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16-12-2019, INTEC CORPORATION, Section 148, 147, 150, 80-IC, HIGH COURT OF DELHI
1. The present petition filed under Article 226 of the Constitution of India inter alia seeks issuance of a writ of certiorari for quashing the notice dated 25.03.2017 issued by the Respondent under section 148 of the Income Tax Act, 1961 (hereinafter 'the Act') in relation to Assessment Year (AY) 2009- 10 and the order dated 07.12.2017 passed by the Respondent disposing of the objections raised by the Petitioner in response to the aforesaid notice.
2. Petitioner has premised the challenge to the notice dated 25.03.2017 (hereinafter 'the impugned notice'), on the ground that the Assessment Officer (AO) did not have the jurisdiction to issue the impugned notice beyond six years from the end of relevant AY - 2009-10 i.e. the maximum time limit provided for issuance of notice under Section 148 of the Act.
3. Before delving into the merits of the case, we may note that the Petitioner has not addressed any arguments with respect to the merits of case, i.e. the assumption of jurisdiction by the AO under section 147/148 of the Act. This has been specifically averred in the note of arguments filed in the Court. Revenue, also asserts that there is no pleading or ground in the petition questioning the validity of reopening viz Section 147/148 of the Act. Thus, we are not venturing into the contest- whether, or not, the impugned notice fulfils the requirement of Section 147. Consequently, we have confined and restricted our scrutiny only to the issue of limitation, in the context of applicability of Section 150 of the Act. Since the scope of challenge has been curtailed, the judgments relied upon by the Petitioner and the Revenue, dealing with the scope of notice under Section 147 have not been dealt with in the present case.
4. Petitioner is engaged in the business of manufacturing and marketing of Roof Mounted Package Air Conditioners (RMPU's) and has a manufacturing unit in Kala Amb, H.P. (hereinafter referred as "Kala Amb Unit"). In order to expand its business, Petitioner set up a new unit at Selaqui in Uttarakhand (hereinafter 'the Selaqui Unit'), in the year 2006. Petitioner claimed to have started production of the RMPU's, in the Selaqui Unit during the financial year 2007-08, and claimed deduction of profits, under Section 80-IC of the Act, in the concerned AY, 2008-09. The claim filed by the Petitioner for deduction of profits was selected for scrutiny and rejected by the AO, inter alia, on the ground of violation of the conditions prescribed in Section 80-IC (4)(ii) of the Act. Petitioner preferred an appeal before the CIT (A), against the order of the AO and succeeded therein. As a result the deductions claimed by the Petitioner under Section 80-IC of the Act, were allowed. The order of CIT (A), was challenged by the Revenue, before the Income Tax Appellate Tribunal (hereinafter 'ITAT').
5. In the meanwhile, Petitioner's case for AY 2009-10 was also selected for scrutiny on the same ground i.e. deductions claimed under Section 80-IC of the Act. Petitioner requested the concerned AO to follow the order of CIT (A), as the same was binding upon him. The concerned AO acceded to Petitioners request and completed the assessment for the AY 2009-10 under Section 143(3) of the Act, without disallowing deduction under Section 80- IC of the Act.
6. Subsequently, vide order dated 16.01.2017, ITAT reversed the findings of the CIT (A) w.r.t. AY 2008-09 and allowed departmental appeal in favour of the Revenue.
7. In this background, the AO issued the impugned notice dated 25.03.2017, under Section 147 / 150 of the Act, for reassessment of the return filed by the Petitioner for the AY 2009-10, requiring the Petitioner to file the return for the said AY. Petitioner complied with the notice and sought reasons for re-opening the assessment, which were provided to it by the Revenue. Thereafter, the Petitioner vide letter dated 20.11.2017 raised objections against the reasons provided by the Revenue for reopening the assessment, which were rejected on 07.12.2017, reiterating that reopening of the assessment is necessary and obligatory in consequence of and in order to give effect to, the finding or direction contained in the order dated 16.07.2019, passed by the ITAT.
Case of Petitioner:
8. Mr. M.S. Syali, learned Senior counsel for the Petitioner, contends that as per Section 149, notice under Section 147 could have been issued within a maximum period of 6 years from the end of the relevant assessment year. The period of six year in the present case i.e. for AY 2009-10 ended on 31.03.2016. Invocation of Section 150 of the Act, on the premise of giving effect to finding/direction contained in the order passed by the ITAT, w.r.t. AY 2008-09, is not valid and does not justify the extension of limitation of six years to re-open an assessment. He contends, it is trite law that the principle of res judicata is not applicable to income tax proceedings, and assessment for each year is a distinct and independent proceeding. The finding recorded in one assessment year is not required to be mandatorily followed in subsequent years, and the AO is duty bound to consider new facts placed on record by the assessee. Further, he contends that in its order dated 16.07.2019, the ITAT has not given any finding or direction with respect to the AY 2009-10. Thus, Section 150 of the Act cannot be invoked for re-opening the assessment for AY 2009-10 on the basis of the aforesaid order. Concomitantly, he submits that the ITAT could not have given any material finding or direction in respect of an assessment year, of which the assessment was not under challenge before it. He further submitted that the word "effect" used in Section 150(1) would mean "final effect" and the term "finding/direction" would mean "final finding/direction". Since, the order of the ITAT is subject to final adjudication by the High Court or Supreme Court, and also for the fact that Petitioner's Miscellaneous Application under Section 254(2) of the Act, seeking rectification of mistakes in the order of the ITAT is pending until today, the order of the ITAT cannot be given effect to, until it has attained finality, one way or the other. In support of his submissions, he has relied upon several precedents on various legal propositions that have been taken into account and dealt with appropriately while giving our analysis and findings.
Case of the Respondent:
9. Per contra, Mr. Zoheb Hussain, learned senior standing counsel for the Revenue, contends that the order passed by the ITAT, holding the Petitioner not eligible to claim benefit of deduction under Section 80-IC of the Act, is binding for the AY 2009-10 as well, and reopening of the assessment under Section 148 read with Section 150 is valid and proper. He contends that the provision of Section 150(1) and 153(3) are clear and unambiguous as to the power of Revenue to reopen assessments, in consequence of, or to give effect to, any finding or direction of an appellate authority. The assessee is not eligible for any benefit under Section 80-IC and as per its own submissions during the course of assessment proceedings in the relevant year, the assessee agreed that the order of the ITAT for AY 2008-09 will be