Category: In the High Courts: Part A-Reported Decisions

55. Manju Somani vs. ITO

[2024] 466 ITR 758 (Del.)

A. Y. 2016–17: Date of order 23^rd July, 2024

Ss. 147, 148 and 148A(d) of ITA 1961

Reassessment — Notice — New procedure — Limitation — Bar of limitation — Prescription of new procedure governing initiation of reassessment proceedings from 01-04-2021 — Notice issued beyond the period of limitation of six years in pre-amended provision unsustainable — Order and consequential notice set aside.

On a writ petition challenging the validity of the reassessment proceedings u/s. 147 of the A. Y. 2016–17, on the statutory prescription of limitation u/s. 149 (as amended by the Finance Act, 2021) by issuance of notice dated 29^th April, 2024 u/s. 148, pursuant to the Supreme Court decision in UOI vs. Ashish Agarwal [2022] 444 ITR 1 (SC); the Delhi High Court held as under:

“i) The proviso to section 149 of the Income-tax Act, 1961 embodies a negative command restraining the Revenue from issuing a notice u/s. 148 for reopening the assessment u/s. 147 in respect of an assessment year prior to 1^st April, 2021, if the period within which such a notice could have been issued in accordance with the provisions as they existed prior thereto had elapsed. This is manifest from the provision using the expression “no notice u/s. 148 shall be issued” if the time limit specified in the relevant provisions “. . . as they stood immediately prior to the commencement of the Finance Act, 2021” had expired. A reassessment which is sought to be commenced after 1^st April, 2021 would therefore, have to abide by the time limits prescribed by section 149(1)(b), 153A or 153B as may be applicable.

ii) Section 149(1)(b) as it stood prior to the introduction of the amendments by way of the Finance Act, 2021 prescribed that no notice u/s. 148 shall be issued if four years “but not more than six years” have elapsed from the end of the relevant assessment year. Thus the period of six years stood erected as the terminal point which when crossed would have rendered the initiation of reassessment u/s. 147 impermissible in law.

iii) The decision in Twylight Infrastructure Pvt. Ltd. vs. CIT [2024] 463 ITR 702 (Delhi); does not empower the Revenue to reopen assessments u/s. 147 contrary to the negative covenant which forms part of section 149.

iv) The notice issued u/s. 148 in order to be sustained when tested on the anvil of the pre-amendment to section 149(1)(b), would have to meet the prescription of six years period of limitation and that period in respect of the A. Y. 2016–17 had ended on 31^st March, 2023. Therefore, the reassessment proceedings which was commenced pursuant to the notice u/s. 148, dated 29^th April, 2024, was unsustainable. The Assessing Officer did not attempt to sustain the initiation of action on any other statutory provision which could be read as extending the time limit that applied. The order u/s. 148A(d) dated 29th April, 2024 and the consequential notice issued u/s. 148 dated 29^th April, 2024 were quashed and set aside.”

BCAJ Admin

54. Jatinder Singh Bhangu and JyotiSareen vs. UOI

[2024] 466 ITR 474 (P&H)

A. Y. 2020–21: Date of order 19^th July, 2024

Ss. 147, 148 and 151A of ITA 1961

Reassessment — Notice — Jurisdiction — Faceless assessment scheme — Issue of notices by jurisdictional AO — Procedure adopted by the department in contravention of statutorily prescribed procedure u/s. 151A — Office memorandum cannot override mandatory specifications in Scheme — Notices set aside — Department given liberty to proceed in accordance with amended provisions.

For the A. Y. 2020–21, the jurisdictional Assessing Officer issued a notice u/s. 148 of the Income-tax Act, 1961 to reopen the assessment u/s. 147 on the ground that there was escapement of income on account of the compensation received by the assessees on the acquisition of their agricultural land.

