IN HIGH COURT OF DELHI AT NEW DELHI Reserved on: 25.09.2019 Pronounced on:16.12.2019 + W.P.(C) 11452/2017 INTEC CORPORATION Petitioner Through: Mr. M.S. Syali, Senior Advocate with Mr. Bharat Beriwal, Mr. Mayank Nagi, Mr. Tarun Singh and Mr. Pulkit Verma, Advocates. versus ASSTT. COMMISSIONER OF INCOME TAX CIRCLE 31(1), NEW DELHI Respondent Through: Mr. Zoheb Hossain, Senior Standing Counsel with Mr. Deepak Anand, Mr. Piyush Goyal, Mr. Vivek Gurnani and Mr. Agni Sen, Advocates. CORAM: JUSTICE VIPIN SANGHI JUSTICE SANJEEV NARULA JUDGMENT SANJEEV NARULA, J. 1. present petition filed under Article 226 of Constitution of India inter alia seeks issuance of writ of certiorari for quashing notice dated 25.03.2017 issued by Respondent under section 148 of Income Tax Act, 1961 (hereinafter 'the Act') in relation to Assessment Year (AY) 2009- 10 and order dated 07.12.2017 passed by Respondent disposing of objections raised by Petitioner in response to aforesaid notice. W.P.(C) 11452/2017 Page 1 of 34 2. Petitioner has premised challenge to notice dated 25.03.2017 (hereinafter 'the impugned notice'), on ground that Assessment Officer (AO) did not have jurisdiction to issue impugned notice beyond six years from end of relevant AY - 2009-10 i.e. maximum time limit provided for issuance of notice under Section 148 of Act. 3. Before delving into merits of case, we may note that Petitioner has not addressed any arguments with respect to merits of case, i.e. assumption of jurisdiction by AO under section 147/148 of Act. This has been specifically averred in note of arguments filed in Court. Revenue, also asserts that there is no pleading or ground in petition questioning validity of reopening viz Section 147/148 of Act. Thus, we are not venturing into contest- whether, or not, impugned notice fulfils requirement of Section 147. Consequently, we have confined and restricted our scrutiny only to issue of limitation, in context of applicability of Section 150 of Act. Since scope of challenge has been curtailed, judgments relied upon by Petitioner and Revenue, dealing with scope of notice under Section 147 have not been dealt with in present case. Brief Facts: 4. Petitioner is engaged in business of manufacturing and marketing of Roof Mounted Package Air Conditioners (RMPU's) and has manufacturing unit in Kala Amb, H.P. (hereinafter referred as "Kala Amb Unit"). In order to expand its business, Petitioner set up new unit at Selaqui in Uttarakhand (hereinafter 'the Selaqui Unit'), in year 2006. Petitioner claimed to have W.P.(C) 11452/2017 Page 2 of 34 started production of RMPU's, in Selaqui Unit during financial year 2007-08, and claimed deduction of profits, under Section 80-IC of Act, in concerned AY, 2008-09. claim filed by Petitioner for deduction of profits was selected for scrutiny and rejected by AO, inter alia, on ground of violation of conditions prescribed in Section 80-IC (4)(ii) of Act. Petitioner preferred appeal before CIT (A), against order of AO and succeeded therein. As result deductions claimed by Petitioner under Section 80-IC of Act, were allowed. order of CIT (A), was challenged by Revenue, before Income Tax Appellate Tribunal (hereinafter 'ITAT'). 5. In meanwhile, Petitioner's case for AY 2009-10 was also selected for scrutiny on same ground i.e. deductions claimed under Section 80-IC of Act. Petitioner requested concerned AO to follow order of CIT (A), as same was binding upon him. concerned AO acceded to Petitioners request and completed assessment for AY 2009-10 under Section 143(3) of Act, without disallowing deduction under Section 80- IC of Act. 6. Subsequently, vide order dated 16.01.2017, ITAT reversed findings of CIT (A) w.r.t. AY 2008-09 and allowed departmental appeal in favour of Revenue. 7. In this background, AO issued impugned notice dated 25.03.2017, under Section 147 / 150 of Act, for reassessment of return filed by Petitioner for AY 2009-10, requiring Petitioner to file return W.P.(C) 11452/2017 Page 3 of 34 for said AY. Petitioner complied with notice and sought reasons for re-opening assessment, which were provided to it by Revenue. Thereafter, Petitioner vide letter dated 20.11.2017 raised objections against reasons provided by Revenue for reopening assessment, which were rejected on 07.12.2017, reiterating that reopening of assessment is necessary and obligatory in consequence of and in order to give effect to, finding or direction contained in order dated 16.07.2019, passed by ITAT. Case of Petitioner: 8. Mr. M.S. Syali, learned Senior counsel for Petitioner, contends that as per Section 149, notice under Section 147 could have been issued within maximum period of 6 years from end of relevant assessment year. period of six year in present case i.e. for AY 2009-10 ended on 31.03.2016. Invocation of Section 150 of Act, on premise of giving effect to finding/direction contained in order passed by ITAT, w.r.t. AY 2008-09, is not valid and does not justify extension of limitation of six years to re-open assessment. He contends, it is trite law that principle of res judicata is not applicable to income tax proceedings, and assessment for each year is distinct and independent proceeding. finding recorded in one assessment year is not required to be mandatorily followed in subsequent years, and AO is duty bound to consider new facts placed on record by assessee. Further, he contends that in its order dated 16.07.2019, ITAT has not given any finding or direction with respect to AY 2009-10. Thus, Section 150 of Act cannot be invoked for re-opening assessment for AY 2009-10 on basis of aforesaid W.P.(C) 11452/2017 Page 4 of 34 order. Concomitantly, he submits that ITAT could not have given any material finding or direction in respect of assessment year, of which assessment was not under challenge before it. He further submitted that word "effect" used in Section 150(1) would mean "final effect" and term "finding/direction" would mean "final finding/direction". Since, order of ITAT is subject to final adjudication by High Court or Supreme Court, and also for fact that Petitioner's Miscellaneous Application under Section 254(2) of Act, seeking rectification of mistakes in order of ITAT is pending until today, order of ITAT cannot be given effect to, until it has attained finality, one way or 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 Respondent: 9. Per contra, Mr. Zoheb Hussain, learned senior standing counsel for Revenue, contends that order passed by ITAT, holding Petitioner not eligible to claim benefit of deduction under Section 80-IC of Act, is binding for AY 2009-10 as well, and reopening of assessment under Section 148 read with Section 150 is valid and proper. He contends that provision of Section 150(1) and 153(3) are clear and unambiguous as to power of Revenue to reopen assessments, in consequence of, or to give effect to, any finding or direction of appellate authority. assessee is not eligible for any benefit under Section 80-IC and as per its own submissions during course of assessment proceedings in relevant year, assessee agreed that order of ITAT for AY 2008-09 will be W.P.