IN THE INCOME TAX APPELLATE TRIBUNAL

LUCKNOW BENCH ‘SMC’, LUCKNOW

BEFORE SHRI T. S. KAPOOR, ACCOUNTANT MEMBER AND

SHRI PARTHA SARATHI CHAUDHURY, JUDICIAL MEMBER

ITA Nos.811 & 812/Lkw/2017

Assessment years:2003-04 & 2014-15

Sandeep Jain, Vs. Income Tax Officer,

C/o 24/4, The Mall, Ward 1(4), Kanpur
Kanpur
PAN: AERPJ 6157 J
(Appellant) (Respondent)

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Appellant by Shri Ashish Jaiswal, Advocate

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Respondent by Shri R.K. Vishwakarma, DR
Date of hearing 06/08/2018
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Date of pronouncement 24/08/2018
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ORDER
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PER T. S. KAPOOR, A.M

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These are two appeals filed by the assessee against the separate
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orders of CIT(A) both dated 18/08/2017. These appeals were heard

together and therefore, for the sake of convenience, a common and
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consolidated order is being passed.

2. The grounds of appeal taken by the assessee in I.T.A. No.811 &

812/Lkw/2017 are reproduced below:

“1 THAT THE ASSESSING OFFICER HAS ERRED IN

REOPENING THE ASSESSMENT BASED UPON THE
DIRECTION OF LEARNED CIT (APPEALS) IN THE
ASSESSMENT YEAR 2004-05.
2 THAT THE ASSESSING OFFICER HAS ERRED IN
REOPENING THE ASSESSMENT PROCEEDING BY
ISSUING NOTICE UNDER SECTION 148 OF THE ACT
WHICH IS BARRED BY LIMITATION.
 I.T.A. Nos.811 & 812/Lkw/2017
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Assessment years:2003-04 & 2014-15

3 THAT THE LEARNED CIT (APPEALS) HAS ERRED IN

CONFIRMING THE ADDITION OF Rs. 1,56,660.00
UNDER SECTION 68 OF THE ACT MADE BY
ASSESSING OFFICER.
4 THAT THE LEAREND CIT (APPEALS) HAS ERRED IN
NOT PROVIDING PROPER AND ADEQUATE
OPPORTUNITY TO THE APPELLANT.”

2.1 The grounds of appeal taken by the assessee in I.T.A. No.

812/Lkw/2017 are reproduced below:
“1. That the learned CIT (Appeals) has erred in confirming
the ad-hoc disallowance made by the assessing officer of

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Rs. 6,38,422.00 out of sales promotion expenses.
2. That the addition / disallowances made by the assessing

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officer and confirmed by learned cit (appeals) is highly

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excessive and arbitrary.
3. That the Learned CIT (appeals) has erred in not
providing proper and adequate opportunity to the
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appellant.”
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3. At the outset, Learned A R. invited our attention to the legal ground

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taken in ITA No. 811/Lkw/2017 and submitted that the notice issued u/s
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148 of the Act was bar ed by limitation and in this respect our attention was
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invited to the copy of the assessment order, wherein the Assessing Officer
had mentioned in his order that on the basis of appellate order passed by
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Learned CIT(A) dated 22.12.2015, the assessee was required to explain the
cash credit u/s 68 of the Act to the extent of Rs.1,56,660/- relevant to F.Y.
2003-04. The Learned A.R. submitted that the notice u/s 147 of the Act was
issued and served on the assessee on 31.03.2016 and the assessment year
was 2003-04, which was beyond a period of six years as contemplated for
reopening of assessment. The Learned A.R. submitted that the provision of
Section 150(2) clearly puts an embargo on the Assessing Officer, wherein it
has been stated that reassessment or re-computation can only be done by
way of action u/s 148 of the Act if the re-computation itself could have been
made at the time the order which was the subject to matter of the appeal
 I.T.A. Nos.811 & 812/Lkw/2017
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Assessment years:2003-04 & 2014-15

by reason of any other provision limiting the time within which any action
for reassessment is taken. In this respect, the Learned A. R. read the
provisions of Section 150(1) and 150(2) of the Act. The Learned A.R. further
submitted that the issue has now been settled by the third Member in the
case of Emgeeyar Pictures (P.) Ltd. vs. DCIT, 70 taxmann.com 45 (Chennai-
TM) and our attention was invited to Para 15 of the order. Our attention
was further invited to an order of the I.T.A.T. Jaipur Bench in the case of
Ramesh Chand Soni, HUF vs. Income Tax Officer, taxmann.com 71 (Jaipur-
Trib.) wherein the Tribunal vide order dated 08.12.2017 has further passed

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the order in favour of the assessee.

