Assistant Commissioner Income Tax vs Jet Life (India) (Former As M/s Sahara Air Lines Ltd.)

“ 1. The order of the Ld. CIT(Appeals) is not correct in law and facts.

2.

On the facts and in the circumstances of the case, the Ld. CIT(A) has erred in holding that the assessment was barred by limitation on the ground that the period of 60 days available to the Assessing Officer as per clause-(iii) of the explanation 1 to Section 153 of the Income Tax Act, 1961 read with the first proviso to the said Explanation should be counted from the last day of limitation u/s 153(1) and not from the last day on which the assessee is required to furnish the audit report.

3.

On the facts and in the circumstances of the case, the CIT(A) has erred in annulling the assessment without considering the judgement of the Hon'ble ITAT, Delhi Bench in the case of Rajesh Kumar Vs. DCIT, IT(SS) Appeal Nos. 10 and 17 (Delhi) of 2007 dated 30/06/2007.

4.

The appellant craves leave to add. alter or amend any/all of the grounds of appeal before or during the course of the hearing of the appeal.

Thus, it was contended that the last date for passing assessment order for A.Y. 2004-05 was 29.06.2007, whereas the assessment order was passed on 23.08.2007. Hence, the assessment order for A.Y. 2004-05 is barred by limitation.

It would be relevant to discuss the issue involved in A.Y. 1997-98. The appellant had filed its return of income for A.Y. 1997-98 on 30-11-1997, which was subsequently revised on 30-03-99. On 24-02-2000 the AO ordered Special Audit u/s 142(2A) of the Act and the assessee submitted the Special Audit Report on 31-05-2000. The assessment was completed on 27-07-2000. The assessee claimed that the assessment ought to have been completed by 07-07-2000 and since the assessment was completed on 27-07-2000 the assessment order was barred by limitation. The learned CIT (A) also held the same view and the assessee's appeal was allowed. Aggrieved by the order of the learned CIT (A), the revenue filed the second appeal before the ITAT. The Hon'ble ITAT has also agreed with the findings of the learned CIT (A) and has dismissed the appeal of the Revenue. During the hearing before the Hon'ble ITAT, the learned Special Counsel of the Department had submitted a chart analyzing the limitation dates based on circular No. 621 dated 19.12.1991 and the interpretation of first proviso to Explanation 1 to section 153, which reads as under:

"Provided that where immediately after the exclusion of the aforesaid time or period, the period of limitation referred to in sub - sections (1), (1A), (1B), (2), (2A) and (4) available to the Assessing Officer for making an order of assessment, reassessment or recomputation, as the case may be, is less than sixty days, such remaining period shall be extended to sixty days and the aforesaid period of limitation shall be deemed to be extended accordingly.”

Chart submitted by the learned Special Counsel of the Department is as under:

Sl. No.	Particulars	Date
1.	Return of Income	30.11.1997
2.	Revised return	30.03.1997
3.	Limitation date as per S 153 (1)	31.03.2000
4.	Date or order u/s 142(2A)	24.02.2000
5.	Number of days remaining for making assessment	37 days
6.	Date by which Audit Report is required to be furnished	31.05.2000
7.	Excluded period as per Explanation 1(iii) to S 153	24.02.2000 to 31.05.2000 (98 days)
8.	Date by which assessment must be made under Explanation 1(iii) of S 153.	31st May 2000 + 37 days i.e. 07.07.2000
9.	Since number of days available for making assessment is 37 days, which is less than 60 days. proviso to Explanation to Section 153 is applicable. Therefore, number of days remaining with the AO for making assessment would be 60 days from 31.05.2000 and not 37 days. Hence, the limitation date would be.	30.07.2000
10.	Assessment order u/s 144 passed on	27.07.2000

I concur with the arguments advanced by the learned Special Counsel of the Department that if the time period available to the A.O., after exclusion of the period referred to in clause (iii) of Explanation 1 of section 153, is less than sixty days; such remaining period shall be extended to sixty days. Thus, in the year under consideration A.Y. 2004-05 also, the assessment order is not barred by limitation under section 153 of the Act.

