ORDER
N.K. Karhail, Judicial Member
1. These are the appeals filed by the assessee against the orders passed by the CIT(A), Ghaziabad.
2. For the sake of convenience, we deal with ITA No. 82/Agr/2003-M.R. Enterprises, Mainpuri v. A.C.I.T., Circle 2(1), Farrkhabad as the issue are common in all the appeals.
3. The grounds of appeal read as under:-
“(1) That the learned Commissioner of Income Tax (Appeals), Ghaziabad, has erred in confirming the following additions which could not have been made by the assessing Officer after 31.03.1997 in the assessment order passed under Sections 143(3)/154 in view of the bar imposed under the provisions of Sub-section 2A of Section 153 of the Income Tax Act, 1961.
(i) Unexplained deposits in Bank Accounts Rs. 1,80,000/-
(ii) Extra Profit on account of Low G.P. Rs. 3,34,314/-
(2) That without prejudice to ground No.(1) above, the learned CIT(A), has erred in not adjudicating upon merits about the following additions on account of-
(i) Alleged unexplained deposits in Bank Accounts Rs. 1,80,000/-
(ii) Extra profit on account of Low G.P. Rs. 3,34,314/-
(3) That the order of the learned CIT(A) is bad in law and on the facts of the case; and
(4) That the Appellant craves leave to add, alter, amend or withdraw any of the grounds of appeal at any time before or at the time of the hearing of the appeal.”
4. Briefly stated facts are that search & seizure operations were carried out on 28.09.1989 and 29.09.1989 at the business premises of the M.R. Group at Mainpuri which included the appellant assessee herein. Certain loose papers, diaries, challans, assets in the form of FDRs, jewellery cash etc. were found and seized partially. As a result of the search, assessments in respect of all the above mentioned assessees for the Assessment Years 1988-89 and 1989-90 were framed by the then Assessing Officer, the A.C.I.T. Investigation Circle, Aligarh. The Assessment Order for the Assessment Year 1988-89 in the case of the assessee was passed under Section 143(3) of the Act on 31.03.1992. Aggrieved by the additions made therein, the assessee preferred an appeal before the CIT(A), Agra. The CIT(A) vide his order dated 31.07.1992/03.08.1992 remanded the matter on some points back to the Assessing Officer and allowed relief on certain (SIC).
5. Against this order of the learned CIT(A) both the assessee as well as the Department went in second appeal before the I.T.A.T. In the meantime, one of the assessee in the group namely, Shri Chander Kumar who was stated to have been carrying on undisclosed business in his personal capacity, filed settlement application before the Income Tax Settlement Commission, wherein he owned up the undisclosed business transactions which he had been indulging in his personal capacity, the benami and undisclosed bank accounts through which such business was being operated as well as certain undisclosed assets in the form of cash, fixed deposits, travellers cheques, jewellery, agricultural lands, benami names etc. which he had acquired over the years out of profits which he had earned in such undisclosed business. The said application was admitted under Section 245D(1) of the I.T. Act for Assessment Years 1987-88 to 1988-89 vide I.T.S.E. Order dated 06.01.1994.
6. In the meantime, the second appeals filed by the assessee as well as the Department came up for hearing before the I.T.A.T., Delhi Bench. The I.T.A.T. in its common order dated 17.11.1994 in a Batch of 20 Income Tax appeals are and cross appeals discussed the facts and issue involved, set aside the order of the First Appellate Authority and restored the matter back to the Assessing Officer with a direction to follow the directions of Settlement Commission which would be given in due course. Para-7 of the said order of the Tribunal reads as under:-
“We went through the petition submitted by Shri Chander Kumar to the Settlement Commission. After going through the petition filed before the Settlement Commission, we are satisfied that Shri Chander Kumar owned up the additions made in the hands of the persons and the firms who figure as appellants before this Tribunal inter alia, for the assessment years 1988-89 and 1989-90. As already seen from above, the Settlement Commission had admitted the petition for consideration and directed the Commissioner, Aligarh to furnish a Further Report within 90 days. That means the Settlement Commission has to pass its final order under Section 245D(6) as yet. Under Section 245(I) the order of settlement passed under Sub-section (4) of Section 245D would become conclusive as to matters stated therein. Therefore, we feel that no purpose would be served by keeping all these matters pending before this Tribunal till the disposal of the Settlement Proceedings take place before Settlement Commission. We, therefore, allow these appeals filed both by the assessees as well as by the Department, for statistical purposes, set aside the orders of the first appellate authority and remand the matters back to the Assessing Officer with a direction that he should follow the directions of the Settlement Commission which may be given in due course of time under Section 245D(4) and (6) and dispose of the assessments of these persons (appellants before this Tribunal) accordingly.”