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4. The Learned D. R. on the other hand submitted that the Assessing

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Officer had taken the action, on the basis of a direction by Learned CIT(A)
and within one year of the direction the assessment was reopened.
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5. Arguing the appeal in ITA No 812/Lkw/2017, the Learned A.R.
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submitted that the Assessing Officer has made ad-hoc disallowance
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equivalent 30% of sale promotion expenses, which is arbitrary and quite

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high, specifically, keeping in view, the fact that assessee had submitted
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books of account and had provided bills and vouchers. It was submitted that
the Assessing Officer without pointing out any mistake in any vouchers or
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bills and without rejecting books of account has made ad-hoc disallowance,
which was not warranted. The Learned A.R. further submitted that the
expenses incurred during the year consideration were lower as compared to
preceding year and therefore, the Assessing Officer should not have made
the disallowance.
6. The Learned D.R. on the other hand heavily placed reliance on the
order of the authorities below and submitted that before Ld. CIT(A)
assessee had not submitted any books of account or vouchers despite
specific direction.
 I.T.A. Nos.811 & 812/Lkw/2017
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Assessment years:2003-04 & 2014-15

7. We have heard the rival parties and have gone through the material
placed on record. We first take ITA No.811/Lkw/2017. The limited issue to
be decided in this appeal is as to whether the reassessment proceedings
initiated by the Assessing Officer during the F.Y. 2015-16 for reopening the
case relating to 2003-04 is legal or not. This question has already been
decided by the Third Member in the case of Emgeeyar Pictures (P.) Ltd. vs.
DCIT, 70 taxmann.com 45 (Chennai-TM). The Hon'ble Third Member has
discussed the issue in detail and has decided the issue in favour of the
assessee by holding as under:

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“3. According to the Ld. counsel, in fact, when the appeal came before

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this Tribunal for the assessment years 2003-04 and 2004-05, this Tribunal
found that the transfer took place in the year 2000. Therefore, the capital

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gain cannot be taxed for the assessment years 2003-04 and 2004-05.
There is neither a finding that the capital gain has to be taxed in the
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assessment year 2001-02 nor any direction to assess the same in the
assessment year 2001-02. The efore, according to the Ld. counsel, the
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Assessing Officer cannot take the benefit of Section 150(1) of the Act for
reopening the completed assessment after expiry of limitation provided in
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Section 149 of tijie Act. Referring to Section 150(1) of the Act, the Ld.
counsel pointed out that the Assessing Officer may reopen the assessment
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notwithstanding anything contained in Section 149 of the Act by issuing a

notice under Section 148, for the purpose of making an assessment or
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reassessment or re computation in consequence of any finding or

direction contained in the order passed by any authority in a proceeding
under this Act. The only proceeding under this Act is appeal by the
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assessee before this Tribunal for the assessment years 2003-04 and 2004-
05 in I.T.A. Nos. 327 & 328/Mds/2010 and there is no finding or direction
by this Tribunal to assess the capital gain arising out of transfer of the
property in the assessment year 2001 -02.
4. Shri D. Anand, the Ld. counsel for the assessee, invited our attention to
the order of this Tribunal dated 31.05.2010 and submitted that Section
150(1) of the Act should not be applied in a case where the assessment or
reassessment or re-computation could not have been made at the time
the order was passed by the Tribunal in view of limitation provided in
Section 149 of the Act. In this case, according to the Ld. counsel, the
order of the Tribunal was passed on 31.05.2010. The period of limitation
for completing the assessment oil the reassessment is two years from the
end of the assessment year in which the income was first assessable. The
income was first assessable in the assessment year 2001-02. Therefore, at
the best, the assessment order can be passed on or before 31.03.2005.
The Assessing Officer passed the initial assessment order, after reopening
 I.T.A. Nos.811 & 812/Lkw/2017
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under Section 147 of the Act, on 30.03.2006. The assessment was

reopened for the second time under Section 150 of the Act, consequent to
the order of this Tribunal for assessment years 2003-04 and 2004-05
dated 30.05.2010. Referring to the judgment of the Apex Court in CIT v.
Greenworld Corporation [2009] 314 ITR 81/181 Taxman 111, the Ld.
Counsel submitted that no notice under Section 148 should be issued
since four years have elapsed from the end of the relevant assessment
year. At the best, Assessing Officer can issue notice under Section 148
within a period of six years in case the income assessable to tax exceeded
Rs. 1 lakh or more. ln this case, even the six-year period expired on
31.03.2008. Therefore, issue of notice under Section 147 r.w.s. 150 of the
Act on 10.06.2011 is beyond the period of limitation.
5. The Ld. counsel for the assessee further submitted that Section 150(2)
of the Act clearly says that if the time limit expired at the time of the order

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which was subject matter of appeal, then provisions of Section 150(1) of
the Act is not applicable. In this case, according to the Ld. counsel, the

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order of the Tribunal was passed on 31.05.2010. The limitation period had