(C) 11452/2017 Page 5 of 34 binding for AY 2009-10. Thus, reopening under section 148 read with 150 is in accordance with law. Moreover, Section 150 does not contemplate finality of orders and has non-obstante clause specifically excluding applicability of section 149. Analysis and Findings 10. Before adverting to merits of contentions raised by learned counsel for both parties, relevant extracts of provisions of law are reproduced hereunder for ready reference: 147. If Assessing Officer has reason to believe that any income chargeable to tax has escaped assessment for any assessment year, he may, subject to provisions of sections 148 to 153, assess or reassess such income and also any other income chargeable to tax which has escaped assessment and which comes to his notice subsequently in course of proceedings under this section, or recompute loss or depreciation allowance or any other allowance, as case may be, for assessment year concerned (hereafter in this section and in sections 148 to 153 referred to as relevant assessment year) : *** *** *** Explanation 2. For purposes of this section, following shall also be deemed to be cases where income chargeable to tax has escaped assessment, namely : (a) where no return of income has been furnished by assessee although his total income or total income of any other person in respect of which he is assessable under this Act during previous year exceeded maximum amount which is not chargeable to income-tax; (b) where return of income has been furnished by assessee but no assessment has been made and it is noticed by W.P.(C) 11452/2017 Page 6 of 34 Assessing Officer that assessee has understated income or has claimed excessive loss, deduction, allowance or relief in return ; (ba) where assessee has failed to furnish report in respect of any international transaction which he was so required under section 92E; (c) where assessment has been made, but (i) income chargeable to tax has been underassessed; or (ii) such income has been assessed at too low rate; or (iii) such income has been made subject of excessive relief under this Act; or (iv) excessive loss or depreciation allowance or any other allowance under this Act has been computed; (ca) where return of income has not been furnished by assessee or return of income has been furnished by him and on basis of information or document received from prescribed income-tax authority, under sub-section (2) of section 133C, it is noticed by Assessing Officer that income of assessee exceeds maximum amount not chargeable to tax, or as case may be, assessee has understated income or has claimed excessive loss, deduction, allowance or relief in return; *** *** *** 148. (1) Before making assessment, reassessment or recomputation under section 147, Assessing Officer shall serve on assessee notice requiring him to furnish within such period, as may be specified in notice, return of his income or income of any other person in respect of which he is assessable under this Act during previous year corresponding to relevant assessment year, in prescribed form and verified in prescribed manner and setting forth such other particulars as may be prescribed; and provisions of this Act shall, so far as may be, apply accordingly as if such return were return required to be furnished under section 139 : W.P.(C) 11452/2017 Page 7 of 34 *** *** *** 150. (1) Notwithstanding anything contained in section 149, notice under section 148 may be issued at any time for purpose of making assessment or reassessment or recomputation in consequence of or to give effect to any finding or direction contained in order passed by any authority in any proceeding under this Act by way of appeal, reference or revision or by Court in any proceeding under any other law. (2) provisions of sub-section (1) shall not apply in any case where any such assessment, reassessment or recomputation as is referred to in that sub-section relates to assessment year in respect of which assessment, reassessment or recomputation could not have been made at time order which was subject-matter of appeal, reference or revision, as case may be, was made by reason of any other provision limiting time within which any action for assessment, reassessment or recomputation may be taken. 153. (1) No order of assessment shall be made under section 143 or section 144 at any time after expiry of twenty-one months from end of assessment year in which income was first assessable: *** *** *** Explanation 2. For purposes of this section, where, by order referred to in clause (i) of sub-section (6), (a) any income is excluded from total income of assessee for assessment year, then, assessment of such income for another assessment year shall, for purposes of section 150 and this section, be deemed to be one made in consequence of or to give effect to any finding or direction contained in said order; or W.P.(C) 11452/2017 Page 8 of 34 (b) any income is excluded from total income of one person and held to be income of another person, then, assessment of such income on such other person shall, for purposes of section 150 and this section, be deemed to be one made in consequence of or to give effect to any finding or direction contained in said order, if such other person was given opportunity of being heard before said order was passed. 11. present case pertains to AY 2009-10. In terms of Section 149(1) (b) of Act, case can be reopened within six years from end of relevant assessment year. Revenue has relied upon Section 150 to reopen assessment for AY 2009-10, in light of order of ITAT pertaining to AY 2008-09. reasons as provided to Petitioner are indicated in letter dated 15.09.2017. Reference thereto is essential for deciding present petition and same is extracted herein below:- In response to your letter dated 22.06.2017, you are hereby provided reasons for reopening as under: " In this case, return for Ay was filed by assessee on 29-09-2009 declaring total income of Rs. 21895890. assessee has claim deduction of Rs. 2536835 being profit from its industrial unit of Selaqui u/s 80IC during AY 2009-10. return was processed under section 143 (1) on same income. case was selected for scrutiny u/s 143 (3) and returned income was accepted. In this case of assessee return of income for AY 2008-09 was filed by assessee declaring income of Rs. 15282400. assessee claimed deduction of Rs. 31309690 from its gross total income u/s 80IC of Income Tax Act W.P.