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Shanti Lal Godawat v. Assistant Commissioner of Income-tax
Factual and Procedural Background
This opinion addresses a bunch of 23 appeals preferred by the assessee and the Department concerning assessment years where a common question of limitation in framing assessment orders by the Assessing Officer (AO) was involved. The appeals were heard together and disposed of by a common order. The core factual matrix is that assessment orders were passed within the limitation period but were served to the assessees after the expiry of the limitation period, leading to a dispute on the validity of such orders.
Legal Issues Presented
- Whether assessment orders passed by the AO but served to the assessee after the prescribed limitation period under the relevant provisions of law are valid or barred by limitation.
- Whether the date of dispatch or the date of service of the assessment order determines the limitation period for validity of the order.
- Whether the assessment orders held to be passed beyond limitation are non est and therefore ineffective under law.
Arguments of the Parties
Assessee's Arguments
- Though assessment orders were passed within the limitation period, they were served after the expiry of the limitation period.
- Since communication of the orders was after the limitation period, such orders should be treated as passed beyond limitation and hence invalid and void.
- Consequently, additions made in such orders cannot be sustained under law.
- Relied on an earlier order dated 31st March 2009 and a decision of the Delhi Bench in Dy. CIT v. Anant Raj Industries Ltd. (2008) 16 DTR 339 (Delhi)(Trib) supporting their contention.
Department's Arguments
- Assessment orders were passed and dispatched within the period of limitation as per official records.
- Orders were handed over to the dispatch clerk on 31st Dec 2007 and dispatched to the assessees within the limitation period, though actual postal acknowledgment was on 2nd Jan 2008.
- Entries in various official registers (dispatch register, receipt register, demand and collection register) demonstrate that the AO lost control over the orders within the limitation period.
- Such official entries are relevant facts under section 35 of the Indian Evidence Act as they are public records made in discharge of official duty.
- Presumption under section 114 of the Indian Evidence Act supports that all official acts were regularly performed.
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| Commissioner Of Agricultural Income-Tax v. Kappumalai Estate [1998] 148 CTR 565 (Ker) : [1998] 234 ITR 187 (Ker) | Held that to be valid and effective, assessment orders must be served within the period of limitation; passing alone is insufficient. | The Court followed this principle to hold that assessment orders dispatched after limitation period are ineffective. |
| K. Joseph Jacob v. Agricultural ITO [1991] 190 ITR 464 (Ker) | Considered similar language regarding limitation and held assessment orders beyond limitation are ineffective. | Reinforced the principle that limitation applies to the date of issuance or service of the order, not merely passing. |
| Government Wood Works v. State of Kerala, 69 STC 62 | Clarified that orders must be beyond control of authorities to be complete and effective within limitation. | Applied to support that assessment orders served after limitation are not complete or effective. |
| Malayil Mills v. State of Kerala, TRC Nos. 15 and 16 of 1991 | Reinforced the above principle regarding limitation and effectiveness of orders. | Followed to hold that orders passed but served after limitation are barred. |
| Dy. CIT v. Anant Raj Industries Ltd. (2008) 16 DTR 339 (Delhi)(Trib) | Supported the assessee's contention on limitation of assessment orders. | Relied upon to uphold the assessee's argument on invalidity of late-served orders. |
Court's Reasoning and Analysis
The court carefully analyzed the material before the Tribunal, including departmental orders, official records, and rival submissions. It noted the undisputed facts that assessment orders were passed on 28th December 2007 but dispatched and served to the assessees only on 2nd January 2008, after the limitation period prescribed under section 153B of the Income Tax Act.
The court compared the limitation provisions under section 153B of the Income Tax Act and section 35(2) of the Agricultural Income Tax Act, observing their similarity in language and intent. It relied on authoritative judicial interpretations by the Kerala High Court, which held that an order must be not only passed but also served within the limitation period to be valid and effective.
The court rejected the Department’s argument that dispatch within limitation sufficed, emphasizing that the effective date for limitation purposes is the date of issuance or service beyond the control of the authorities, not merely the date of passing or internal dispatch. The official records and registers were found insufficient to extend the limitation period.
Following the precedent and the principle that orders served after limitation are non est (void), the court concluded that the assessment orders were barred by limitation and thus ineffective.
Consequently, the court held the appeals of the assessees meritorious on the question of law and declined to consider the merits of the additions since the orders themselves were invalid.
Holding and Implications
The court's final ruling is as follows:
The appeals of the assessees are allowed on the question of limitation, holding that the assessment orders passed but served after the limitation period are barred by limitation and hence non est and ineffective under law.
As a direct consequence, all assessment orders under section 153A and section 143(3) of the Income Tax Act for the relevant years are set aside. Departmental appeals against these assessment orders are dismissed.
No broader precedent beyond the application of established limitation principles was set; the decision primarily affects the validity of the specific assessment orders under consideration.