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already expired, therefore, no order can be passed under Section 150(1 )
of the Act in the guise of reopening under Section 147 of the Act. The Ld.
counsel has also placed this reliance on the judgment of the Apex Court in
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K.M. Sharmav. HO [2002] 254 ITR 772/122 Taxman 426. Therefore,
according to the Ld. counsel, the Assessing Officer ought not to have
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reopened the assessment in the guise of giving effect to the order of the
Tribunal for the assessment year 2003-04 and 2004-05.
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6. The Ld. counsel further submitted that the CIT (Appeals), referring to
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the contention of the assessee that there was no specific finding or

direction of the Tribunal in the order dated 31.05.2010, observed that
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there was an inference that the finding of the ITAT is that the capital gain
is to be taxed in assessment year 2001-02. According to the Ld. counsel,
on the basis of the inference there cannot be any assessment under
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Secti n 150(1) of the Act. The language used by the Parliament is "finding
or direction" of any authority under the provisions of the Income-tax Act.
In his case there was no finding or direction by the ITAT. Therefore, there
cannot be any inference that the Tribunal intended to tax the capital gain
in the assessment year 2001-02. The Ld. counsel has also advanced his
argument on merit and submitted that Section 5QC of the Act is applicable
from assessment year 2003-04, and therefore, not applicable for the year
(under consideration. The Ld. counsel also placed his reliance in the
judgment of Madras High Court in CIT v. Vellore Electric Corpn. [2006]
287 ITR 50.
7. On the contrary, Shri A.V. Sreekanth, the Ld. Departmental
Representative, submitted that on appeal by the assessee for assessment
years 2003-04 and 2004-05, this Tribunal found that there was an
agreement for joint development of property on 25.12.2000 and the
assessee had also handed over the possession of the property to the
builder on the same day. Therefore, this Tribunal found that the capital
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Assessment years:2003-04 & 2014-15

gain cannot be taxed in the assessment years 2003-04 and 2004-05 since
the transfer, took placed in the assessment year 2001-02. On the basis of
this observation, the Assessing Officer reopened the assessment under
Section 150(1) r.w.s. 147 of the Act. Therefore, according to the Ld. D.R.,
there was a clear observation by this Tribunal that capital gain r as to be
assessed in the assessment year 2001-02. Referring to the order of the
CIT (Appeals), the Ld. D.R. pointed out that the CIT (Appeals), by placing
reliance on the judgment of Karnataka High Courting. CIT v. Spences
Hotel (P.) Ltd. [2007] 289 ITR 145/160 Taxman 360. found that notice
issued for assessment year 1976-77 on 17.11.1998, on the basis of the
finding of the Tribunal for the assessment year 1980-81, was found to be
in order. The Ld. D.R. submitted that the CIT (Appeals) also referred to
the judgment of Andhra Pradesh High Court in B.A.R Abdul Rakman
Saheb v. 7TO|[1975] 100 ITR 541 and submitted that sub section (3) of

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Section 153 wipes the limitation provided in Section 153(1) and 153(2) of
the Act. Referring to sub-section (2) to Section 153, the Ld. D.R. pointed

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out that if any income was excluded from the total income of the assessee
for an assessment year, then for assessing tl at income for another

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assessment year should be considered as one made consequent to the
order giving effect to the finding or direction contained in the order the
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higher authority. Therefore, according to the Ld. D.R., when the Assessing
Officer passed an order giving effect to the order of the Tribunal for
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assessment years 2003-04 and 2004-05, it has to be deemed that the
order of the assessment was passed giving effect to the finding contained
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in the order of this Tribunal. Therefore, according to the LI, D.R., the CIT
(Appeals) has rightly confirmed the order of the Assessing Officer.
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8. We have considered the rival submissions on either side and perused

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the relevant material on record. Initially the assessee filed the return of
income for assessment year 2001-02 on 25.04.2005 consequent to-the
notice issued under Section 148 of the Act, disclosing the loss of Rs.
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56,758/-. However, the Assessing Officer reopened the assessment under

Sec ion 147 of the Act and determined the loss at Rs. 2,4427- by an order
dated 30.03.2006 instead of Rs. 56,758/- claimed by the assessee.
9. The assessee filed appeals before this Tribunal against the orders
of the lower authority for assessment years 2003-04 and! 2004-05 in IT.A.
Nos. &27 & 328/Mds/2010. The main contention of the assessee before
this Tribunal was that the capital gain arising out of the transfer of
property cannot be taxed in the assessment years 2003-04 and 2004-05.
This contention of the assessee was accepted by the Tribunal on the
ground that the joint development agreement was entered into on
25.12.2000 and the possession of the property was also handed over on
the very same day. Therefore, this Tribunal found that the capital gain
cannot be taxed in assessment years 2003-04 and 2004-05. This order of
the Tribunal was passed on 31.05|.2010. We have carefully gone through
the provisions of Section 150(2) of the Act, which reads as follows:—
"150(1)………………………………
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Assessment years:2003-04 & 2014-15