The assesee filed a writ petition and challenged the notice contending that the procedure of faceless assessment prescribed u/s. 144B was not followed and section 151A required for issuance of notices by the Faceless Assessing Officer. The Punjab & Haryana High Court allowed the writ petition and held as under:

“i) The Central Government in the exercise of powers conferred by section 151A of the Income-tax Act, 1961 by Notification No. S. O. 1466(E), dated 29^th March, 2022 ([2022] 442 ITR (St.) 198) has introduced the e-Assessment of Income Escaping Assessment Scheme, 2022. Under section 151A, the scheme of faceless assessment is applicable from the stage of show-cause notice u/s. 148 as well as section 148A. A detailed procedure of faceless assessment has been prescribed u/s. 144B and section 151A require for issuance of notice and assessment by the Faceless Assessing Officer. Clause 3(b) of the notification clearly provides that the scheme would be applicable to notices u/s. 148. Even otherwise, it is a settled proposition of law that assessment proceedings commence from the stage of issuance of show-cause notice. It is axiomatic in tax jurisprudence that circulars, instructions and letters issued by the Central Board of Direct Taxes or any other authority cannot override statutory provisions. The circulars are binding upon authorities but courts are not bound by circulars. The mandate of sections 144B and 151A read with the notification dated 29^th March, 2022 ([2022] 442 ITR (St.) 198) issued thereunder is lucid. There is no ambiguity in the language of statutory provisions and therefore, the office memorandum or any other instruction issued by the Board or any other authority cannot be relied upon. Instructions or circulars can supplement but cannot supplant statutory provisions.

ii) In the wake of the above discussion and findings, we find it appropriate to subscribe to the view expressed by the Bombay, Telangana and Gauhati High Courts. The instant petitions deserve to be allowed and accordingly allowed.

iii) The notices issued by the jurisdictional Assessing Officer u/s. 148 are hereby quashed with liberty to the respondent to proceed in accordance with procedure prescribed by law.”

BCAJ Admin

53. N. H. Kapadia Education Trust vs. ACIT (Exemption)

[2024] 467 ITR 278 (Guj)

A. Y. 2013–14: Date of order 4^th March, 2024

S. 11(1)(d)of ITA 1961

Educational trust — Exemption — Corpus fund — Corpus donations whether for material gains or charitable purpose — Absence of material to establish that corpus donations given for securing admission – Cannot be treated as donations towards charitable purposes — Tribunal not justified in holding assessee ineligible for exemption on corpus fund.

The assessee was an educational trust. For the A. Y. 2013–14, the Assessing Officer found in the scrutiny assessment u/s. 143(3) of the Income-tax Act, 1961, the copies of the receipts issued to students for the payment of the one-time admission fees mentioned that the amount paid was for the one-time admission fees. The Assessing Officer held that such a fee was not a voluntary contribution given with a specific direction to treat it as corpus donation, which could be claimed as exempt u/s. 11(1)(d). Therefore, he disallowed the exemption claimed on the corpus donation and treated it as income of the assessee.

The Commissioner (Appeals) relied on the decision of the Tribunal in the assessee’s case for the A. Ys. 2004–05, 2005–06 and 2009–10 and deleted the addition made by the Assessing Officer. On appeal by the Revenue, the Tribunal held that the admission fee could not be treated as “corpus donation” and, that on the facts on record, neither the admission fee charged from the students qualified as a “voluntary” donation, nor there was a specific direction that the amount would be used only for the purpose of the corpus of the trust. The fees charged by the students were neither voluntary nor were directed to be used solely for the purpose of the corpus and therefore, the development fund amount could not be treated as corpus donation. Accordingly, the assessee was not eligible for the benefit of exemption u/s. 11(1)(d) on the corpus donation. However, if the amount was treated as the income of the assessee-trust, then the assessee was eligible for deduction or allowance of expenses incurred against those receipts towards objects of the trust.

The Gujarat High Court allowed the appeal filed by the assessee and held under:

“i) The amounts paid by the parents of the students admitted to the educational institution of the assessee-trust were payments towards corpus donation and were not collected by way of capitation fees. The Assessing Officer had not conducted any inquiry with regard to the examination of parents who had admitted the students in school as to whether the payment was made towards the corpus fund or capitation fee. Though it was true that the donation was bound to have been given for material gain in securing admission, it could not be characterized as a donation towards charitable purpose and the assessee would not be entitled to have the benefit, but in the absence of any material on record, such view could not be taken.

ii) Therefore, the Tribunal had committed an error by treating the admission fees charged from the students as not forming part of the corpus fund of the trust. Therefore, the Tribunal was not justified in confirming the addition of the corpus fund to the income of the assessee by holding that the receipts could not be treated as corpus donation and not eligible for exemption u/s. 11(1)(d).”