7. The Income Tax Settlement Commission passed the order under Section 245D(4) of the I.T. Act on 20.04.2000. Thereafter, the A.O. proceeded to make the assessment under Section 143(2)/254 of the I.T. Act and passed the assessment order on 11.03.2002.
8. On appeal, the learned CIT(A) has held thus:-
“As per the directions given by Hon’ble I.T.I., the A.O. had no authority to examine or re-examine the issues relating to the several additions made in the original assessment order which were however, not formed part or were not covered by the settlement application filed by Shri Chander Kumar. Further as is evident from the facts narrated during the course of appellate proceedings as also from the para-7 of the Hon’ble I.T.A.T. order, the order passed by the first appellate authority i.e. CIT(Appeals), Agra was already set-aside by the Hon’ble I.T.A.T. in 20 cases including the appellant’s case and other 19 cases on 17.11.1994. Hence the A.O. did not have any authority or the direction to reconsider the additions which were already made by the then A.O. in the earlier assessment order passed in case of the appellant and hence the question of limitation date as argued by the appellant did not arise as any limitation can apply in case of proceedings open before any authority and can not apply in case of no proceedings legally pending before the A.O. Hence the argument of the appellant that the proceedings before the A.O. were got barred by limitation under the provisions of Section 153(2A) of the Income Tax Act, 1961 does not survive as no proceedings were pending before the A.O. who was bound to follow the directions of the Hon’ble I.T.A.T.
As regards the arguments of the appellant that there could be no addition over the above the findings given by the Settlement Commission is concerned, I have considered the same. It is reiterated that it is not the case of fresh addition made for the first time vide order under Section 143(3) read with Section 254 which is subject matter of present appeal. As per the admitted facts of the case, the additions were already made vide the assessment order framed by the then A.O. As regards the order passed by the learned CIT (Appeals), Agra, the directions contained therein ands the remand of certain issues by the learned CIT (Appeals), Agra is concerned, that order no longer survive in view of the Hon’ble I.T.A.T. direction contained in the judgment dated 17.11.1994 given in 20 appeals filed including that of the appellant. This order passed by the Hon’ble ITAT clearly directed the A.O. to follow the direction of the Settlement Commission and hence the additions which already existed vide the original assessment order and which were not deleted by any authority whatsoever could not be deleted suomoto without any proceedings pending before him or directions to do so, as has wrongly been contended by the appellant. To sum up the facts of the case, the additions made vide regular assessment order will obviously survive unless and until there is any relief granted by any authority subsequent to the same. In the instant case for the additions finding place in the order passed under Section 143(3) read with Section 254 of the Act the same have not been deleted by any superior authority viz. the learned CIT(Appeals) whose order is set-aside by the Hon’ble I.T.A.T., the Hon’ble I.T.A.T. or by the Settlement Commission before whom such additions were not even included in the application filed by Shri Chander Kumar. Hence the A.O. while passing order under Section 143(3)/254 of the Act had no finding direction or authority to delete those additions which were made vide the original assessment order. The order passed under Section 143(3)(/254 is therefore, confirmed.”
9. Before us the learned Counsel for the assessee has contended that the Assessment Order passed under Section 143(3)/254 of the Act dated 11.03.2002 is barred by limitation in view of the provisions contained in Section 153(2A) of the Act in as much as the order dated 17.11.1994 passed by I.T.A.T. was served on Assessing Officer before 31.03.1995 and as such, the A.O. ought to have passed the Assessing Order under Section 143(3)/254 by March 1997, whereas, the A.O. has completed the assessment under Section 143(3)/254 on 11.04.2002.