(C) 11452/2017 Page 9 of 34 being profit from new industrial unit at Selaqui in Uttarakhand claim to have commenced manufacturing and production during year. entire manufacturing of assessee was done upto AY 2007-08 from its industrial unit at Kala-Amb, Himachal Pradesh and during year under assessment, manufacturing process had been split between unit at Kala-Amb and Selaqui. Hence, during scrutiny proceedings for AY 2008-09, Assessing Officer (AO) disallowed deduction claim u/s 80IC on profits of Selaqui unit being unit not eligible as same was made by splitting its earlier manufacturing unit. aggrieved assessee filed appeal before Ld. CIT (A) who decided matter in favour of assessee vide his order dated 05-10-2011. scrutiny proceeding for AY 2009-10 was under progress when order of CIT (A) was pronounced. assessee has claimed deduction of Rs. 2536835 being profit from its industrial unit at Selaqui u/s 80IC during AY 2009-10. Though department filed appeal before ITAT against decision of CIT (A) for AY 2008-09 before then AO, in relation to proceedings for AY 2009-10, assessee pressed to follow order of CIT (A) in respect of allowability of deduction u/s 80IC for AY 2008-09 and also submitted that decision of Tribunal would be binding as on that date. relevant portion of submission made by assessee vide letter dated 22.12.2011 is reproduced as under: At very outset, we would like to bring on record that directions given by Additional Commissioner of Income Tax, Range-23, New Delhi (copy of which has not been enclosed with your notice under reply) are prejudiced to assessee in as much as same are beyond scope of Act and application u/s 144A dated 30.11.2011 filed by assessee. However, W.P.(C) 11452/2017 Page 10 of 34 we assume that this must be in response to our application dated 30.11.2011 to him u/s 144A of Income Tax Act, 1961 seeking directions to you to follow order of learned CIT (A)- XXIII, New Delhi (copy of which has already been placed on record) in assessee s own case for AY 2008-09. That, as such, CIT (A) order being only order before you till date same is binding upon you. reason given to us for not following said order being that you will be preferring appeal to Tribunal is academic in nature and as and when you do so decision of Tribunal would be binding as on that date. then AO allowed deduction while considering submission of assessee. Now, Hon ble ITAT in its order dated 16-01-2017 allowed appeal of Revenue and sustained addition made by AO for AY 2008-09 by holding that it is case of splitting up/re-construction of business already in existence for which assessee is not eligible for deduction u/s 80IC. AO allowed of deduction of Rs. 2536835 u/s 80IC for AY 2009-10 by considering submissions made by assessee following order of CIT (A) in assessee s own case for AY 2008-09 which was in assessee s favour. Now that ITAT has held that assessee is not at all eligible for any benefit u/s 80IC. Now, as per assessee s own submission made during proceeding for AY 2009-10, directions of ITAT in 2008-09 is also binding for AY 2009-10. I have independently examined all material and reached on conclusion that case is squarely covered by Section 150 of Income Tax Act which states as under: W.P.(C) 11452/2017 Page 11 of 34 Notwithstanding anything contained in notice under section 148 may be issued at any time for purpose of making assessment or reassessment or re-computation in consequence of or to give effect to any finding or direction contained in order passed by any authority in any proceeding under this Act by way of appeal, reference or revision or by Court in any proceeding under any other law. As per assessee s own submission made during proceedings for AY 2009-10, directions of ITAT is AY 2008-09 is also binding for AY 2009-10. case is not covered under first proviso to Section 147 of Income Tax Act. Considering factual matrix, statutory provisions and legal principles, undersigned has reason to believe that there has been escapement of income to tune of Rs. 2536835/- chargeable to tax for assessment year 2009-10 and hence it is fit case for initiation of proceedings in terms of section 147 of I.T. Act, 1961. Accordingly, necessary approval u/s 151 of I.T. Act, 1961 is solicited for issuance of notice u/s 148 of I.T. for Asstt. Year 2009-10. 2. reason of re-opening for A.Y. 2009-10 u/s 147 of Income Tax Act, 1961 provided above is for your information. 12. On perusal of reasons for reopening, it emerges that, during course of assessment for AY 2009-10, Petitioner has claimed deduction from its gross income under Section 80-IC of Act, being profit from manufacturing and production at its new industrial unit at Selaqui in W.P.(C) 11452/2017 Page 12 of 34 Uttarakhand. Petitioner claimed that entire manufacturing of assessee upto AY 2007-08, was done from its industrial unit at Kala Amb, Himachal Pradesh and thereafter, manufacturing process had been split between unit at Kala Amb and Selaqui. During scrutiny proceedings for AY 2008-09, AO disallowed deductions claimed under Section 80-IC on profits of Selaqui unit made by splitting its earlier manufacturing unit. On appeal preferred by Petitioner, CIT (A) decided matter in favour of assessee. During scrutiny proceeding for AY 2009-10, Petitioner pressed to follow order of CIT (A) in respect of deduction under Section 80-IC for AY 2008-09 and also submitted that decision of ITAT would be binding upon it. relevant portion of submission made by Petitioner has been reproduced in reasons that formed basis for reopening assessment, as extracted hereinabove. Since Petitioner agreed to be bound by findings of ITAT, question arises as to whether it is legally permissible to reopen assessment pertaining to AY 2009-10 in light of decision of ITAT pertaining to AY 2008-09. 13. main plank of Petitioner s argument is that Section 150 mandates existence of finding or direction for re-assessment of year for which action is taken. Mr. M.S. Syali has argued, that finding or direction must relate to AY 2009-10, and finding in respect of AY 2008-09 would not suffice. In this regard, Mr. Syali has firmly relied upon judgment of Supreme Court in Income Tax officer v. Murlidhar Bhagwan Das, (1964) 52 ITR 335 (SC), wherein it has been held as under:- W.P.