BCAJ Admin

52. Principal CIT vs. DineshbhaiJashabhai Patel

[2024] 467 ITR 238 (Guj)

A. Y. 2014–15: Date of order 16^th January, 2024

Ss. 246A and 251(1)(a) of the ITA 1961; 46A of ITR 1962

Appeal to Commissioner (Appeals) — Discretion to admit additional evidence — Sufficient cause to accept additional evidence in appellate  proceedings — Additional evidence admitted by Commissioner (Appeals) considering assessee’s illiteracy and unawareness of notices due to language problem — Appellate proceedings continuation of assessment proceedings — Commissioner (Appeals) rightly permitted assessee to produce additional evidence in consonance with Rule 46A.

The assessee was the proprietor of an enterprise in the waste craft paper business. Though the assessee was given various opportunities, he did not respond to the notices and the Assessing Officer could not verify the genuineness of the sundry creditors. The Assessing Officer treated the sundry creditors as bogus and accordingly made additions in his ex-parte order u/s. 143(3) read with section 144 of the Income-tax Act, 1961.

The assessee submitted before the Commissioner (Appeals) that he was an illiterate person and was not aware of the notices issued by the Assessing Officer and explained the increase in sales, debtors, closing stock, and creditors as per the balance sheet. The assessee contended that the Assessing Officer did not consider the increase in sales, and closing stock but only picked up the creditor’s amounts and made additions as bogus creditors without any justification. The assessee also furnished the copies of accounts of each creditor from his books of account and contra accounts with their addresses and permanent account numbers, which were duly reconciled by the Commissioner (Appeals) who admitted these documents to go to the root of the controversy involved and called for a remand report from the Assessing Officer. In the remand report the Assessing Officer objected to the acceptance of the additional evidence and also stated that the assessee failed to produce supporting bills or vouchers for the purchases made from the various parties and did not file bank details and proof of payments. In the rejoinder, the assessee furnished copies of audited accounts, sample purchase bills, and contra accounts with bank statements, and the Commissioner (Appeals) after considering this evidences deleted the addition. The Tribunal upheld the order of the Commissioner (Appeals).

On appeal, the Department contended that the Commissioner (Appeals) could not have admitted the additional evidence in terms of the provisions of rule 46A(2) of the Income-tax Rules, 1962 since the assessee did not furnish any sufficient cause for not submitting the evidence and had remained absent in the assessment proceedings though the sufficient opportunity was given.
The Gujarat High Court dismissed the appeal filed by the Revenue and held as under:

“i) The Commissioner (Appeals) had considered the aspect of additional evidence as objected to by the Assessing Officer after considering the explanation of the assessee that the assessee was an illiterate person and had studied up to fourth standard and he was not able to read in English, and therefore, the provisions of rule 46A(1) more particularly clause (b) thereof was complied with as the assessee was prevented by sufficient cause from producing the evidence which he was called upon to produce by the Assessing Officer.

ii) The Commissioner (Appeals) had stated in his order to the effect that the assessee had in his possession the report u/s. 44AB, a copy of the return of income filed by the creditors, the permanent account number and full addresses of the creditors, copies of accounts of creditors in his books of account, and the proof that the assessee had a continuous trading relationship with the creditors. All such evidence was corroborative and could not have been manipulated at that stage. The Assessing Officer had the opportunity to cross-verify any information during remand proceedings but he had sent the remand report in a very routine manner. The independent corroborative evidence placed on record during the remand proceedings could not be ignored. There was no discrepancy in the sundry creditor’s accounts that could be added to the income of the assessee and hence the addition was deleted.

iii) The assessee being an illiterate person could not appear before the Assessing Officer and the appellate proceedings being the continuation of the assessment proceedings, the Commissioner (Appeals) had rightly permitted the assessee to produce the additional evidence in consonance with rule 46A.”