(2) The 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 an assessment year in
respect of which an assessment, reassessment or recomputation
could not have been made at the time the order which was the
subject-matter of me appeal, reference or revision, as the case
may be, was made by reason assessment, reassessment or
recomputation may be taken.”
10. In view of Section 150(2) the provisions of sub-section (1) of Section
150 of the Act is not applicable in respect of1 the assessment year in
which the assessment, reassessment or re-computation could not have
been made at the time the order, which was subject matter of the appeal,
was passed by reason of any other provisions limiting the tune within
which the action for reassessment or re-computation should be taken. In

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the case before us, Section 149 of the Act provides maximum of six years
from the end of the relevant assessment year in case the income

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chargeable to tax exceeds Rs. 1 lakh. The relevant assessment year is

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2001-02 and the six years period from the end of the relevant assessment
year expired on 31.03.2008, Therefore, the limitation for reopening under
Section 147 of the Act expired on 31.03.2008 when the Tribunal passed
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the order on 31.05.2010. Therefore, this Tribunal is of the considered
opinion that the Assessing Officer cannot take any advantage on the basis
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of the order of this Tribunal dated 31.05.2010 by invoking Section 150(1)
of the Act. This Tribunal is of the considered opinion that the Assessing
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Officer can pass an order under Section 150(1) of the Act provided the
appellate/revisional order was passed within the period of limitation
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available for reopening the assessment. In this case, on the date 0f

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appellate order i.e. 31.05.2010, the limitation period had expired.

Therefore, the o der passed tjy the Assessing Officer by issuing notice for
reopening the assessment on 10.06.2011 is barred by limitation.
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11. We have carefully gone through the judgment of the Apex Court in
KM. Sharma (supra). The Apex Court, after considering the provisions of
Section 150(2) of the Act, found that sub-section (2) of Section 150 puts
embargo on reopening assessments, which have attained finality on expiry
of period of limitation. The Apex Court also found that sub-section (2) of
Section 150 makes it clear that reassessment permissible under Section
150(1) of the Act would not be available to Department when the period
of limitation for such assessment or reassessment has expired at the time
it is proposed to be reopened. In this case, the Revenue proposed to
reopen the assessment on 10.06.2011 by issuing a notice under Section
148 of the Act, on which date, the period of limitation was admittedly
expired. The Apex Court further found that sub-section (2) of Section 150
insulates all assessments, which have become final and may have been
found liable to reassessments or re-computation either on the basis of
orders in proceedings under the Act or orders of Courts passed under any
other law. In fact, the Apex Court has observed as follows:—
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Assessment years:2003-04 & 2014-15

'We do not find the above reasoning of the High Court is sound.
The plain language of sub section (2) of section 150 clearly
restricts the application of sub-section (1) to enable the authority
to reopen assessments which have not already become final on
the expiry of the prescribed period of limitation under section
149. As is sought to be c one by the High Court, sub-section (2)
of section 150 cannot be held applicable only to reassessnents
based on orders "in proceedings under the Act" and not to orders
of court "in proceedings under any other law". Such an
interpretation would make the whole provision under section 150
discriminatory in its application to assessments sought to be
reopened on the basis of orders under the Income-tax Act and
other assessments proposed to be reopened on the basis of
orders under any other law. The interpretation, which creates

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such unjust and discriminatory situation, las to be avoided. We do
not find that sub-section (2) of section 150 has that result. Sub-

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section (2) intends to insulate all proceedings of assessments,
which have attained finality due to the then existing bar of

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limitation. To achieve the desired result it was not necessary to
make any amendment in sub section (2) corresponding to sub-
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section (1), as is the Reasoning adopted by the High Court.
Sub-section (2) aims at putting an embargo on reopening
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assessments, which have attained finality on the expiry of the
prescribed period of limitation. Sub-section (2) hi putting such
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embargo refers to the whole of sub-section (1) meaning thereby

to insulate all assessments, which have become final and may
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have beer, found liable to reassessments or recomputation either

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on the basis of orders in proceedings under the Act or orders 9f

courts passed under any other law. The High Court, therefore,
was in error in not reading the whole of the amended sub-section
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(1) into subsection (2) and coming to the conclusion that the
reassessment proposed on the basis of the order of the court in
proceedings under the Land Acquisition Act could be commenced
even though the original assessments for pie relevant years in
question have attained finality on the expiry of the period of
limitation under section 149 of the Apt. On a combined reading of
sub-section (1) as amended with effect from April 1, 1989, and
sub-section (2) of section 150 as it stands, in our view, a fair and
just interpretation would be that the authority under the Act has
been empowered only to re-open assessments, which have not
already been closed and attained finality due to the operation of
the bar of limitation under section l49.'
12. We have also carefully gene through the judgment of Karnataka High
Court in Spences Hotel (R) Ltd. (supra). In the case before Karnataka
High Court, it found that Section 150(1) of the Act begins with the words
"notwithstanding anything contained u r Section 149". Therefore, the
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Assessment years:2003-04 & 2014-15