10. The learned Counsel has further submitted that pursuant to the I.T.A.T. Order the A.O. initiated the proceedings and issued notice on 13.01.1997 under Section 143(1) of the Act for compliance on 21.01.1997. This was followed by notice dated 24.01.1997 issued under Section 143(3) for compliance on 31.01.1997. Thus, the A.O. was conscious of the fact that the assessment was to be completed before the period of limitation prescribed under Section 153(2A) of the Act. However, he did not pass the assessment order within the period prescribed under Section 153(2A) of the Act. The learned Counsel has submitted that the order dated 17.11.1994 passed by the Tribunal when read as a whole is clearly in the nature of order to which the provisions of Section 153(2A) applies and therefore, the second assessment made is time barred as it would have been completed within a period of two years as stipulated in the section which ended on or before March 1997. He has further argued that the Revenue is taking the date of Settlement Commission as relevant date for completing the assessment. The reliance on Section 153(3) is totally misconceived as in the present case the period of limitation will run from the order of the Tribunal. Section 153(3) will not apply to case of this type. The said section will apply to the case where simple direction is issued without setting aside the assessment as a whole for fresh denovo assessment. This is also clear from the fact that this section itself is subject to the provisions of Section 153(2A) which clearly applies to the assessment to be made denovo after initial assessments are set aside without direction. Therefore, once the case falls under Section 153(2A) the time limit prescribed by it will come into operation and the time limit prescribed under Section 153(3) would not override the above limit. Thus, the second assessments are clearly time barred. A reliance has been made to the decision of the Allahabad High Court in the case of C.I.T. v. Smt. Kamla Devi, 217 ITR 330, C.I.T. v. Escorts Farms P. Ltd., 180 ITR 280 (Delhi), Bengal Tea and Fabrics Limited v. A.C.I.T. 223 ITR 729 (Gauhati) and Gulab Chand Motilal v. CIT, 174 ITR 119 (M.P.). Without prejudice to the contention as raised above, the learned Counsel has further submitted that since CIT(A) has not gone in the merits of the addition, the proper course would, therefore, be in the interest of justice that the mater be sent back to the A.O. who after providing opportunity to the assessee on merits may be directed to complete the assessments.
11. The learned D.R. in its written submission has submitted that the argument of the assessee is not legally correct because for giving effect to the order of Settlement Commission the time limit prescribed under Section 153(1), 153(2) and 153(2A) are not applicable. In this connection he has referred to the provisions of Section 245D(8) of the I.T. Act and submitted that in view of the statutory provisions of Section 245D(8) the assessment order passed by the A.O. is within the limitation and is legally correct. Since the assessment was framed within the limitation period, ratio of the decision in the case relied upon by the assessee are not applicable as in the said cases there was no involvement of the Settlement Commission.
12. We have heard the parties and perused the records of the case as well as the case law relied upon by the parties. In the absence of statutory provisions to the contrary, it is well settled that when the statute laid down the period of limitation for passing an order that requirement is fulfilled as soon as an order is passed within that period. If the order is set aside on appeal and the Appellate Authority directs fresh order to be passed, then there is no requirement of law that the consequential order to give effect to the appellate order must also be passed within the statutory period of limitation. It is, however, seen that the provisions contained in Section 153(2A) of the Act is an exception to the above General Rule. This Sub-section has been inserted in the Act by the Taxation Laws (Amendment) Act, 1970. This Sub-section was substituted by the Finance Act, 2001 w.e.f. 01.06.2000. Prior to this substitution which is relevant for our consideration reads as under:-
“(2A) Notwithstanding anything contained in Sub-sections (1) and (2), in relation to the assessment year commencing on the 1st day of April, 1971, and any subsequent assessment year, an order of fresh assessment in pursuance of an order under Section 250 or Section 254 or Section 263 or Section 264, setting aside or canceling an assessment, may be made at any time before the expiry of one year from the end of the financial year in which the order under Section 250 or Section 254 is received by the Chief Commissioner or Commissioner or, as the case may be, the order under Section 263 or Section 264 is passed by the Chief Commissioner of Commissioner;
Provided that where the order under Section 250 or Section 254 is received by the Chief Commissioner or Commissioner or, as the case may be, the order under Section 263 or Section 264 is passed by the Chief Commissioner or Commissioner on or after the 1st day of April, 1999 but before the 1st day of April, 2000, such an order of fresh assessment may be made at any time upto the 31st day of March, 2002.”
Section 153(3) reads as under:-
(3) The provisions of Sub-section (1) and (2) shall not apply to the following classes of assessments, reassessments and recomputation which may, [subject to the provisions of Section (2A),] be computed at any time-
“(i) …..”
“(ii) Where the assessment, reassessment or recomputation is made on the assessee or any person in consequence of or to give effect to any finding or direction contained in an order under Section 250, 254, 260, 262, 263, or 264 (or in an order of any court in a proceeding otherwise than by way of appeal or reference under this Act)”.
“(iii) …..”