ORDER
K.S.S. PRASAD RAO, J.M. :
This is a bunch of 23 appeals preferred by the assessee and the Department for the assessment years stated (supra). Since in all these appeals there is a common question of assessment having been barred by limitation is involved, they were heard together and disposed of by this common order for the sake of convenience.
2. Both the parties were heard regarding the issue of limitation in framing assessment by the AO and its legal implications as detailed herein.
3. On careful consideration of the material made available before the Tribunal relating to the issue on hand and analyzing the same in the light of orders passed by the Departmental authorities as well as the rival submissions made by both the parties, it is found that undisputedly the assessment orders though passed before the period of limitation contemplated under the relevant provisions of law, the copies of the orders were served to the assessee after the expiration of the limitation provided under the relevant provision. Therefore, the assessees are contending that as the communication of the orders, though passed before the expiry of limitation were served after expiry of limitation period contemplated under the relevant provisions of law. Therefore, they are to be held as passed after the period of limitation and thereby they will become invalid and void orders. Once they are held as invalid and void, the additions made in such orders will not sustain under law. Therefore, they prayed for passing necessary orders holding that the assessment orders passed by the AO are barred by limitation and thereby they will become non est. He relied on the order dt. 31st March, 2009 in ITA Nos. 14 to 20/Jd/2009 for asst. yrs. 2000-01 to 2006-07 and the decision of the Delhi Bench of this Tribunal rendered in the case of Dy. CIT v . Anant Raj Industries Ltd. (2008) 16 DTR 339 (Delhi)(Trib).
4. Contrary to this, the learned Departmental Representative contended that undisputedly the assessment orders are passed within the period of limitation applicable as contemplated under the relevant provisions of law. As per the records maintained during the course of their official functions and records maintained in the office, the orders passed by the AO were handed over to the concerned personnel for service of them on the assessees on 31st Dec, 2007. Accordingly, they were dispatched to the assessees within the period of limitation provided under law. In that view of the matter, the assessment orders are to be held to be passed within the period of limitation as contemplated under relevant provisions of law. Therefore, the contentions of the assessee that they are to be held as passed beyond limitation period, is not tenable under law. Accordingly he sought for upholding the assessment orders passed in all these orders by dismissing the issues raised by the assessee. The following submissions are given by the learned Departmental Representative :
"Revenue's case is that the AO after preparing the assessment order sent the same for approval to the Jt. CIT of his range on 28th Dec, 2007 through a forwarding letter duly entered into dispatch register maintained in his office, copy of the relevant page is enclosed at page No. 2. Thereafter the office of the Jt. CIT/Addl. CIT received the order on the same date and entry for receipt is also made in the receipt register maintained in the office of the Addl. CIT, copy placed at page No. 3. Jt. CIT, thereafter accorded the approval to the assessment order on the same very date i.e., on 28 Dec, 2007 under a letter of even date, copy placed at page No. 4 and the entry for letter issued is also duly made in the postal register maintained by his office, copy placed at page No. 5. The AO in this case received a letter on 28th Dec, 2007 itself under serial number by putting endorsement on the letter sent to the Jt. CIT and the corresponding entry was made in the receipt register, copy placed at page No. 6.
Thereafter the entries of complete assessment order were made in the demand and collection register maintained for this purpose in the office of the Asstt. CIT at serial Nos. 144 (asst. yr. 2001-02), 147 (asst. yr. 2004-05), 148 (asst. yr. 2005-06) on 28th Dec, 2007. This was so done after making assessment order which stood duly signed along with the making of demand notice/challan for recovery of tax and other notices. Copies of all such demand notices and income-tax Form 36 are also enclosed. The AO thus lost control of the assessment order after he has sought the approval from the superior authority and made entries in the register which are regularly maintained in the Department as a matter of practice and are evidence of making assessment by him. The AO has handed over the assessment order complete in all respect to the dispatch clerk on 31st Dec, 2007 for onward transmission of the same to the assessee and the dispatch clerk has made entries thereof in the dispatch register on 31st Dec, 2007 as per copy placed at page No. 17 even though the factual date of handing over of the envelope containing assessment order and other relevant documents acknowledged by the postal authorities is 2nd Jan., 2008.
It was also argued that the entries appearing in the different office register and other documents are part of the Government records and these are relevant facts to decide the case as per section 35 of the Indian Evidence Act which reads as under :
35. Relevancy of entry in public record, made in performance of duty—An entry in any public or other official book, register or record, stating a fact in issue or relevant fact, and made by a public servant in the discharge of his official duty, or by any other person in performance of a duty specially enjoined by the law of the country in which such book, register or record is kept, is itself a relevant fact.
Further, it was pleaded that the documentary evidences available in the form of registers belong to two different offices the office of Jt. CIT and the office of Asstt. CIT, Central Crcle-2, Udaipur and there is no contradiction in these evidences. The presumption provided under section 114 of the Indian Evidence Act also support the Revenue case that all judicial and official acts have been regularly performed."