notice issued to the assessee, pursuant to the finding of the Tribunal with
regard to escaped income for assessment, was found to be valid.
Referring to Section 150(2) of the Act, the Karnataka High Court found
that placing reliance on Section 150(2) was misplaced. The Karnataka
High Court had no benefit of going through the subsequent judgment of
Apex Court in KM. Sharma (supra). In view of finding of the Apex Court in
K.M. Sharma (supra) as extracted above, the judgment of Karnataka High
Court in Spences Hotel (P.) Ltd. (supra) may not be of any assistance to
the Revenue.
13. Now coming to the judgment of Andhra Pradesh High Court in B.A.R.
Abdul Rahman Saheb (supra), the assessee before he Andhra Pradesh
High Court challenged the order of the Assessing Officer before the
Appellate Assistant Commissioner, who allowed the appeal holding that
the unexplained investment during the accounting years J156-57 and

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1957-58 should be brought to tax in the assessment years 1957-58 and
1958-59 and the addition made in the assessment ear 1959-60 could not

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be sustained. Subsequent to the order of the Appellate Assistant

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Commissioner, the Income Tax Officer issued notice on 20.03.1969 to
show cause why the assessments fo assessment years 1957-58 and
1958-59 should not be reopened and unexplained investments in the
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respective accounting years added The assessee challenged the action of
the Assessing Officer on the ground that the notice issued on 20.03.1969
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for reopening Assessments for assessment years 1957-58 and 1958-59
were time barred and bad in law The Andhra Pradesh High Court found
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that Explanation 2 to Section 153 of the Act provides for taking steps
under Section 147 to assess lie income of another year without any
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limitation prescribed by Section 149 as regards the issue of notice under

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Section 148 of the Act. The Andhra Pradesh High Court had also 10
occasion to consider the subsequent judgment of Apex Court in KM
Sharma (supra).
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14. We have also gone through the judgment of Allahabad High Court in
Ashwani Dhingra v. Chief CIT [2005] 276 ITR 98 [2004] 141 Taxman 651.
In the case before Allahabad High Court, the assessee land was acquired
by the Government of Punjab on 20.08.1973 under the Land Acquisition
Act, 1984. The compensation was awarded on 12.09.1990 and 29.05.1993
by the orders of Punjab & Haryana High Court. Interest was also paid on
21.08.2001 from the date of taking over the possession of the land.
Subsequently, the assessee shifted to Noida in the year 1991 and doing
business there. After receiving the interest on the Compensation amount
on 21.08.2001, the assessee filed revised return on 14.01.2001 for
assessment years 1995-96 to 2001-02. The Assessing Officer reopened
the assessment by issuing notice under Section 148 for the assessment
years 1989-90 to 1994-95. The assessee challenged the notice before the
Allahabad High Court on the ground that the assessments cannot be
reopened. The Allahabad High Court, by placing judgment of Apex Court
in K.M. Sharma (supra), found that the words "or by a court hi any
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Assessment years:2003-04 & 2014-15

proceeding under any other law" were inserted by Direct Tax Laws
(Amendment) Act, 1987 with effect from 01.04.1989. The Allahabad High
Court found that the notice was issued after 01.04J1989, i.e. after the
amended Act came into effect from 01.04.1989 and accordingly, rejected
the contention of the assessee.
15. We have also carefully gone through the judgment of Madras High
Court in Vellore Electric Corporation (supra). In the case before the
Madras High Court, the issue arose for consideration was whether the
period of limitation prescribed for reopening the assessment was
applicable even for an order passed by the Assessing Officer by invoking
the provisions of Section 150 of the Act. The Madras High Court, by
placing reliance on the judgment of the Apex Court in KM. Sharma (supra)
found that the plain language of sub-section (2) of Section 150 clearly
restricts the application of sub-Acction (1) of Section 150 to enable the

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authorities to reopen the assessments which have not already Become
final on the expiry of the period of limitation prescribed under Section

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149(2) of the Act. The Madras High Court further j found that the hold

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sub-section (1) of Section 150 insulates all a sessments which have
become final and may have been found liable for reassessment or re-
computation on the basis of orders of the authorities under Income-tax
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Act or orders of High Court or under any other law. The Madras High
Court further found that Section 150(1) as amended with effect from
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01.04.1989 did not enable the authorities to reopen assessments which
have become final due to the bar of limitation prior to 01.04.1989 and this
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position was equally applicable to reassessments proposed on the basis of

order passed under the Act under any other law.
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16. In view of the above finding of the Madras High Court, this Tribunal is
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of the considered opinion that the judgment of Allahabad High Court in

