with pointing out the chronology of events leading to the filing of the present appeal before us, it was pointed out that initially the assessee had filed return of income declaring total income of Rs.(-)48,82,805/-(Loss). The assessment was finalized under Section 143(3) of the Act vide order dated 28.12.2007, accepting the returned income. Subsequently, the ld. Commissioner of Income-tax (ld. CIT in short) on examining the case records noted error in the assessment order which was prejudicial to the interest of the revenue. He noted that the assessee had not accounted for the amount receivable by it from the Government of Rajasthan of Rs.990 lakhs as per the Arbitral Tribunal Award in respect of loss of toll collection in connection with construction of Bharatpur bye pass road. Accordingly, a show-cause notice was issued to the assessee u/s 263 of the Act and the order passed by the ld. CIT on 25.02.2010 directing the Assessing Officer to pass a fresh assessment order taxing the award on accrual basis in accordance with the Mercantile System of Accounting. Thereafter, the order giving effect to the order of the ld. CIT passed u/s 263 of the Act was passed by the Assessing Officer on 26.02.2010, i.e. the very next day, adding the amount of arbitral award of Rs.990 lakhs to the income of the assessee. Against this order giving effect to the order of the ld. CIT, the assessee filed an appeal on 12.03.2012 before the ld. CIT(A) who dismissed the assessee’s appeal holding it non-maintainable since the order passed by the Assessing Officer was simply to give effect to the findings of the ld. CIT and, as per the ld. CIT(A), no appeal lay against such appeal effect order passed by the Assessing Officer. Aggrieved by this order of the ld. CIT(A) dated 09.08.2012, the present appeal has been filed before us after a delay of 2359 days on 26.03.2019.
6. The reasons for the delay were explained and brought out before us in writing vide an application filed by the assessee for seeking condonation of the delay which was filed along with the appeal filed before us in Form No.36. The contents of the same are reproduced hereunder:-
“Sub : Application for delay Condonation in filing appeal
(1) The appellant MSK Project (India) JV Limited now merged with Madhav Infra Projects Ltd filed return of income for A Y 2005/06 declaring loss of Rs. 48, 82, 805/- that was accepted & assessed u/s 143(3) of the Act.
(2) Subsequently in order u/s 263 passed on 25.02.2010 ld. CIT holding order to be erroneous & prejudicial to the interest of revenue directed AO to pass fresh order to include claim receivable of Rs.9,90,00,052/- by the appellant company from Rajasthan Government as taxable income on mercantile basis.
(3) That AO in order giving effect to the order u/s 263 of the Act made addition of Rs.9,90,00,052/- being the amount of Arbitral Tribunal Award raised demand of Rs.2,10,58,532/- payable by the appellant.
(4) That the award of Arbitral Tribunal was set aside by Hon’ble Supreme Court & only an amount of Rs. 26.34 lakhs along with interest was confirmed to be payable to the appellant company.
(5) Although amount of Rs. 26.34 lakhs has been confirmed to be payable by Rajasthan Government by the Supreme Court to the appellant, till date no payment is received by the appellant. The recovery suit is already filed in the district court at Jaipur. As such the matter is yet judicial.
(6) That meanwhile appeal against order giving effect to order u/s 263 of the Act was dismissed by ld. CIT (A) – III, Baroda vide order dated 09.08.2012.
(7) That the appellant filed application u/s 155(16) of the Act on 28/11/2018 before Dy. Commissioner of Income Tax, Central Circle – 1, Vadodara to amend the order giving effect to order u/s 263 of the Act under the developments occurred as stated under Para 4 & 5 after receiving the order u/s 263.
(8) That the appellant while in pursuance of proceedings before Arbitral Tribunal, Rajasthan High Court as well Supreme Court filed application u / s 155 (16) of the Act & was under bona fide belief that amendment will be made, appeal before the Hon’ble ITAT, Ahmedabad remained to be filed within 60 days from receipt of appellate order.
(9) That the communication rejecting application u / s 155 (16) of the Act was received on 16.03.2019, the appellant has immediately approached Advocate to prepare appeal challenging order of ld. CIT (A) dismissing the appeal. Hence appeal could not be filed within 60 days of receipt of the CIT (A) order.”
7. Besides, ld. Counsel for the assessee, during the course of hearing before us, filed a chronology of events leading to the filing of the present appeal before us which is reproduced hereunder:-
“LIST OF DATES AND EVENTS