BCAJ Admin

57 Jankalyan Vinimay Pvt Ltd vs. DCIT

[2023] 455 ITR 456 (Cal.)

A.Ys.: 2011–12, 2012–13 and 2016–17;

Date of Order: 7th February, 2023

S. 220(6) of ITA 1961

Recovery of tax — High-pitched assessment — Stay of recovery — Appeals not disposed of for a long time — Assessee is entitled to stay of recovery proceedings.

For the A.Ys. 2011–12, 2012–13 and 2016–17 high-pitched assessments were completed in the year 2017–18. Well within the period of limitation, the assessee filed the appeals before the Commissioner (Appeals) and the appeals have been pending since 2018. The Assessing Officer rejected the stay application u/s. 220(6) of the Income-tax Act, 1961 by communication dated 8th December, 2022.

Assessee filed writ petitions challenging the orders of the Assessing Officer rejecting the application for stay. Allowing the writ petition a Division Bench of the Calcutta High Court held as under:

“Since the appeals were filed in 2018 and the stay applications filed before the Deputy Commissioner during the year 2018 followed by subsequent reminders, were rejected only on 8th December, 2022, and the assessment orders were not given effect to date, there was to be a direction that the appeals filed before the Commissioner (Appeals) be disposed of at an early date and until then, the Department was not to take any coercive action against the assessee for recovery of the Income-tax, which had been assessed.”

BCAJ Admin

56 SANATH KUMAR MURALI vs. ITO

[2023] 455 ITR 370 (Kar)

A.Y.: 2016–17; Date of Order: 24th May 2023

Ss. 48, 147, 148, 148A(b), 148A(d) and 149 of ITA 1961

Reassessment — Notice after three years — Limitation — Capital gains — Order for issue of notice without considering reply filed by assessee to initial notice —Words “income chargeable to tax” found in section 149 must be read in terms of “income” as arising out of “capital gains” as provided u/s. 48 in the assessee’s case — Notice barred by limitation — Order and notice set aside.

On 3rd March, 2023, the notice u/s. 148A(b) of the Income-tax Act, 1961 came to be issued to the petitioner stating that information was received which suggested that income chargeable to tax for the A.Y. 2016–17 has escaped assessment within the meaning of section 147, detailing the information along with supporting documents. The information was that as per the TDS statement u/s. 194-IA, during the relevant year the assessee had sold an immovable property for a consideration of ₹55,77,700 which has escaped assessment.

The assessee-petitioner filed a reply to the said notice dated 16th March, 2023, in which details were laid out, setting out the sale consideration relating to the sale deed of 22nd November, 2015, as ₹55,77,700 and also furnishing details of the sale deed by virtue of which the petitioner has purchased the property on 24th September, 2011, for a consideration of ₹15,91,735 (cost of acquisition). The assessee also worked out the long-term capital gain at ₹33,85,769. It was submitted that, as the income escaping assessment did not exceed rupees fifty lakh, in terms of section 149(1)(b) of the Income-tax Act, the notice u/s. 148 could not be issued. However, the Assessing Officer rejected the assessee’s submissions and on 21st March, 2023, passed order u/s. 148A(d) and also issued notice u/s. 148 dated 21st March, 2023.

The assessee filed a writ petition and challenged the order and the notice. The Karnataka High Court allowed the writ petition and held as under:

“i) When the procedure is followed culminating in an order passed u/s. 148A(d) of the Income-tax Act, 1961, the authority is required to apply his mind and consider the reply of the assessee to the show-cause notice u/s. 148A(b) and pass a considered order. The words used in section 149(1)(b) are “income chargeable to tax” which has escaped assessment amounts to or is likely to amount to fifty lakh rupees or more for that year. The income chargeable under the head “Capital gains” which would arise in case of a sale transaction is as provided u/s. 48, which provides that income chargeable under the head “Capital gains” shall be computed by deducting from the full value of the consideration, the cost of acquisition and in the event the property purchased has been held for a period beyond three years in terms of the second proviso to section 48 the words, “cost of acquisition” are to be substituted by the words, “indexed cost of acquisition”.