Ashwani Dhingra (supra), the judgment of Karnataka High Court in
Spences Hotel (P.) Ltd. (supra) and the judgment of Andhra Pradesh High
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Court in B.A.R. Abdul Rahman Saheb (supra) would not be applicable to

the facts of the case.
17. We have also carefully gone through the judgment of the Apex
Court in Greenworld Corpn. (supra). After referring to Section 150 of the
Act, the Apex Court observed that if no proceedings before the authority
or if the (assessment year hi question is not a subject matter which would
fall for consideration, Section 150 of the Act will have no application. In
fact, the Apex Court has observed as follows at para 60 to 67 of its
judgment:--
'60. The aforementioned provision although appears to be of a very wide
amplitude, but would not in terms of sections 147 and 148 of the Act can
a proceeding can be initiated only within the period of limitation
prescribed therefore as contained in section 149 of the Act.
61. Section 150(1) of the Act is an exception to the aforementioned
provision. It brings within its ambit only such cases where reopening of
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the proceedings may be necessary to comply with an order of the higher

authority. For the said purpose, the records of the proceedings must be
before the appropriate authority. It must examine the records of the
proceedings. If there is no proceeding before it or if the assessment year
in question is also not a matter which would fall for consideration before
the higher authority, section 150 of the Act will have no application.
62. In ITO v. Murlidhar Bhagwan Das [1964] 52 ITR335 (SC)? it was held
(page 339):
"The proceedings would! be in time, if the second proviso to section
34(3) of the Act could be invoked. The question, therefore, is what is the
tme meaning of the terms of the second proviso to section 34(3) of the
Act. if, reads:
'Provided further that nothing in this section limiting the time

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within which any action may be taken, or any order, assessment
or reassessment may be made, shall apply to a reassessment

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made under section 27 or to the assessment or reassessment
made on the assessee or any person. In consequence of or to give

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effect to any finding o|* direction contained in an order under
section 31, section 33, section 33A, Ejection 33B, section 66
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section 66A. | !
Prima facie this proviso lifts the ban of limitation imposed by the
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other provisions of the section in the matter of taking an action in
respect of or [making an order of assessment or reassessment
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falling within the scope off the said proviso. The scope of the
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proviso is con fined to an assessment or reassessment made on!

the assessee or any person in consequence of an order to give
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effect to any finding or direction contained in any order made

under section 31, i.e., in an appeal before the Assistant Appellate
Comnissioner, under section 33, i.e., in an appeal before the
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Tribunal, under section 33A, i.e., in a revision before the

Commissioner, under section 33B, i.e., in a revision before the
Commissioner against an order of the Income-tax Officer, and
under sections 66 and 66A, i.e., in a reference to the High Court
and appeal against the High Court' s order to the Supreme Court.
Learned counsel for the appellant contends that the scope of the
proviso is only confined to the assessment of the year that is the
subject-matter of the appeal or the revision, as the case may be.
Learned counsel for the Department argues that the
comprehensive phraseology used in the proviso takes in its the
disposal of the appeal broad sweep any finding given by the
appropriate authority necessary for or the revision, as the case
may be, and to any direction given by the said authority to
effectuate its finding and that the said finding or direction may be
in respect of any year or any person. As (the phraseology used in
the proviso is not clear or unambiguous, the question raised
 I.T.A. Nos.811 & 812/Lkw/2017
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Assessment years:2003-04 & 2014-15

cannot be satisfactorily resolved without having a precise

appreciation of a brief history of section 34 of the Act culminating
in the enactment of the proviso in the present form."
63. This court noticed the development of law as also the fact that the
decision of the Income-tax Officer given in a, particular year does not
operate as resjudicata to opine (page 343):
"The lifting of the ban was only to give effect to the orders that may be
made by the appellate, revisional or reviewing tribunal within the scope
of its jurisdiction. If the intention was to remove the period of limitation
in respect of any assessment against any person, the proviso would not
have been added as a proviso to sub-section (3) of section 34, which
deals with completion of an assessment, but would have been added to
sub-section (1) thereof."

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64. In regard to the question that what would be meaning of the term
“finding” or “direction”, it was held (page 345):

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"A 'finding', therefore, can be only that which is (necessary for the

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disposal of an appeal in respect of an assessment of a particular
year. The Appellate Assistant Commissioner may hold, on the
evidence, that the income shown by the assessee is not the
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income for the relevant year and thereby exclude that income
from the assessment of the year under appeal. The finding in that
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context is that that income does not belong to the relevant year.
He may incidentally find that the income belongs to another year,
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but that is not a finding necessary for the disposal of an appeal in

