COMMISSIONER OF INCOME TAX Vs. ORISSA FOREST DEVELOPMENT

JUDGEMENT

(1.) ON an application filed by the Commissioner of Income Tax, Orissa under Section 256(1) of the Income Tax Act, 1961, the Income Tax Appellate Tribunal has referred the following questions of law by its order dated 8.4.1991 passed in R.A. No. 9 (CTK)/1991 arising out of I.T.A. No. 126 (CTK)/1990 for opinion of this Court.

(2.) THE brief facts of the case are as follows: The Orissa State Legislature passed a legislation called the Orissa Kendu Leaves (Control) of Trade) Act, 1961 (the Act, in short) for the regulation of trade in Kendu Leaves prohibiting any person other than the Orissa Government or its Officers or agent to purchase or transport Kendu Leaves. It fixed the purchase price at which the Kendu Leaves would be purchased for a year in consultation with an Advisory Committee. The Government had power to appoint agents for the purchase of Kendu Leaves. Under Section 10 of the said Act, the Kendu Leaves purchased by the Government or the officers or the agents would be sold or otherwise disposed of in such manner as directed by the Government. In the year 1977, the Government of Orissa in Forest Department entered into an agreement with the Orissa Forest Corporation Ltd. (hereinafter 'assessee') and appointed it as the selling agent under Section 10 of the Act for disposal of the Kendu Leaves purchased by the Forest Department. During the period relevant to the assessment year 1978 -79, Kendu Leaves were sold at a price higher than the price fixed and specified in Clause 16 of the Agreement, i.e., Rs. 285/ - per quintal. The Kendu Leaves Coordination Committee decided in its meeting held on 9.8.1978 that the Agreement between the Government and the assessee should be adopted with the modification that in case the average selling price of Kendu Leaves would be more than the amount (cost of production + royalty + marketing expenses) indicated in the Agreement, the excess would be paid to the Government. The Committee also declined to grant rebate on the royalty for 1973 and 1974 crops. The assessee's accounting period ended on 31.3,1978 and it made a provision for payment of collected additional amount of Rs. 1,35,92,730/ - to the State Government. The Assessing Officer was of the opinion that the extra profit earned was assessable in the hands of the respondent -assessee whereas the case of the assessee was that the same was not its income because the assessee was merely an agent of the Government and the said amount belonged to the Government from the very time of physical receipt of the same by the assessee. The order of assessment was passed by reopening notice under Section 148 of the Income Tax Act, 1961 (hereinafter I.T. Act), and after a number of assessments made under Section 144 of the I.T. Act were set aside by order passed under Section 146 of the I.T. Act, the final position was that the reopening order was passed under Section 146 on 18.3.1983 indicating therein that the assesee was prevented by sufficient cause not to comply with the order of the Assessing Officer. Therefore, the assessment under Section 144 was cancelled and assessment was reopened. The assessee filed third revised return on 20.3.1985 and the order of assessment was passed on 21.1.1986. The assessee preferred appeal against the aforesaid order of assessment dated 21.1.1986 before the Commissioner of Income Tax (Appeals), who by order dated 21.2.1987 passed in I.T.A. No. 505/ORA/85 -86 set aside the order of assessment with a categorical direction over the issue of additional royalty payable to the Government of Orissa. Notices were issued under Sections 143(2) and 142(1) and the order of assessment for the assessment year 1978 -79 was passed by the Assessing Officer on 31.3.1989. The said order was again challenged before the Commissioner of Income Tax (Appeals) on various grounds including on the ground that the order of assessment made was barred by limitation. It was contended that since the assessment had been reopened under Section 146 of the I.T. Act, fresh assessment was to be completed within the time limit prescribed under Sub -section (2A) of Section 153 of the I.T. Act. It was further argued before the Commissioner of Income Tax (Appeals) that since proceedings had been initiated by issuance of notice under Section 148 of the Act, the time limit under Section 153(1)(c) of the Act did not apply. The Commissioner of Income Tax (Appeals) upheld the order of assessment and dismissed the appeal preferred by the assessee (respondent herein) being devoid of any merit. On the point of limitation, the Commissioner of Income Tax (Appeals) held that due to assessee filing a revised return, the period of limitation for assessment got extended and as the last assessment completed on 21.1.1986 and the same was set aside on 21.2.1987, a fresh order of assessment is permissible within two years from the end of the financial year of the set aside order in terms of Section 153(2A) of the Act.

(3.) LET us now take up question No. 1. The admitted fact is that the last assessment was completed on 21.1.1986 and the same was set aside by the Commissioner of Income Tax (Appeals) on 21.2.1987. According to the learned Counsel for Revenue, the Assessing Officer could pass fresh assessment orders within two years from the end of the financial year of the set aside order in terms of Section 153(2A) of the I.T. Act. Accordingly, learned Counsel for the Revenue submitted that there was no infirmity in the order of the Commissioner of Income Tax (Appeals) who rightly held that there was no limitation in passing the order of assessment. In this regard, Mr. S.N. Ratho, learned Counsel for the respondent -assessee submitted that the language of Section 153(1)(2A) was clear and that the assessment order should have been passed on or before 31.3.1985 and therefore the present order of assessment was clearly barred by limitation, According to him, Clause (c) of Sub -section (1) of Section 153 deals with period of limitation regarding filing of revised return but Sub -section (2A) was silent in that regard. Let us now see the provisions of Section 153, which deals with completion of assessment arid re -assessment.