5. On careful consideration of material made available and analyzing the same in the light of rival submissions of both parties and the citations and relevant provisions of law we find that undisputedly the date of search in all these matters is 7th March, 2006 and the assessment orders were passed on 28th Dec, 2007. The said orders were dispatched to the assessee on 2nd Jan., 2008 and accordingly served on the assessee. Basing on these undisputed facts, it is found that section 153B is as follows :
"(1) Notwithstanding anything contained in section 153, the AO shall make an order of assessment or reassessment—
(a)
in respect of each assessment year falling within six assessment years referred to in clause (
b ) of sub-section (1) of section 153A within a period of two years from the end of the financial year in which the last of the authorizations for search under section 132 or for requisition under section 132A was executed.
(b)
in respect of the assessment year relevant to the previous year in which search is conducted under section 132 or requisition is made under section 132A within a period of two years from the end of the financial year in which the last of the authorizations for search under section 132 or for requisition under section 132A was executed.
Provided ……….
(i) the provisions of clause (a) or clause (b) of this sub-section shall have effect as it for the words "two years" the words "twenty one months" had been substituted."
So also, the provisions contained in section 35(2) of Agrl. IT Act regarding limitation, is as follows :
"No order of assessment under section 18 or assessment or reassessment under sub- section (1) of this section shall be made after the expiry of five years from the end of the year in which the agricultural income was first assessable"
6. On comparison of the above referred two provisions, it is found that in both the provisions, the assessment orders "shall make" under section 153B IT Act "shall be made" in section 35(2) of the Agrl. IT Act. Therefore, both these provisions are akin to each other. The Hon'ble Kerala High Court has considered the provisions contained in section 35(2) of the Agrl. IT Act and came to the conclusion that to make the order complete and effective it should be issued, so as to be beyond the control of the authorities concerned, for any change or modification. The assessment order is not only to be passed, but it is to be served to the assessee within the period of limitation provided thereunder. The Hon'ble Kerala High Court rendered in the case of Commissioner Of Agricultural Income-Tax v. Kappumalai Estate [1998] 148 CTR 565 (Ker) : [1998] 234 ITR 187 (Ker) and the judgment of the same High Court in the case of K. Joseph Jacob v . Agrl. ITO [1991] 190 ITR 464 (Ker.), wherein provisions contained in section 35(2) of Agrl. IT Act were considered wherein same language was used by the legislature. The Hon'ble Kerala High Court has found that the order passed by the concerned officer is beyond the period of limitation and accordingly such an order is ineffective as it is barred by limitation. The facts are that the assessment order is passed on 13th March, 1985 and it was dispatched on 22nd April, 1985 and received by the assessee on 26th April, 1985 for the asst. yr. 1979-80 and orders were passed on 24th March, 1986 and dispatched on 2nd Dec, 1986 and received by the assessee on 5th Dec, 1986 for the asst. yr. 1980-81. By applying the principles laid down by the High Court in the case of Government Wood Works v. State of Kerala 69 STC 62 and in an earlier decision of the Bench of the same Court in the case of Malayil Mills v. State of Kerala in TRC Nos. 15 and 16 of 1991 it was held that the orders for both the years were not made within the period prescribed under section 35(2). It was further observed by the Hon'ble High Court that to make the order complete and effective, it should be issued so as to be beyond the control of the authorities concerned for any possible change or modification. Hence, respectfully following the judicial interpretation made by the Hon'ble Kerala High Court of similar provisions as was found in the provisions contained in section 153B stated supra, we are of the considered opinion that the assessment orders passed in the case of the assessees on 28th Dec, 2007 but dispatched on 2nd Jan., 2008 are beyond the period of limitation provided under the concerned provisions of law, more so when such orders cannot be taken as orders made in the manner as has been understood by a higher forum.
7. By considering the similar such issue as well as the decisions of the Hon'ble Kerala Hon'ble High Court (supra) and in this Tribunal's order dt. 31st March, 2009 in ITA Nos. 14 to 20/Jd/2009 for asst. yrs. 2000-01 to 2006-07 it was held that the assessments are barred by limitation. Respectfully following the rule of precedence, in these matters also, in view of no change in the facts and circumstances of the case as well as provisions of law under consideration, we hereby hold that the assessments in all these years are barred by limitation. Therefore, such assessment orders are non est and ineffective under law. Accordingly we find that the issue raised by the assessees is meritorious and it is hereby allowed, in respect of assessments under section 153A as well as under section 143(3) of the IT Act.
8. Though both the parties have addressed on the issues relating to merits of the additions also, we are of the considered opinion that in view of holding the assessment orders as non est having been passed beyond the period of limitation prescribed under law, the consideration of the other issues on merits will be only academic and hence they were not adverted to at all. As a result, the appeals of the assessee are allowed on question of law. As all the Departmental appeals are against the very said assessment orders, which were held as non est as stated (supra), the issues raised on merits on additions are not adverted to and they are dismissed as having been filed against non est assessment orders.
9. In the result, the appeals of the assessees are allowed whereas the appeals of the Department are dismissed.
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