(C) 11452/2017 Page 13 of 34 It is important to remember that proviso does not confer any fresh power upon Income-tax Officer to make assessments in respect of escaped incomes without any time- limit. It only lifts ban of limitation in respect of certain assessments made under certain provisions of Act and lifting of ban cannot be so construed as to increase jurisdiction of tribunals under relevant section. lifting of ban was only to give effect to orders that may be made by appellate, revisional or reviewing tribunal within scope of its jurisdiction. If intention was to remove period of limitation in respect of any assessment against any person, proviso would not have been added as proviso to sub-section (3) of section 34, which deals with completion of assessment, but would have been added to sub-section (1) thereof. words relied upon are "section limiting time", "any person", "in consequence of or to give effect to any finding or direction." "finding", can be only that which is necessary for disposal of appeal in respect of assessment of particular year. AAC may hold, on evidence, that income shown by assessee is not income for relevant year and thereby exclude that income from assessment of year under appeal. finding in that context is that that income does not belong to relevant year. He may incidentally find that income belongs to another year, but that is not finding necessary for disposal of appeal in respect of year of assessment in question. expression "direction" cannot be construed in vacuum, but must be collated to directions which AAC can give under section 31 of 1922 Act. Under that section he can give directions, inter alia, under section 31(3)(b), (c) or (e ) or section 31(4) of 1922 Act. expression "direction" in proviso could only refer to directions which AAC or other Tribunals can issue under powers conferred on him or them under respective sections. Therefore, expression "finding" as well as expression "direction" can be given full meaning, W.P.(C) 11452/2017 Page 14 of 34 namely, that finding is finding necessary for giving relief in respect of assessment of year in question and direction is direction which appellate or revisional authority, as case may be, is empowered to give under sections mentioned therein. words "in consequence of or to give effect to" do not create any difficulty, for they have to be collated with, and cannot enlarge, scope of finding or direction under proviso. If scope is limited as aforesaid, said words also must be related to scope of findings and directions. expression "any person" in its widest connotation may take in any person, whether connected or not with assessee, whose income for any year has escaped assessment; but this construction cannot be accepted, for said expression is necessarily circumscribed by scope of subject-matter of appeal or revision, as case may be. That is to say, that person must be one who would be liable to be assessed for whole or part of income that went into assessment of year under appeal or revision. combined reading of section 30(1) and section 31(3) of 1922 Act indicates cases where persons other than appealing assessees might be effected by orders passed by Appellate Commissioner. Modification or setting aside of assessment made on firm, Joint Hindu family, association of persons, for particular year may affect assessment for said year on partner or partners of firm, member or members of HUF or individual, as case may be. In such cases though latter are not eo nomine parties to appeal, their assessments depend upon assessments of former. It is not necessary to pursue matter further. It was, therefore, to be held that expression "any person" in setting in which it appeared must be confined to person intimately connected in aforesaid sense with assessments of year under appeal. (emphasis supplied) 14. Petitioner has further relied on Rajender Nath v. CIT, (1979) 120 W.P.(C) 11452/2017 Page 15 of 34 ITR 14 (SC), wherein it has been held as under:- 11. expressions "finding" and "direction" are limited in their meaning. finding given in appeal, revision or reference arising out of assessment must be finding necessary for disposal of particular case, that is to say, in respect of particular assessee and in relation to particular assessment year. To be necessary finding it must be directly involved in disposal of case. It is possible in certain cases that in order to render finding in respect of A, finding in respect of B may be called for. For instance, where facts show that income can belong either to or B and to no one else, finding that it belongs to B or does not belong to B would be determinative of issue whether it can be treaed as A's income. finding respecting B is intimately involved as step in process of reaching ultimate finding respecting A. If, however, finding as to A's liability can be directly arrived at without necessitating finding in respect of B, then finding made in respect, of B is incidental finding only. It is not finding necessary for disposal of case pertaining to A. same principles seem to apply when question is whether income under enquiry is taxable in assessment year under consideration or any other assessment year. As regards expression "direction" in section 153(3)(ii) of Act, it is now well settled that it must be express direction necessary for disposal of case before authority or court. It must also be direction which authority or court is empowered to give while deciding case before it. expressions "finding" and "direction" in section 153(3)(ii) is not of Act must be accordingly confined (sic) . Section 153(3)(ii) is not provision enlarging jurisdiction of authority or court. It is provision which merely raises bar of limitation for making assessment order under section 143 or section 144 or section 147 ITO v. Murlidhar Bhagwan Das (1964) 52 ITR 335 (SC) and N. Kt. Sivalingam Chettiar v. CIT (1967) 66 ITR 586 (SC). question formulated by Tribunal raised W.P.(C) 11452/2017 Page 16 of 34 point whether AAC could convert provisions of section 147(1) into those of section 153(3)(ii) of Act. In view of section 153(3)(ii) dealing with limitation merely, it is not easy to appreciate relevance or validity of point. (emphasis supplied) 15. Petitioner also relied upon Gujarat Power Corporation Ltd. vs. ACIT, (2013) 350 ITR 266, wherein it has been held as under:- 41. powers under section 147 of Act are special powers and peculiar in nature where quasi-judicial order previously passed after full hearing and which has otherwise become final is subject to reopening on certain grounds. Ordinarily, judicial or quasi-judicial order is subject to appeal, revision or even review if statute so permits but not liable to be re-opened by same authority. Such powers are vested by Legislature presumably in view of highly complex nature of assessment proceedings involving large number of assessees concerning multiple questions of claims, deductions and exemptions, which assessments have to be completed in time frame. To protect interest of revenue, therefore, such special provisions are made under section 147 of Act. However, it must be appreciated that assessment previously framed after scrutiny when reopened, results into considerable hardship to assessee. assessment gets reopened not only qua those grounds which are recorded in reasons, but also with respect to entire original assessment, of course at hands of revenue. This obviously would lead to considerable hardship and uncertainty. It is precisely for this reason that even while recognizing such powers, in special requirements of statute, certain safeguards are provided by statute which are zealously guarded by courts. Interpreting such statutory provisions courts upon courts have held that assessment previously framed cannot be reopened on mere change of opinion. It is stated that power to reopening cannot be equated with review. W.P.