ii) The words found in section 149 “income chargeable to tax” must be read in terms of “income” as arising out of the “capital gains” as provided u/s. 48 and this is the only manner of understanding the words, “income chargeable to tax” u/s. 149(1)(b). Section 48 provides that the entirety of the sale consideration does not constitute “income”. The Memorandum Explaining the Provisions of Finance Act, 2021 does not in any way lead to a different interpretation of the words, “income chargeable to tax”. The words used u/s. 149 for the purpose of the extended time limit is to be interpreted in terms of the plain wording of section 149 and cannot be construed differently while relying on any executive instruction.

iii) The Assessing Officer had not applied his mind to the reply filed by the assessee to the show-cause notice u/s. 148A(b) nor noticed the legal position while deciding the application of the extended period u/s. 149(1)(b) which was pointed out by the assessee in its reply. There is a bar prohibiting the issuance of notice u/s. 148 of the Income-tax Act, 1961 for reopening the assessment u/s. 147 if three years have elapsed from the end of the relevant assessment year unless the case falls under clause (b). Accordingly, no notice u/s. 148 could be issued after three years from the end of the A.Y. 2016-17, and this is subject to the exception of an extended period of limitation of three years, but not more than ten years from the end of the relevant assessment year, if the Assessing Officer had material which would reveal that “the income chargeable to tax” which has escaped the assessment amounted to or was likely to amount to R50 lakhs or more. It could not be stated that since the stage at which the notice was issued was at a premature stage, the entirety of the sale consideration ought to be taken note of.

iv) The order passed u/s. 148A(d) and the notice issued u/s. 148 for the A.Y. 2016-17 were set aside.”

BCAJ Admin

55 Excel Commodity and Derivative Pvt Ltd vs. UOI

[2023] 455 ITR 341 (Cal)

A.Y.: 2018–19; Date of Order: 29th August, 2022

Ss. 147, 148, 148A(b) and 148A(d) of ITA 1961

Reassessment — Notice — New procedure — Initial notice — Assessee’s explanation on the ground set down in initial notice accepted — Order for the issue of notice based on new ground — Order invalid — Writ — No question of remanding the matter to AO for passing speaking order — Order u/s. 148A(d) and direction of Court (Single Judge) remanding matter to AO set aside.

On a writ petition challenging the order u/s. 148A(d) of the Income-tax Act, 1961, the Single Judge of the Calcutta High Court held that the order dated 7th April, 2022, was devoid of reasons and without any discussion on the contentions raised by the assessee in its objections to the show-cause notice issued by the Assessing Officer u/s. 148A(b) and quashed the order but remanded the matter back to the Assessing Officer to pass a fresh speaking order.

The Division Bench allowed the appeal filed by the assessee and held as under:

“i) The term “information” in Explanation 1 u/s. 148 of the Income-tax Act, 1961 cannot be lightly resorted to and to give unbridled power to the Department to reopen an assessment. The procedure contemplated u/s. 148A requires the Assessing Officer to consider the reply to the show-cause notice u/s. 148A(b) and thereafter pass a reasoned order u/s. 148A(d). If in the opinion of the Assessing Officer, the information furnished by the assessee in his reply is satisfactory, then nothing more requires to be done. But if the Assessing Officer is of the view that the reply furnished by the assessee is not acceptable, he has to pass a speaking order u/s. 148A(d). Since the Central Board of Direct Taxes noticed that in several cases information made available or the data uploaded by the reporting entities is not fully accurate due to human or technical error it issued a Circular dated 22nd August, 2022, instructing to Departmental officers with regard to the uploading of data on the portal of the Department to effect due verification and opportunity of being heard given to the assessee before initiating proceedings u/s. 148 or 147.