13. On a plain reading of Sub-section (2A) of Section 153 would show that order of fresh assessment in pursuance of order passed by Appellate/Revisional Authority setting aside or cancelling an assessment, may be made at any time before the expiry of the prescribed time limit under Section 153(2). Section 153(3)(ii) authorize the completion of assessment at any time if the purpose is to give an effect to the direction or finding contained in order passed under any of Sections mentioned in the said sub-section. Thus, Sub-section (3) deals with the exceptional circumstances where no time limit apply for completion of assessments or reassessments or recomputations. But the provisions of this sub-section are expressly made “subject to Sub-section (2A)”. It means that the time limit for making fresh assessment as referred to in Sub-section (2A) is not lifted. Thus, where any fresh assessment to be made in consequence of order of set-aside or cancellation of assessment though passed under any of sections mentioned in Section 153(3)(ii) the time limit prescribed under Sub-section (2A) would apply. Thus, the intention, purpose and import of the order passed by the I.T.A.T. will determine the character, scope and limitation of assessment proceedings passed in pursuance to the aforesaid order of I.T.A.T. In I.T.O. v. Murlidhar Bhagwandas reported in (1964) 52 ITR 335 the Hon’ble Supreme Court while construing this words “finding” or “directions” in the corresponding provision of second proviso to Section 34(3) of 1992 Act has held that the expression “finding” and “directions’ meant a finding necessary for giving relief in respect of the assessment for the year in question and a direction which the Appellate/Revisional Authority, as the case may be, was empowered to give under the sections mentioned in that provision. A finding could, therefore, only be that which was necessary for the disposal of an appeal in respect to assessment of a particular year. An appellate authority might hold that an item of income assessed for a particular year was not the income for the relevant year and thereby exclude that income from the assessment for the year under appeal. He might incidentally find that the income belonged to another year, but that is not a finding necessary for the disposal of the appeal in respect of the year of assessment before him. This principle was again reiterated in Rajinder Nath v. C.I.T. reported in 120 ITR (SC) wherein it has been observed that direction by the Statutory Authority is in the nature of order requiring positive compliance. When it is left to the option and discretion of the Assessing Officer whether or not to take action, it cannot, be described as a direction.
14. The question that arises for consideration is whether fresh assessment which was required to be made in pursuance to the order of I.T.A.T. as aforesaid ought to have been made within the period prescribed under Section 153(2A) or under Section 153(3)(ii).
15. The Hon’ble Bombay High Court in the case of C.I.T. v. Mrs. Ratanbai N.K. Dubhash reported in (198) 230 ITR 495 (Bombay) has explained the scope of “setting aside the assessment”, “cancellation of assessment” and “annulment of assessment” and the time limit for making fresh assessment in pursuance to the order setting aside the assessment. The Court has held thus:-
“In an appeal against an order of assessment, the first appellate authority under Section 251 of the Act has the power to “affirm, reduce, enhance or annual the assessment” or to set aside the assessment and refer the case back to the Assessing Officer for making a fresh assessment according to the directions given by him. In the case of an appeal against an order of penalty, the power is to “affirm or cancel such order” or vary it so as either to enhance or reduce the penalty. The Legislature has thus used different expressions, such as, “annulling the assessment”, “setting aside the assessment” or “canceling the order of penalty”. The expression “cancellation of assessment” has been used in Section 146 of the Income Tax Act, 1961, which deals with the power of the Assessing Officer to reopen a best judgment assessment under Section 144 of the Act. It is thus clear that the Legislature has consciously and deliberately used the expression “annulment of assessment” in Section 251 of the Act. There is a material distinction between setting aside an assessment and annulment of an assessment. In a case where the order of assessment is set aside, it is open to the Assessing Officer to make a fresh assessment in accordance with law. In the case of annulment, the order becomes non-est. On a conjoint reading of Sections 143, 144B, 251 and 153 of the Act, it becomes abundantly clear that if an assessment is set aside by the appellate authority, the extended time-limit is available for making a fresh assessment in pursuance of the direction of the appellate authority, but in the case of annulment, no such extended time is available.”