(C) 11452/2017 Page 17 of 34 (emphasis supplied) 16. On this issue, Revenue has relied upon decision of this Court in Commissioner of Income Tax v. P.P. Engineering Works, (2014) 369 ITR 433 (Delhi), where Court had occasion to interpret Section 150 and 153. In said decision, this Court also considered judgment of Supreme Court in Murlidhar Bhagwan Das (supra), and taking note of legislative history including purpose behind enactment of Sub-Section (2) to Section 150, and explanations 2 and 3 to Section 153 of Act, observed as under:- 4. Aggrieved, appellant-Revenue preferred appeal before Tribunal relying upon Section 153 of Act. It is noticeable that Commissioner of Income Tax (Appeals) did not refer to Section 150 (2) and Section 153, Explanation 2 of Act. Tribunal also without referring to two provisions, held that assessment order could not be sustained, as Tribunal had not given any finding or direction in earlier order dated 11th August, 2008 relating to assessment year 2000- 1. *** *** *** 7. Delhi High Court in Rural Electrification Corpn. Ltd. v. CIT (2013) 355 ITR 345/34 taxmann.com 197 (Delhi) had occasion to consider effect of Explanation 3 and whether ratio as expounded by Supreme Court in ITO v. Murlidhar Bhagwan Das (1964) 52 ITR 335 (SC) would be still applicable. legislative history including purpose behind enactment of sub-section (2) to Section 150 and Explanations 2 and 3 to Section 150 of Act were referred to. Reference was also made to sub-section (3), clause (ii) of Section 153 of Act and thereafter it was opined: W.P.(C) 11452/2017 Page 18 of 34 "12. When Income Tax Act, 1961 was enacted, Section 153 did not contain Explanations 2 and 3. Those explanations were introduced subsequently in 1964 after Supreme Court decision in Murlidhar Bhagwan Das (supra). It is therefore, apparent that two explanations were added so as to supersede view taken by Supreme Court in respect of 1922 Act. Explanation 2 in Section 153 makes it clear that even where any income is excluded from total income of assessee from particular assessment year, then assessment of such income for another assessment year shall, for purpose of Section 150 as also of Section 153, be deemed to be one made in consequence of or to give effect to any finding or direction contained in said order. In other words, finding in respect of different year can also be used for purposes of invoking provisions of Section 150 of said Act, by virtue of deeming provision contained in Explanation 2 in Section 153 of said Act. This would otherwise not have been available in view of decision of Supreme Court in Murlidhar Bhagwan Das (Supra). Similarly, Explanation 3 stipulates that where, by order inter-alia passed by Tribunal in appeal, any income is excluded from total income of one person and held to be income of another person, then, assessment of such income on such other person shall, for purposes of Section 150 as also Section 153, be deemed to be one made in consequence of or to give effect to any finding or direction contained in said order " 8. In Rural Electrification Corporation Ltd. (supra), Explanation (3) to Section 153 was applicable and in this case, Explanation 2 to Section 153 would be applicable, and ratio W.P.(C) 11452/2017 Page 19 of 34 and reasoning given in Rural Electrification Corpn. Ltd. (supra) would apply with equal force. Explanation 2 to Section 153 applies when income is found to be relating to some other year and Explanation 3 applies when income is found to be income of some other person. Otherwise, two explanations are identical and serve same purpose. 9. Similar view has been taken by Gujarat High Court in Kalyan Ala Barot v. M.H. Rathod (2010) 328 ITR 521 , wherein effect of two explanations read with sub-section (2) to Section 150 were considered and it was held: "13. On plain reading of sub-section (3) of section 153 of Act, it is apparent that same lifts bar of limitation laid down under sub- section (1) and subsection (2) thereof in respect of classes of assessments, reassessments or recomputations enumerated thereunder. Thus, in light of provisions of section 153(3)(ii) normal time limit for completion of assessments or reassessments, as contained in section 153(1) or section 153(2), shall have no application where assessment is made on assessee or any person in consequence of or to give effect to any finding or direction contained in order under sections 250, 254, 260, 262, 263 or 264 or in order of any Court in proceeding otherwise than by way of appeal or reference under Act. 14. language employed in Explanation 2 to section 153 makes it abundantly clear that under said provision, when order in appeal, revision or reference is made whereby any income is excluded from total income of assessee for assessment year, then assessment of such income for another assessment year shall be deemed to be one made in consequence of or to give effect to any finding or W.P.(C) 11452/2017 Page 20 of 34 direction contained in said order for purpose of section 150 or section 153. Thus, for purpose of resorting to exception provided under sub-section (3)(ii), it is not necessary that there should be any specific finding or direction contained in said order with regard to assessment of income for another assessment year in light of deeming provision in Explanation 2 below section 153 of Act. very fact that income has been excluded from total income of assessee for assessment year by virtue of order referred to in clause (ii) of sub-section (3) would be sufficient for purpose of making assessment of such income in another year and for purpose of section 150 and section 153, same would be deemed to have been made in consequence of or to give effect to any finding or direction contained in said order. 18. Another contention raised on behalf of petitioner is that finding in terms of section 150 of Act can only be that which is necessary for disposal of appeal in respect of assessment of particular year. expressions "finding" as well as "direction" can be only in context of finding necessary for giving relief in assessment of year under consideration. That order made in relation to particular assessment year cannot be made basis for reopening concluded assessment of earlier assessment year. However, said contention loses sight of Explanation 2 below section 153 which provides that where, by order referred to in clause (ii) of sub-section (3), where any income is excluded from total income of assessee for assessment year, then, assessment of such income for W.P.(C) 11452/2017 Page 21 of 34 another assessment year shall, for purposes of section 150 and section 153, be deemed to be one made in consequence of or to give effect to any finding or direction contained in said order. 