ii) The Assessing Officer had used the information lightly which had resulted in the issuance of notice. The assessee had submitted an explanation to the notice with documents in support of its claim. The Assessing Officer had accepted the explanation given by the assessee that it had not indulged in fictitious derivative transactions and had given up the allegation which had formed the basis of the show-cause notice u/s. 148A(b). Thereafter, he had proceeded on fresh ground alleging that the transaction with some other company was an accommodation entryand passed the order under section 148A(d). The order passed u/s. 148A(d) was not based on the reason for which the notice dated 22nd March, 2022, was issued u/s. 148A(b). Therefore, on that score also, the order u/s. 148A(d) was to be set aside in its entirety without giving any opportunity to reopen the matter on a different issue.

iii) The order was illegal and unsustainable and the necessity to remand the matter to the Assessing Officer did not arise. The order dated 7th April, 2022 u/s. 148A(d) and the direction of the court remanding the matter to the Assessing Officer were set aside. Consequently, no further action could be taken by the Department against the assessee on the issue in question.”

BCAJ Admin

54 H. P. Nursing Registration Council vs. Principal CIT

[2023] 455 ITR 512 (HP)

A.Y.: 2010–11; Date of Order: 25th May, 2022

S. 2(24) of ITA 1961

Income — Assessability — Meaning of “Income” — Institution established by State Government to regulate the registration of nurses and maintain standards of professionalism — One-time grant in aid received by the institution to strengthen it — Not assessable as income.

The assessee was formed under the Himachal Pradesh Nursing Registration Council Act, 1977 and was substantially funded by the Government. The assessee received ₹1 crore from the Government of India under the scheme of upgradation/strengthening of nursing services under human resources for health. In the return of income, the assessee declared NIL income and claimed exemption u/s. 11(1)(a) of the Act. In the scrutiny assessment, the Assessing Officer treated the grant in aid as the income of the assessee u/s. 2(24)(iia) of the Act. The Assessing Officer concluded that the assessee was not entitled to any exemption as its registration u/s. 12AA was effective from 01.04.2010 relevant to A.Y. 2011-12 and the assessee also did not qualify to be entitled to exemption u/s. 10(23C)(iiiab) of the Act.

The Commissioner(Appeals) and the Tribunal upheld the decision of the Assessing Officer.

The Himachal Pradesh High Court allowed the appeal filed by the assessee and held as under:

“i) The term “income” as defined in section 2(24) of the Income-tax Act, 1961, is inclusive of various heads mentioned therein. It was only by way of the amendment, made effective from 1st April, 2016, that such monetary release by a State or the Central Government has been incorporated as income by way of section 2(24)(xviii). Even in this clause exemption has been carved out in respect of subsidy or grant by the Central Government for the purpose of corpus of a trust or institution established by the Central Government or State Government, as the case may be. This clearly illustrates the legislative intent that prior to 1st April, 2016, this type of grant was not specifically included as income. The later inclusion of such a provision will not have a retrospective application. Even by way of the amendment, exemption is available to such institutions.

ii) Since the assessee received only a one-time grant with a specific purpose which nowhere suggested scope of profit generation or revenue for the assessee, the amount received by the assessee by way of grant-in-aid thus could not be termed to be revenue receipt.”

BCAJ Admin

53 CIT(IT) vs. Brandix Mauritius Holdings Ltd.

[2023] 456 ITR 34 (Del.)

A.Y.: 2011–12; Date of Order: 20th March, 2023

S. 292B of ITA 1961 and CBDT Circular No. 19 of 2019 dated 14th August, 2019

Document Identification Number (DIN) — Orders from AO — Communication of — Validity — Circular of Board mandating DIN for communications — Circular binding on AO — Order passed in violation of Circular — Not a defect curable u/s. 292B — Communication of such orders not valid.

For the A.Y. 2011-12, the final assessment order passed on 15th October, 2019 did not bear the Document Identification Number (DIN). In appeal, the assessee challenged the validity of the assessment order. The Tribunal allowed the appeal of the assessee in view of the CBDT Circular No. 19/2019 dated 14th August, 2019 which specifies the manner in which DIN is required to be generated while communicating any correspondence issued by the Department.