However, the Hon’ble ITAT did not accept the arguments of the special counsel. The main and relevant extract of the order of the Hon’ble ITAT which explains the place to the judgment is being rebonded here in person:

“The assessment year involved in the present case is the assessment year 1997-98. As per the provisions of section 153(1) the time limit for completing the assessment for the said assessment year is any time between 01.04.1998 and 31.03.2000 being 2 years from the end of the A.Y. The AO had directed for special audit under section 142(2A) on 24.02.2000 and the same was to be furnished by 31.05.2000. Thus, as per sub-clause (iii) of explanation I, the period that is to be excluded would be 98 days. Thus, by the order of the AO directing for special audit being passed on 24.03.2000 the exclusion time exceeds the point at which the assessment becomes barred by limitation being 31st March, 2000. As the period between 24.02.2000 and 31.03.2000 is only 37 days and the period of exclusion being the period between 24.02.2000 and 31.05.2000 being 98 days as per the proviso the period of exclusion being the period available to the AO would extend by 98 days, which is more than 60 days. It is further noticed from the proviso that it is the period of limitation referred to in sub-section (i), which is the point, which is extended. This is because as per the proviso, if the remaining period after excluding the period of exclusion is less than 60 days, then the period of limitation is deemed to be extended accordingly and not the period available to the assessing authority from the due date of the submission of the special audit report as provided in section 142(2A). Thus, the period of limitation as provided under section 153(1)(a) being 31st March, 2000, in this case, is the point which would have to be considered. This point gets extended by 98 days and the 98 days in regard to this assessment ends on 07.07.2000. Consequently, the finding of Id. CIT(A) that the limitation expired on 07.07.2000 as per the provisions of section 153(1) read with sub-clause (iii) of explanation I alongwith the proviso to explanation I of section 153 would have to be upheld. Our view also derives support from the extracts from Kanga and Palkhiwala as provided by the Id. Special Counsel, wherein it has been specifically clarified that the proviso to explanation I extends w.e.f. 27 september, 1991 the period of limitation in cases covered by sub-section (1) of section 153 so that the AO can get a clear period of 60 days for the assessment. Similarly the extract from Sampath Iyengar's 10th edition and Vol. V also in para 43 specifically says that after the insertion of proviso to explanation I to section 153 w.e.f. 27, Sept, 1991 the remaining period of limitation referred to in sun-section )I) of section 153 for completing the assessment shall be extended so also the memorandum explaining the provisions in Finance (No.2) Bill of 1991 specifies that the remaining period of limitation referred to sub-section 1 of section 153 for completing the assessment gets extended. In all these references, it is specifically mentioned that the when the remaining period is less than 60 days, then the remaining period of limitation referred to in sub-section 1 of section 153 shall be deemed to be extended. Thus, what is noticed is that it is the limitation point which is prescribed in section 153(1), being the remaining period of limitation, which is extended, and not from the last date from which the assessee is required to furnish the audit report. By the term "the remaining period of limitation" what is to be understood is that there was already a point of limitation fixed by the statute, in this case the date being 31.03.2000, and it is this already fixed point of limitation as per statute that is extended due to the exclusion of the period as provided in the explanation as also the proviso to the explanation, the exclusion being 98 days as the period after the exclusion is more than 60 days in the present case. Thus, 98 days from 31.03.2000 ends on 07.07.2000 the assessment having been completed on 27.07.2000 has been rightly held to be barred by limitation by the Id. CIT(A) and his order is upheld."

11.

Now, if the facts of the year under consideration i.e. A.Y. 2004-05 and facts in A.Y. 1997-98 are put in a tabular form by applying the order of the ITAT in A.Y. 1997-98 in order to see whether the facts of both the years are identical or not, the following position would emerge :

Sr. No.	PARTICULARS	A.Y. 2004-05 DATE	A.Y. 1997-98 DATE
1.	Return of Income	01.11.2004	30.11.1997
1a	Revised Return of Income	--	31.03.1999
2.	Limitation date as per Section 153(1) of the I.T. Act	31.12.2006	31.03.2000
3.	Date of order u/s 142(2A)	28.12.2006	24.02.2000
4.	Number of days remaining for making assessment	4days	37days
5.	Request filed by the appellant vide letter dated 8.06.2007 to extend time limit for submission of SAR u/s 142(2A). Order dated 11.06.2007 passed by the A.O. granting extension of time by 60 days to submit the SAR. Extended Date by which audit report is to be submitted	25.06.2007	31.05.2000
6.	Excluded period as per Explanation 1(iii) to Section 153	180 days (i.e.28.12.2006 to 25.06.2007)	98 days (i.e.24.02.2000 to 31.05.2000)
7.	Date by which assessment must be made under Explanation 1(iii) of Section 153	29.06.2007 (i.e. 31.12.2006 + 180 days)	07.07.2000 (i.e. 31.03.2000 + 98 days)
8.	As per the proviso to Explanation I to Section	29.06.2007	07.07.2000

	153 if the remaining period is less than 60 days, then it shall be extended to 60 days. Limitation point prescribed in proviso to section 153(1) is 31.12.2006 and this fixed point of limitation is extended by 180 days (from 31.12.2006 to 29.06.2007) and in the appellant's case, the exclusion is more than 60 days. Hence it also satisfies the proviso to the Explanation 1 to section 153.
9.	Last Date of passing the Assessment Order for the A.Y. 2004-05 as per the provisions of section 153 of the Act.	29.06.2007	07.07.2000
10.	Date of Assessment Order passed u/s 143(3)/142(2A) of the I.T. Act	23.08.2007	27.07.2000