19. On combined reading of sub-section (1) of section 150 and sub-section (3) of section 153, it is apparent that in cases falling under clause (ii) of sub-section (3) of section 153 read with Explanation 2 thereunder, provisions of subsection (1) of section 150 would be applicable and bar of limitation under section 149 would not be applicable. While section 150(1) and section 153(3) contemplate issuance of notice under section 148 and completion of assessment, reassessment and recomputation respectively, in consequence of or to give effect to any finding or direction contained in order passed by any authority in any proceeding under Act by way of appeal, reference or revision, Explanation 2 to section 153(3) contains deeming provision which provides that where by order referred to in clause (ii) of sub-section (3) any income is excluded from total income of assessee for assessment year, then assessment of such income for another assessment year shall for purposes of section 150 and section 153 be deemed to be one made in consequence of or to give effect to any finding or direction contained in said order." (emphasis supplied) 17. Petitioner has however argued that dicta of Supreme Court in Murlidhar Bhagwan Das (supra) under Income Tax Act, 1922 is applicable with equal force to Section 150 of 1961 Act, notwithstanding amendments noted above. It is also argued that Revenue cannot take W.P.(C) 11452/2017 Page 22 of 34 recourse to judgment of P.P Engineering (supra) as it applies only to situations that are covered by Explanation to Section 153. However, we find that subsequent to decision of Supreme Court in Murlidhar Bhagwan Das (supra), position in law has undergone change, in view of enactment of Sub-Section (2) to Section 150 and Explanations 2 and 3 added to Section 153. Now, there cannot be any doubt that finding in respect of different year can also be used for purpose of invoking provisions of Section 150 of said Act. Our observations are not to be construed to mean that ratio of Supreme Court in Murlidhar Bhagwan Das (supra) has lost relevancy. However, certainly observations made therein have to be examined in light of changed legal position. explanation inserted subsequent to said judgment has to be weighed in facts of each case. explanation has to be read so as to harmonize with, and clear up any ambiguity in main provision. In this regard it is useful to refer to decision of Supreme Court in S. Sundaram Pillai v. V.R. Pattabiraman, (1985) 1 SCC 591, relevant portion of which reads as under: "53. Thus, from conspectus of authorities referred to above, it is manifest that object of Explanation to statutory provision is (a) to explain meaning and intendment of Act itself, (b) where there is any obscurity or vagueness in main enactment, to clarify same so as to make it consistent with dominant object which it seems to subserve, (c) to provide additional support to dominant object of Act in order to make it meaningful and purposeful, W.P.(C) 11452/2017 Page 23 of 34 (d) Explanation cannot in any way interfere with or change enactment or any part thereof but where some gap is left which is relevant for purpose of Explanation, in order to suppress mischief and advance object of Act it can help or assist Court in interpreting true purport and intendment of enactment, and (e) it cannot, however, take away statutory right with which any person under statute has been clothed or set at naught working of Act by becoming hindrance in interpretation of same. 18. Undoubtedly, situations contemplated by Explanation do not exist in present case, however, it is to be borne in mind that Explanation 2 introduces deeming concept and therefore, scope of Section is enlarged. This, however, cannot be construed to mean that Section 150 can be resorted to only for situations which are covered by virtue of Explanation 2 to Section 153. 19. Before proceeding further, it would be necessary to first understand, "finding" in question in present case. ITAT has, for AY 2008-09, held that Assessee s Selaqui unit for which deduction under Section 80- IC was sought, did not carry on any manufacturing activity and it was just dropbox address. Assessee had transferred more than 20% of total machinery employed at Selaqui unit from Kala Amb unit in violation of Section 80-IC (4) (ii) of Act. relevant findings in ITAT order read as under:- 17. We are unable to. agree with Id. CIT, (A) who has W.P.(C) 11452/2017 Page 24 of 34 taken affidavit filed by Shii R.S. Sidhu as gospel truth even without insisting upon any evidence to support his findings. First of all, affidavit of Shri R.S. Sidhu relied upon by ld. CIT (A) is undated Secondly, CIT (A) has proceeded in haste in entertaining undated affidavit in evidence in violation of Rule 46A of Income-tax Rules, 1962 (for short 'the Rules') to believe averment made by assessee in affidavit as gospel truth. Thirdly, there was no mention of telephone number, tele-fax and internet facility at Selaqui unit because in purchase order dated 05.07.2007 telephone number of Kala Amb unit is given and tele-phone number, of Head Office, Delhi of assessee has been given Fourthly documents transporting machinery purchased from Grip Engineers Pvt. Ltd., and ABB, Faridabad are not tallying with material receipt dated 03.05.2007 regarding transportation of21 electrical motors through truck no. DL 1M 1252 whereas 21 electrical motors were alleged to have been transported by ABB through truck no. HR35J5393 on 28.04.2007. All these facts go to prove that Selaqui unit was just drop box address and no manufacturing activities are being carried out in same. 18. Assessee stated to have purchased machinery from M/s. Grip Engineers Pvt. Ltd., BaUabhgarh and ABB, Faridabad on 23.04.2007 and 28.04.2007 respectively but stated to have stored same at Kala Amb unit for want of non-availability of transit form to be issued by Uttarakhand Government. When assessee alleged to have started manufacturing at Selaqui unit in month of June 2007, it is difficult to believe as to why order was placed 5 months in advance without getting necessary transit form issued, which to our mind, does not require any extensive exercise, particularly when Government is providing exemption to new unit u/s 80-IC, it cannot take five months to issue transit form. 19. Moreover, when this fact is examined in light of fact that no travelling allowance has been debited by assessee to P&L account during year under assessment, it is W.P.