Commissioner of Income Tax vs Vellore Electric Corporation Ltd.

K. Raviraja Pandian, J.—The appeals are at the instance of the Revenue against the orders of the Tribunal. The assessee was a company distributing electricity in Vellore area. The Government of Tamil Nadu by its order dt. 1st July, 1974 has taken over the assessee''s business. In respect of grant of compensation and its quantum, the assessee carried the matter upto Supreme Court. The Supreme Court by its order dt. 6th Jan., 1995 granted compensation in a sum of Rs. 51,45,536 and interest on the compensation in a sum of Rs. 59,14,533. Pursuant to the order, as the interest arising in each year of account has to be assessed in the concerned assessment year, the AO reopened the assessment u/s 148 read with Section 150 of the IT Act and assessed the interest. That order was canvassed in appeal before the CIT(A) unsuccessfully. However, the Tribunal has allowed the appeals by the assessee. Hence, the Revenue is before this Court by way of appeal.

The point in controversy in this case is, "whether the period of limitation prescribed for reopening the assessment is applicable even for an order passed by the AO by invoking the provision u/s 150 of the IT Act."

The Tribunal while discussing the issue has relied on a decision of the Supreme Court in the case of K.M. Sharma Vs. Income Tax Officer, Ward 13(7), New Delhi, and very elaborately extracted the order of the Supreme Court. In the said case, the three Judges Bench of the Supreme Court has categorically held that the plain language of Sub-section (2) of Section 150 clearly restricts the application of Sub-section (1) to enable the authorities to reopen the assessments which have not already become final on the expiry of the period of limitation prescribed u/s 149. Sub-section (2), in placing an embargo on reopening of assessments, which have attained finality on the expiry of the period of limitation prescribed u/s 149, refers to the whole of Sub-section (1), intending thereby to insulate all assessments which have become final and may have been found liable for reassessment or recomputation on the basis of either orders in proceedings under the IT Act or orders of Courts passed under any other law. The Supreme Court further held that the provisions of Section 150(1) as amended w.e.f. 1st April. 1989, did not enable the authorities to reopen assessments, which had become final due to the bar of limitation prior to 1st April, 1989, and this position was equally applicable to reassessments proposed on the basis of orders passed under the IT Act or under any other law. The proceedings which had attained finality under existing law due to bar of limitation cannot be held to be reopened for revival unless the amended provision is clearly given retrospective operation so as to allow upsetting of proceedings which had already concluded and attained finality.

The above judgment will squarely answer the issue against the Revenue and as such we are of the view that the order of the Tribunal, which followed the decision of the Supreme Court, requires no interference and accordingly the appeals stand dismissed, Consequently, the connected CMPs are also dismissed.