The Delhi High Court dismissed the appeal filed by the Revenue and held as follows:

“i) It is well established that circulars issued by the CBDT in the exercise of its powers u/s. 119 of the Income-tax Act, 1961 are binding on the Department. The CBDT Circular No. 19 of 2019 dated
14th August, 2019 ([2019] 416 ITR (St.) 140) sets out the manner in which the document identification number is required to be generated while communicating a notice, order, summons, letter and any correspondence issued by the Income-tax Department, i.e., the Revenue. Inter alia, the object and purpose of allocating document identification numbers to communications, such as notices, orders, summons, letters or any correspondence emanating from the Revenue is to maintain a proper audit trail. Therefore, the CBDT, in the exercise of its powers, has mandated that no communication shall be issued by any Income-tax authority relating to assessment, appeals, orders, statutory or otherwise, exemptions, enquiry, investigation, verification of information, penalty, prosecution, rectification or approval, to the assessee or any other person, on or after 1st October, 2019, unless it is allotted a computer-generated document identification number. Further, there is a specific requirement under the 2019 circular to quote the document identification number in the body of any such communication. The 2019 circular also sets out certain circumstances in which exceptions can be made. These circumstances are categorically referred to in paragraph 3 of the 2019 circular.

ii) The object and purpose of the issuance of the 2019 circular, inter alia, is to create an audit trail. Therefore, the communication relating to assessments, appeals, orders, etcetera which are mentioned in paragraph 2 of the 2019 circular, albeit without a document identification number, can have no standing in law, having regard to the provisions of paragraph 4 of the 2019 circular. Recourse to section 292B of the Act, is untenable, having regard to the phraseology used in paragraph 4 of the 2019 circular.

iii) The final assessment order was passed by the Assessing Officer on 15th October, 2019, u/s. 147 read with sections 144C(13) and 143(3) of the Act. Concededly, the final assessment order did not bear a document identification number. There was nothing on record to show that the Revenue took steps to demonstrate before the Tribunal that there were exceptional circumstances, as referred to in paragraph 3 of the 2019 circular, which would sustain the communication of the final assessment order manually, albeit, without the document identification number.

iv) Given this situation, clearly paragraph 4 of the 2019 circular would apply. Paragraph 4 of the 2019 circular, decidedly provides that any communication which is not in conformity with paragraphs 2 and 3 shall be treated as invalid and shall be deemed to have never been issued. The phraseology of paragraph 4 of the 2019 circular fairly puts such communication, which includes communication of assessment orders, in the category of communications which are non-est in law. The Tribunal was right in holding that the final assessment order was not valid.”

BCAJ Admin

52 Kausalya Agro Farms and Developers Pvt Ltd vs. Dy. CIT

[2023] 455 ITR 432 (Telangana)

A.Ys.: 2012–13 to 2014–15, 2016–17 to 2018–19;

Date of Order: 2nd February, 2023

Ss. 36(1)(iii), 147, 254 of ITA 1961

Appeal to Appellate Tribunal — Scope of proceedings — Appeal by the assessee against order affirming disallowance in part — No cross objections filed by Department — Tribunal remanding of matter in entirety — Prejudicial to the assessee — Tribunal directed to limit its adjudication to issues raised by assessees.

On appeals before the Tribunal against the order of the Commissioner (Appeals) partly affirming the disallowance of interest expenditure u/s. 36(1)(iii) of the Income-tax Act, 1961 and on the issue of validity of reopening of reassessment u/s. 147, the Tribunal remanded the matter in entirety to the Assessing Officer to examine afresh in the light of all the evidence of the assessees’ fund position and the issue as to whether the corresponding borrowings claimed to have carried no interest involving plotted land buyers.

The Telangana High Court allowed the appeal filed by the assessee and held as under:

“i) The Tribunal was required to adjudicate the appeals on the grounds which were raised before it by the assessees. Remanding the matter in its entirety to the Assessing Officer had caused serious prejudice to the assessees in as much as even those reliefs which had been granted by the Commissioner (Appeals) stood nullified in view of the Tribunal’s direction to the Assessing Officer to re-do the whole exercise in its entirety. No cross-appeals have been filed by the Department against the order of the Commissioner (Appeals) granting substantial relief to the assessees.

ii) The common order of the Tribunal u/s. 254 was to be set aside and the Tribunal directed to hear the appeals before it on the limited grounds urged by the assessee, namely, the disallowance of interest expenditure u/s. 36(1)(iii) to the extent disallowed by the Commissioner (Appeals) and the validity of the reassessment proceedings u/s. 147.”