(C) 11452/2017 Page 25 of 34 difficult to believe that any manufacturing activities have been carried out at Selaqui unit. Because earning turnover of Rs.11.11 crores with profit of Rs. 3.13 crores from assembling / manufacturing unit is humanly not feasible without supervision of senior / junior functionaries of ,assessee either from Kala Amb unit or from Head Office, Delhi nor any skilled worker has ever visited Selaqui unit or proyed to be engaged. So, all these facts strengthen findings returned by AO' which have been overturned by CIT (A) on basis of whims and fancies. Since assessee has transferred tools and machinery more than 20% of total machinery employed' at Selaqui unit from Kala Amb unit it is violation of section 80- IC (4)(ii) of Act. 20. factum of transfer of machinery by Grip Engineers Pvt. Ltd. Balabhgarh and ABB, Faridabad to Kala Amb unit of assessee on 23.04.2007 and 28.04.2007 respectively with which assessee has alleged to have started manufacturing in month of June 2007 is not to be seen in isolation, rather it is to be seen in light of connected facts and circumstances that assessee has debited only amount of Rs. 1,35,388/- under head wages, bonus, PF, ESI, etc, with which at most only one worker can be hired and no expenditure has been debited to P&L account on account of travelling expense nor telephone, tele-fax and internet facility is proved to have been established at Selaqui unit. So we are of considered view that new plant and machinery, even if assumed to be transferred by assessee from Kala Amb unit to Selaqui unit, it was never put to use to carry out manufacturing activities to qualify for exemption under Section 80-IC. 20. We may note that aforesaid order has been upheld by this Court in ITA No. 72/2019, decided on 28th January 2019, and matter is stated to be pending challenge before Supreme Court. 21. Petitioner has argued that since deduction under Section 80-IC of W.P.(C) 11452/2017 Page 26 of 34 Act has to be claimed on year to year basis, it is possible for Assessee to be denied deduction in one year, but to be allowed deduction in another year. In support of this submission reliance has been placed on, CIT v. Seeyan Plywoods, 190 ITR 564 (Ker), CIT v. Satellite Engineering Ltd., 113 ITR 208 (Guj), CIT v. Suessin Textile Bearing Ltd., 135 ITR 443 (Guj), HCL Technologies v. ACIT, 377 ITR 483 (Del), Deputy Commissioner of Income Tax, Circle-11(1) Bangalore v. Ace Multiaxes Systems Ltd., 400 ITR 141. While, this position may be correct, however, one cannot ignore fact that finding given by ITAT strikes at foundation of claim of Petitioner that Selaqui unit is entitled to deduction under Section 80-IC of Act for immediate succeeding year in question. Since ITAT categorically observed that Petitioner cannot claim deduction under Section 80-IC of Act, as it did not commence production at Selaqui unit for AY 2008-09, Petitioner cannot claim deduction under same proviso without satisfying AO that for AY 2009-10, he had in fact commenced production at Selaqui unit. Moreover, one cannot also lose sight of fact that during scrutiny proceedings before AO for year 2009-10, Assessee took benefit of order of CIT (A) by submitting that its case for present year is covered by decision of CIT (A) for AY 2008-09. Petitioner in its reply dated 22.12.2011 stated that any order passed by ITAT will be binding as on that date. relevant portion is recorded in following words:- "At very outset, we would like to bring on record that directions given by Additional Commissioner of Income Tax, Range-23, New Delhi (Copy of which has not been enclosed with your notice under reply) are prejudicial to W.P.(C) 11452/2017 Page 27 of 34 assessee in as much as same are beyond scope of Act and application under Section 144A dated 30.11.2011 filed by assessee. However, we assume that this must be in response to our application dated 30.11.2011 to him under Section 144A of Income Tax Act, 1961 seeking directions to you to follow order of Ld. CIT(A) XXIII, New Delhi (Copy of which has been already placed on your record) in assessee's own case for assessment year 2008-09. That, as such, CIT(A) order before you till date same is binding upon you. Your reason given to us for not following said order being that you will be preferring appeal to Tribunal is academic in nature and as and when you do so decision of Tribunal would be binding as on that date" 22. In pursuance to aforesaid reply and on consideration thereof, AO allowed deduction of Assessee for AY 2009-10 and accepted return of income filed by Assessee. acceptance of deduction claimed by Assessee in relevant assessment year was direct consequence of order passed by CIT (A) in preceding AY, and undertaking given by Petitioner to be bound by order of ITAT for AY 2008-09. Pertinently, at that stage Petitioner did not claim that each year is to be assessed separately and, therefore, finding of CIT (A) for AY 2008-09 is not relevant for assessment of income for AY 2009- 10. Petitioner is now somersaulting in its submission and is clearly approbating and reprobating, which is not permissible. Thus, in view of facts in present case, where Petitioner categorically agreed to be bound by order of ITAT, finding rendered by ITAT is sufficient and Revenue would be entitled to avail benefit of Section 150. 23. Additionally, Petitioner has harped that there was no ground for W.P.(C) 11452/2017 Page 28 of 34 reassessment of AY 2009-10 and subject matter of appeal before ITAT was confined to AY 2008-09. grounds of appeal, discussion and decisions relied upon before ITAT, all concentrate on said year only. Reliance was placed on CIT vs. Greenworld Corporation, (2009) 314 ITR 81 (SC), wherein issue arose with respect to giving effect to directions of CIT under Section 263 of Act. While, deciding said question, Court held, finding is held to be one, to which effect needs to be given, to comply with order of authority concerned . relevant portion of said decision reads as under:- Section 150(1) of Act is exception to aforementioned provision. It brings within its ambit only such cases where reopening of proceedings may be necessary to comply with order of higher authority. For said purpose, records of proceedings must be before appropriate authority. It must examine records of proceedings. If there is no proceeding before it or if assessment year in question is also not matter which would fall for consideration before higher authority, section 150 of Act will have no application. This Court noticed development of law as also fact that decision of Income-tax Officer given in particular year does not operate as res judicata to opine : "The lifting of ban was only to give effect to orders that may be made by appellate, revisional or reviewing Tribunal within scope of its jurisdiction. If intention was to remove period of limitation in respect of any assessment against any person, proviso would not have been added as proviso to sub-section (3) of section 34, which deals with completion of assessment, but would have been added to sub- W.P.(C) 11452/2017 Page 29 of 34 section (1) thereof." (emphasis supplied) 24. Further, reference has been made to decision of Marubeni India v. Commissioner of Income Tax, 328 ITR 306 (Del), to submit that ITAT could not have given finding in respect of AY which is not subject- matter of appeal before it. However, Petitioner lost sight of fact that it is not finding in respect of AY 2009-10, rather aforesaid finding has direct bearing on assessment for AY 2009-10. While it is true that in terms of Section 254, while dealing with proceedings arising out of AY 2008-09, ITAT did not have jurisdiction to adjudicate on ground not before it, however, finding in this case cannot be considered as relevant and limited only to AY 2008-09. aforenoted findings would also be relevant for AY 2009-10. 