L ALAGUSUNDARAM CHETTIAR Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) THE admitted facts stated by the Tribunal are as follows THE assessment for the assessment year 1961-62 was initially completed, taking a sum of Rs. 7, 81, 500 as deemed dividend, thus determining the total income at a loss of Rs. 3, 11, 975. Subsequently, on appeal, the Appellate Tribunal held that the sum of Rs. 7, 81, 500 cannot be treated as dividend and, consequently, the loss to be carried over in the assessment was quantified at Rs. 11, 94, 684. THE Income-tax Officer gave effect to this order for the subsequent assessment year. Later, on a reference to this court, the order of the Tribunal was reversed, and the original assessment was restored on this point. Consequently, the Income-tax Officer sought to amend the assessment, thereby reducing the amount of loss to be carried forward and set off in the year in question as well as in the subsequent yearsTHE case of the assessee is that such a rectification has to be made either under section 154, or by way of revision under section 147(b), for both of which there would be a period of limitation of four years from the year in which the order requiring the amendment was made. THE Appellate Tribunal held that the amendments made by the Income-tax Officer for that year as well as subsequent years were only consequential orders giving effect to the decision of the High Court and could not be affected by the bar of limitation prescribed in those sections. On these facts, the following questions were referred to this court"(1) Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal is right in holding that the order passed by the Income-tax Officer dated July 30, 1977, in relation to the assessment year 1965-66 consequent to the order passed by him in the assessment for 1961-62 pursuant to the decision of the Madras High Court was only a consequential order and, therefore, the same could be passed without any period of limitation?(2) Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal is right in holding that the order passed by the Income-tax Officer dated July 30, 1977, consequent to the order passed by him in the assessment for 1961-62 was not an order either under section 143(3) or under section 154 and, consequently, the period of limitation under the said section will not apply?(3) If the answer to the above question is in the negative and if answer is that the order is under section 154, whether, on the facts and in the circumstances of the case, the order dated July 30, 1977, passed by the Income-tax Officer in the assessment for 1965-66 without notice to the assessee is valid in law?(4) If the answer to question No. 2 is in the negative and if the answer is that the order is made under section 154, whether the order dated July 30, 1977, passed in relation to the assessment year 1965-66 is not barred by limitation?(5) Whether, on the facts and in the circumstances of the case, the order dated July 30, 1977, passed by the Income-tax Officer in relation to the assessment year 1965-66 was bad in law as it was passed beyond the period of limitation?" Before us, it was submitted by learned counsel for the assessee that as far as the subsequent assessment years are concerned, they were not amendments made to give effect to any direction within the meaning of section 153(3)(ii) for which only Explanation 2 has provided that an income excluded from one assessment year could be included in the total income of subsequent year without any bar of limitation. On the other hand, learned counsel for the Revenue brought to our notice a decision of this court in Kanaka Films Private Ltd. v. ITO where the Revenue had taken such an objection, but was overruled by this courtWe find that the questions raised are practically concluded by that decision. THE amendments carried out by the Income-tax Officer were only consequential orders and cannot be fettered by the bar of limitation under section 154 or under section 147(b). This situation has arisen only because of the considerable time taken in the appellate and reference proceedings which go beyond four years and never envisaged in the Act. If the appeals of the earlier years had been disposed of as expected within a year or two, this question itself would not have arisen. If we were to apply the provisions of section 154 or section 147(b) strictly, to the amendments of the assessments of the subsequent years, then, such amendments would be practically impossible in any case. Even in the present case, it is stated that an appeal to the Supreme Court is pending against the decision of the High Court. On the same reasoning advanced by the assessee, if the assessee were to succeed in the Supreme Court, the benefit would not be available because of the bar of limitation. THErefore, we are of the considered opinion that the limitations prescribed under section 154 or under section 147(b) were not meant to be applied to amendments made consequential to the decisions of the High Court or the Supreme Court even though the power of the Income-tax Officer to amend the assessments in consequence of these decisions may be traceable to either section 147(b) or section 154. Our answers to questions Nos. 1 and 2 referred to above are in the affirmative. Questions Nos. 3 and 4 do not arise. Our answer to question No. 5 is in the negative. No costs.