Thus, on going through the order of the Hon'ble ITAT as well as the submissions of the appellant and the above chart, it is quite evident that the facts of both assessment years and the issue involved are identical. In both the assessment years, there was a Special Audit ordered under section 142 (2A) and the assessment was framed after the Special Audit Report was submitted. The question in both the assessment years is as to what would be the last date for passing the assessment order by the AO. From the above chart, which is based on Hon'ble ITAT order, the last date for completion of the assessment for A.Y. 2004-05 was 29.06.2007, whereas the assessment order was passed on 23.08.2007 and thus, the order was barred by limitation.

12.

Since, the facts and issue involved in the year under consideration i.e. A.Y. 2004-05 are identical to A.Y. 1997-98, the order of the Hon'ble ITAT in appellants own case is binding and has to be followed in order to uphold the principles of judicial unity and discipline. The principles of judicial discipline require that the orders of the higher appellate authorities should be followed unreservedly by the subordinate authorities. The mere fact that the order of the appellate authority is not 'acceptable' to the department cannot be ground for not following it unless its operation has been stayed/reversed by a competent court. In the hierarchy of authorities set up under the Act, the Tribunal is superior to the first appellate authority or the Assessing Officer, who is bound by the orders of the Tribunal which will be as effective as the orders of the High Court so far as their binding character on him is concerned. Merely because the Department or the assessee has pursued the matter in appeal proceedings it does not act as a kind of stay of operation of the order of the Tribunal. So long as an order of the Tribunal is not set aside, the first appellate authority or the A.O. is bound to give effect to it.

"We desire to add and as was said in Cassell and Co. Ltd. v. Broome [1972] AC 1027 (HL), we hope it will never he necessary for us to say so again that " in the hierarchical system of courts " which exists in our country, " it is necessary for each lower tier ", including the High Court, "to accept loyally the decisions of the higher tiers". " It is inevitable in a hierarchical system of courts that there are decisions of the supreme appellate tribunal which do not attract the unanimous approval of all members of the judiciary ... But the judicial system only works if some one is allowed to have the last word and that last word, once spoken, is loyally accepted " (See observations of Lord Hailsham and Lord Diplock in Broome v. Cassell). The better wisdom of the court below must yield to the higher wisdom of the court above. That is the strength of the hierarchical judicial system"

"Even if it be accepted that the order made by the A.I.T.O. in the present case was invalid, its effect cannot be that the proceedings before the A.I.T.O. must be held to have continued after that order was made by him. Even an invalid order terminating proceedings has the effect of terminating them; and in such a case, the appropriate method for correcting the illegality committed is to have that order vacated by appellate or other higher authorities having jurisdiction to intervene. As long as the order is not set aside, it remains in force and takes full effect. The order was not totally without jurisdiction; at best it was an order not contemplated by law and it could not be treated as a non-existent order."

"Having heard learned counsel for the parties, we have come to the conclusion that this petition deserves to be allowed. The order passed by the Commissioner directing the Income-tax Officer to make fresh assessment having been set aside by the Tribunal, the Income-tax Officer had no jurisdiction to proceed to assess the petitioner afresh. It may be that the Revenue was aggrieved by the order passed by the Tribunal but the Income-tax Officer cannot assume jurisdiction to assess the petitioner afresh by holding that the order of the Tribunal was not accepted by the Revenue. Till the order passed by the Tribunal is set aside, the Revenue is bound by the order passed by the Tribunal. Learned counsel for the Revenue was unable to justify the action taken by the Income-tax Officer. The notice and the draft assessment orders issued by the Income-tax Officer, therefore, deserve to be quashed."

"The apex court of the country in no uncertain terms held that the law declared by a High Court is binding on all subordinate courts and Tribunals within the territory to which it exercises the jurisdiction. In Bhopal Sugar Industries Ltd. v. ITO [1960] 40 ITR 618 (SC), the Income-tax Officer (subordinate authority) refused to carry out clear and unambiguous directions of the Income-tax Appellate Tribunal (superior authority). Deprecating it, their Lordships of the Supreme Court observed (page 622): Such refusal is in effect a denial of justice, and is furthermore destructive of one of the basic principles in the administration of justice based as it is in this country on a hierarchy of courts. If a subordinate Tribunal refuses to carry out directions given to it by a superior Tribunal in the exercise of its appellate powers, the result will be chaos in the administration of justice..."

"At this juncture, we cannot resist observing that the judgment delivered by the Income-tax Tribunal was very much binding on the Assessing Officer. The Assessing