25. We are also conscious of fact that it is only such findings - which are material to decide subject matter of appeal that can form basis of reopening under Section 147. bar of limitation would be lifted and Section 150 can be invoked, only if there is such finding. Reopening could be done in consequence of or to give effect to such finding . findings of ITAT in aforenoted order are not incidental observations. These are categorical findings of fact which are germane for determination of claim of Assessee, for deduction under Section 80-IC of Act. Section 150 also uses expression "in consequence of", which means that there may be situation that warrants reopening in view of finding given by Appellate/Revisional authority. These findings fall within scope W.P.(C) 11452/2017 Page 30 of 34 of Section 150, as it is finding, which was necessary for disposal of appeal before Appellate authority for AY 2008-09. 26. Adverting now to ground of limitation raised by Petitioner, plain reading of Section 150 reveals that it deals with situation where assessment or re-assessment for particular year or for particular person is necessitated by order passed by appellate or revisional authority or on reference. In such cases, it may not be possible for Revenue to adhere to time limits prescribed under Section 149, as order of appeal, reference or revision or by Court, proceeding under any other law may be passed beyond period contemplated under section 149. It is for this reason, legislature has not placed any time limit for making assessment or re-assessment in such circumstances and for this reason, Section 150 begins with non-obstante clause. At same time, it does not mean that power under Section 150(1) is uncanalised or unrestricted. safeguard has been built under Sub-section (2) of Section 150. entire object of Section 150 (2) is to bar proceedings under Sub-Section (1) in matter of assessment/re-assessment or re-computation, which has become subject matter of reference or revision by reasons of any other provisions limiting time limit. Section 150 (1) provides that power to issue notice under Section 148 in consequence of or giving effect to any finding or direction of Appellate/Revisional Authority or Court, is subject to provision contained in Section 150(2), which provides that directions under Section 150(1) cannot be given by Appellate/Revisional Authority or Court if on date on which order impugned in appeal/revision was passed, re-assessment W.P.(C) 11452/2017 Page 31 of 34 proceedings had become time barred. In other words, as per section 150(2), Appellate Authority could give directions for re-assessment only in respect of assessment year, which was within limitation stipulated under Section 148 in respect of which re-assessment proceedings could be initiated on date of passing of order under appeal. In this regard, it would be profitable to refer to decision of Praveen Kumari v. CIT (1999) 237 ITR 339 and Sharma (KM) v. ITO (2002) 254 ITR 772 (SC), wherein Court held as under: 20. According to sub-section (2) of section 150 provisions of sub-section (1) of that section shall not apply where, by virtue of any other provision limiting time within which action for assessment or reassessment may be initiated, issuance of notice for such assessment or reassessment is barred on date of order, which is subject-matter of appeal, reference or revision, in which finding or direction is contained. It would, thus, mean that appellate or revisional authority cannot give direction for assessment or reassessment which goes to extent of conferring jurisdiction upon Assessing Officer if his jurisdiction had ceased due to bar of limitation. If issuing of notice for assessment or reassessment for particular assessment year had become time-barred at time of order, which was subject- matter of appeal, provisions of section 150(1) cannot be invoked to aid of Revenue for making assessment or reassessment. 25. In light of provisions contained in sub-section (2) of section 150, it cannot be said that notices issued by Assessing Officer to petitioners under section 148 of Act on March 1, 1996, were within period of limitation. Even if it is assumed that order of assessment was subject- matter of appeal before Tribunal, that would also not help Revenue. orders of assessment in cases of both W.P.(C) 11452/2017 Page 32 of 34 assessees for assessment year 1978-79 were passed on January 30, 1989. Thus, relevant date on which period of limitation must be available is January 30, 1989. However, sub-section (2) of section 150 refers to subject-matter of appeal, reference or revision. In that light, it is actually appellate order of Commissioner which can be said to be subject-matter of appeal before Tribunal. In that view of matter, order of Commissioner dated March 29, 1990, is order which was subject-matter of appeal before Tribunal. period of limitation should have been available on date of appellate order of Commissioner. Since notices under section 148 have been issued by Assessing Officer to both petitioners on March 1, 1996, these notices are beyond period of limitation as laid down in section 149(1)(b) read with section 150(2) of Act. (emphasis supplied) 27. legislature has designedly not placed any time limit under Section 150, and reading period of limitation into it, would be incorrect approach. In present case, date relevant for deciding question of limitation in terms of Section 150(2), and observations in Praveen Kumari (supra), would be date of order of CIT (A), which was passed on 05.10.2011 and was subject matter of appeal. Thus, limitation of six years under Section 149, must be alive on date of passing of order of CIT (A). In present case since, as on 05.10.2011, time limit for reopening of assessment for A.Y. 2009-10 had not lapsed, order of ITAT was well within limitation. 28. In view of forgoing decision, we are of view that reopening of assessment under Section 147, read with Section 150, was within W.P.(C) 11452/2017 Page 33 of 34 period of limitation. 29. Needless to say that during reassessment proceedings, Asseessee will be entitled to lead fresh material and evidence to prove his entitlement to claim deduction under Section 80-IC for AY 2009-10, before AO, and this order does not in any way abrogate or limit his rights to justify his claim before AO. 30. present petition is dismissed in above terms. interim order made absolute vide order dated 8th May 2019, stands vacated. SANJEEV NARULA, J. VIPIN SANGHI, J. DECEMBER 16, 2019 ss W.P.(C) 11452/2017 Page 34 of 34 Intec Corporation v. Asstt. Commissioner of Income-tax Circle 31(1), New Delhi