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respect of the year of assessment in question. The expression

direction cannot be construed in vacuum, but must be collated to
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the directions which the Appellate Assistant Commissioner can

give under section 31. Under that section he can give directions,
inter alia, under section 31(3)(b), (c) or (e) or section 31(4). The
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expression directions in the proviso could only refer to the

directions which the Appellate Assistant Commissioner or other
tribunals can issue under the powers conferred on him For them
under the respective sections. Therefore, the expression' finding1
as well as the expression ' direction' can be given full meaning,
namely, that the finding is a finding necessary for giving relief in
respect of the assessment of the year in question and the direction
is a direction which the appellate revisional authority, as the case
may be, is empowered to give under the sections mentioned
therein."
65. It was clarified that the words any person would refer to those who
were not nominee parties to the appeal although this assessment of their
income would depend upon the assessments of the assessee.
66. Mudholkar J., speaking for the minority, referred to this court' s decision
in S.C. Prashar v. Vasantsen Dwarkadas [1963] 49 ITR 1 wherein the
 I.T.A. Nos.811 & 812/Lkw/2017
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Assessment years:2003-04 & 2014-15

validity of the aforementioned provisions was questioned; read down th&

proviso appended to section 34(1) stating (page 349 of 52 ITR):
"No doubt, this court has recently held in S.C. Prashar v.
Vasantsen Dwarkadas [1963] 49 ITR 1 that the proviso in so far
as it removes the bar of limitation with respect to persons other
than the assessee, is invalid as it infringes the provisions of article
14 of the Constitution. That, however, is a question apart. What
we have to consider is t le legislative intent, and for ascertaining
it, it is legitimate to look also at that part of the enactment which
has been held to be invalid."
67. To the similar effect are the decisions of this court in N.Kt
Sivalingam Chettiar v. CIT [19671 ITR 14 (SC).
In the case before us, the Tribunal has not examined the records for the

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assessment year under consideration. Moreover, no (proceeding was
before, the Tribunal for the year under consideration. Therefore, as held by

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the Apex Court, Section 150) of the Act is not applicable for the year under

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consideration. In other words!, the observation mad$ toy the Tribunal in the
order dated 31,05.2010 cannot be considered either as "finding" or
"direction”.
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18. We find that the Andhra Pradesh High Court in CIT v. G. Viswanadham
[1988] 172 ITR 401/38 Taxman 142 considered an identical issue and
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observed as follows at pages 408 & 409 of ITR:-
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“A reading of these Explanations clearly shows that they merely illustrate

and clarify the meaning of the words "in consequence of or to give effect to
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any finding or direction" contained in an appellate, revisional or any other

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order. Explanation 2 says that where an appellate, revisional or other order

excludes any .income from the total income of the assessee for an
assessment year the assessment of such income for another assessment
year shall, for the purposes of both section 150 and section 153, be deemed
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to be one made in consequence of or to give effect to any finding or

direction contained in the order. Similarly, Explanation 3 says that where by
an appellate, revisional or other order my income is excluded from the total
income of one person and held to be the income of another person, the
assessment ojf income of such other person shall, both for the 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 the[ order,
provided, of course, such other person was given an opportunity of being
heard before the said order was made. What is, however, clear is that
Explanations 2 and 3 do not purport to obliterate jor remove the restriction
contained in sub-section (2) of section 150. They, no doubt, refer to section
150, but for a limited purpose, mentioned above.
A review of the above provisions makes it clear that the Act provides certain
time limits both for initiation of proceedings. The time limits for initation of
such proceedings are contained in sections 149 and 150, while the time
 I.T.A. Nos.811 & 812/Lkw/2017
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Assessment years:2003-04 & 2014-15

limits for completion of such proceedings are mentioned in sub sections (2)
and (3) of section 153 sub-section (3) of section 153 is a proviso to sub-
doubt, are relevant both for section 150 and section 153(3) but their
purpose is merely to illustrate certain words occurring therein, and not to
remove or obliterate the time limits prescribed in the several provisions
referred to above.
Learned standing Counsel for the Revenue brought to our notice certain
decisions, all of which appear to have been rendered with reference to
Explanation 2 in section 153. In B. A.R. Abdul Rahman Saheb v. ITO [1975]
100 ITR 541, a Bench of this court held that the effect of section 150 and
sub-section (3) of section 153 read with Explanation 2 is that, if any income
is deleted from assessment by the order of a higher authority, or the
ground that it is not the income of that year, steps may be taken under
section 147 to asses it as the income of another year, without any limitation

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prescribed under section 149 as regard the issue of notice under section
148 or as to the completion of the assessment or eassessment prescribed

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by section 153. The Bench read subsection (2) of section 150 as providing

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that the provisions of sub-section (1) thereof w ll not apply to a case of
assessment, reassessment or recomputation of income, if it related to an
assessment year in respect of which assessment, reassessment, etc., could
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not have been made at the time when the order, which was the subject-
matter of appeal, reference or revision, was made, by reason of the time
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limits fixed under section 153 for making the assessment, reassessment,
etc. (vide paragraph 2 at page 545). It would immediately be seen that sub-
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section (2) of section 150 does not refer to section 153. It only refers to
"any other provision limi ing the time within which any action for
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assessment, reassessment or recomputation may be taken". The word

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"taken" refers only to initiation of proceedings and not to completion.