16. It may be mentioned that when the assessment is set aside by the appellate authority without ordering fresh assessment, such order would amount to annulment of assessment. In such case, the limitation provided under Section (2A) of Section 153 would not be available to make fresh assessment. However, if the original time limit is available, the A.O. may proceed from the stage at which the illegality which resulted in annulment of assessment supervened and to make he assessment afresh. It may further be mentioned that when the appellate authority set aside the assessment and direct the Assessing Officer to make fresh assessment without imposing any restriction or limitation as to how the fresh proceedings are to be conducted by the Assessing Officer,t he Assessing Officer has the same power in making such fresh assessment as he had originally when making the assessment under Section 143 of the Act. The appellate authority may limit the scope of enquiry by the Assessing Officer to any specified aspect or issue. Thus, the distinction is fine in the application of Section 153(2A) and Section 153(3)(ii). If there is a case of mere setting aside the assessment order and allowing the Assessing Officer to make fresh assessment then limitation prescribed under Section 153(2A) would apply and where the assessment or reassessment recomputation is to be made in pursuance of finding or direction made in the Appellate/Revisional order then provisions of Section 153(3)(ii) would apply and such assessment, reassessment or recomputation could be made at any time. The perusal of the order dated 17.11.1994 passed by the ITAT Delhi Bench as extracted above would show that there was specific direction to the A.O. that he should follow the directions of the Settlement Commission which may be given in due course of time under Section 254D(4) and (6) and dispose of the assessments of the persons accordingly. The directions given by the I.T.A.T. as aforesaid clearly fall within the purview of Section 254(1) of the Act wherein the Tribunal has been empowered to pass such order as it think fit. Thus, directions given by the I.T.A.T. is duly empowered by the law. Further the said directions in the fact and circumstances of the case were necessary to pass for disposal of the pending appeals before the Tribunal. The directions given by the Tribunal leave no scope to the A.O. save and except to pass order following the directions of the Settlement Commission. It may be mentioned that provisions of Section (2A) of Section 153 envisages a situation where a fresh assessment is to be made after earlier assessment as a whole is set aside or cancelled and not to a situation where specific directions have been given by the Appellate Authority as in the instant case.
17. The case of Smt. Kamla Devi (supra) relied upon by the learned A.R. is distinguishable on facts as in the said case the CIT under Section 263 set aside the assessment order and directed to make fresh assessment, whereas in the instant case the I.T.A.T. directed the A.O. to pass the order as per directions made by it. In the case of Gulab Chand Motilal (supra), the Madhya Pradesh High Court has held thus:-
“By virtue of Sub-section (2A) of Section 153, assessments covered by Sub-section (2A) of Section 153 have to be completed within the time limit prescribed by that provision. In order to give full effect to the fiction introduced by Explanation 2 to Section 153, and to the object of insertion of Sub-section (2A) in Section 153, it must be held that where fresh assessment is being made for a particular assessment year, in pursuance of a finding or direction incorporated in an order under Section 250, Section 254, Section 263 or Section 264, passed in proceedings relating to another assessment year, then the fresh assessment would be deemed to have been made, for the purpose of Section 150 and Section 153, in consequence of or to give effect to any finding or direction setting aside or canceling the assessment for that particular year. That is how full effect can be given to the statutory fiction created by Explanation 2 to Section 153. If the provisions of Sub-section (2A) of Section 153 are held to be inapplicable to a case where a fresh assessment is made in consequence of a fiction introduced by Explanation 2 to Section 153, the effect would be that though, subsequent to the assessment year 1970-71, there would be a time limit for making a fresh assessment in pursuance of an appellate or revisional order setting aside or canceling an assessment to give effect to a finding or direction contained in that order, there would be no such time-limit for making a fresh assessment for any assessment year to give effect to a finding or direction contained in any appellate or revisional order passed in proceedings relating to any other assessment year. Such an interpretation would frustrate the object of insertion of Sub-section (24) in Section 153 and would also result in not giving full effect to the legal fiction introduced by Explanation 2 to Section 153.”
18. We are, however, of the view that the decision of the Madhya Pradesh High court as aforesaid is not the correct interpretation of the provisions of Section 153 of the Act. This view find force from Chaturvedi & Pithisaria’s Income Tax law, Fifth Edition, Volume-3, page 5290, wherein it has been commented upon the decision of Madhya Pradesh High Court in the case of Gulab Chand Motilal v. C.I.T. (supra) and expressed the view that this decision requires reconsideration as the same has been decided by applying the deeming provisions contained in Explanation 2, which are not applicable to a case covered by Section 153(2A). The other two decisions relied upon by the learned Counsel for the assessee are distinguishable on facts. The reliance made by the learned D.R. to Section 245D(8) in support of his contention that the assessment order is within time is not correct in as much as the Settlement Commission has not passed order dated 20.04.2000 under Section 245D(4) of the Act in the case of the assessee but the same has been passed in case of other assessee. Thus, the said section cannot be relied upon to find out as to whether the assessment order has been passed in time or not in the instant case.
19. In view of what has been discussed above, we are of the view that the assessment order passed in pursuance to the direction of the Tribunal is not barred by time. Thus, the first ground of appeal raised by the assessee fails. We, however, agree with the alternative submission of the learned Counsel for the assessee as aforesaid and set aside the impugned order and restore the same to the file of A.O. who may pass a fresh order in accordance with the directions of the Tribunal as aforesaid after affording a reasonable opportunity of being heard to the assessee.
20. In the result, these appeals of the appellants assessees are allowed for statistical purposes.