BCAJ Admin

51 Cement Corporation of India Ltd vs. ACIT

[2023] 456 ITR 61 (Del.)

A.Y.: 2011–12; Date of Order: 6th February, 2023

S. 254 of ITA 1961 and Rule 24 of Income-tax Rules, 1962

Appeal to Appellate Tribunal — Ex-parte order — Powers of Tribunal — Tribunal has the power to set aside ex-parte order — Matter remanded to the Tribunal to decide the appeal on merits.

By an order dated 24th January, 2018, the Tribunal dismissed the appeal filed by the assessee for non-appearance. The order was received by the assessee on 5th February, 2018. On 24th September, 2018, the assessee filed a miscellaneous application before the Tribunal praying for recalling the order dated 24th January, 2018 and requesting for hearing the appeal. The reason for non-appearance before the Tribunal was that the notice of hearing issued by the Tribunal was misplaced by the authorised officer of the assessee company. The assessee was unaware that its appeal had been dismissed and came to know about it only on 5th February, 2018. Further, the inadvertent delay in filing the miscellaneous application was due to the fact that the concerned employees were transferred to a plant outside Delhi and some of them even retired during the relevant period. The assessee thus submitted there was sufficient cause for delay.

The miscellaneous application was dismissed by the Tribunal on 7th September, 2022 on the ground that the time limit of six months for filing the miscellaneous application as provided by section 254(2) of the Income-tax Act, 1961, expired on 31st July, 2018. In the absence of power with the Tribunal to condone the delay in filing the miscellaneous application, the miscellaneous application came to be dismissed on the ground of limitation.

The Delhi High Court allowed the writ petition filed by the assessee and held as follows:

“i) According to rule 24 of the Income-tax (Appellate Tribunal) Rules, 1963, if on the date fixed for hearing by the Tribunal, or on any other date to which the hearing is adjourned, the appellant does not appear in person or through an authorized representative, when the appeal is called out for hearing, the Tribunal may dispose of the appeal on the merits or otherwise, after hearing the respondent. The proviso appended to the rule indicates that where an appeal has been disposed of on the merits, and the appellant appears thereafter, the Tribunal shall set aside the ex parte order and restore the appeal, if it is satisfied that there was sufficient cause for his non-appearance. Although in the main part of rule 24, the expression used is “may”, when read with the proviso appended thereto, it leads to the conclusion that if the Tribunal chooses to dispose of the appeal on the merits or otherwise, after hearing the respondent in the absence of the appellant, and the appellant, thereafter, appears and shows sufficient cause for not appearing on the date when the appeal is disposed of, the Tribunal is obliged, in law, to set aside the order passed and restore the appeal.

ii) Rule 24 of the 1963 Rules which does not have the impediment of limitation, as is prescribed u/s. 254 of the Income-tax Act, 1961. Under section 254, the Tribunal is also vested with incidental and ancillary powers which can be exercised in such situations such as in the assessee’s case. The issue involved in the appeal before the Tribunal which deserved a hearing on the merits, for the reasons that while there was a delay, the assessee had furnished reasons for explaining the delay that the notice of hearing issued by the Tribunal for the hearing on 24th January, 2018, was misplaced, and did not reach the concerned officer, that it was unaware of the passing of the dismissal order dated 24th January, 2018, and came to know about it only on 5th February, 2018, and that the inadvertent delay in filing the miscellaneous application was caused on account of the concerned persons having been temporarily transferred to a plant outside Delhi, and some persons retiring during the relevant period.

iii) The order of the Tribunal was set aside and the matter was remitted to the Tribunal for disposal of the assessee’s appeal on merits.”

BCAJ Admin