Similarly, at page 547, the Bench observed:" the effect of section 150 and
this sub-section (section 153(3)) read with Explanation 2 is that if any
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income is deleted from assessment n a higher proceeding on the ground

that it is not the income of that year, steps may be taken under Section 147
to assess it as the income of another year, without any limitation applying
to the issue of notice under section 148 or to the completion of the
assessment or reassessment. .... "With great respect, we think that this
observation overlooks the provisions I contained in sub-section (2) of
section 150. However, inasmuch as the case before us is not one falling
under Explanation 2 to section 153, we do not think it necessary to refer
the matter to a larger Bench."
19. By respectfully following the judgment of the Apex Court in KM. Sharma
(supra) and the 'c| Corporation (supra), this Tribunal is of the judgment of
Madras High Court in Vellore Elects considered opinion that the order of the
Assessing Officer is barred by limitation, therefore, the same cannot stand
in the eyes of law. Accordingly, the orders of the lower authorities are set
aside.
19. In the result, the appeal of the assessee is allowed.”
 I.T.A. Nos.811 & 812/Lkw/2017
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Assessment years:2003-04 & 2014-15

8. We further find that this issue is covered in favour of the assessee by

the order of I.T.A.T. Jaipur Bench in the case of Ramesh Chand Soni, HUF
vs. Income Tax Officer (supra) vide order dated 08.12.2017. The head notes
of the said tribunal are reproduced below:
“Section 150, read with section 149. of the income-tax Act, 1961 -
Income escaping assessment - Assessment in pursuance of an order of
appeal etc. (Limitation) - Assessment years-2001-02 and 2002-03 -
Whether for purpose of computation of period of limitation for
reassessment as prescribed in sub-section (2) of section 150, limitation
provided under section 149 has to be counted from end of relevant
assessment year till date of order which is subject matter of appeal

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wherein directions were passed - Held, yes - Whether, therefore, where

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directions, were passed by Tribunal then order of Commissioner
(Appeals) was subject matter of appeal be ore Tribunal and therefore,

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order of Commissioner (Appeals) was relevant or purpose of section
150(2) and not Original assessment order - Held; yes [Para 7] [In favour
of assessee]”
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9. In the present case, undoubtedly, the case was reopened in view
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of CIT(A)’s order dated 22.12 2015 and on that date the assessment
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order for 2003-04 were already barred by limitation by the provisions of

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Section 149 of the Act. Therefore, we accept the contentions of the

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Learned A.R. and following the above judicial precedent allow the appeal
of the assessee. Accordingly, appeal in ITA No.811/Lkw/2017 is allowed.
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10. As regards, appeal in ITA No.812/Lkw/2017, we find that the

Assessing Officer has passed the order u/s 143(3) of the Act without
rejection of books of account and assessee during the course of
assessment proceeding has produced the books of account including bills
and vouchers and this fact has been noted by the Assessing Officer in his
order itself. He simply disallowed 30% of the expenses under the head
sales promotion to safeguard the leakage of Revenue. In his order, he
did not point out any infirmity or defect in the books of account or
vouchers. The Learned CIT(A), on the other hand has held that the
assessee did not produce books of account and vouchers for re-
 I.T.A. Nos.811 & 812/Lkw/2017
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Assessment years:2003-04 & 2014-15

verification and re-estimation of the disallowance. The Learned CIT(A)

could have examined the assessment record, wherein the assessee has
filed complete details of vouchers to verify the genuineness of expenses
and simply by holding that the assessee did not produce the books of
account and vouchers, he sustained the addition. The findings of the
Assessing Officer clearly states that the assessee had produced books of
account and had also produced bills and vouchers, therefore, in view of
these contradictions and for the sake of justice, we set aside the order to
Learned CIT(A), who should pass a speaking orde regarding the

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arbitrary disallowance made by the Assessing Officer. In nutshell, appeal

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filed in ITA No. 812/Lkw/2017 is allowed for statistical purposes.

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11. In the result, appeal of the assessee in ITA No. 811/Lkw/2017 is
allowed and ITA No.812/Lkw/2017 is allowed for statistical purposes.
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(Order pronounced in the open court on 24/08/2018)
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Sd/. Sd/.
(PARTHA SARATHI CHAUDHURY) ( T. S. KAPOOR )
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Judicial Member Accountant Member

Dated:24/08/2018
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Aks/-

Copy of the order forwarded to :

1. The Appellant
2. The Respondent.
3. Concerned CIT
4. The CIT(A)
5. D.R., I.T.A.T., Lucknow Asstt. Registrar