ITA No.418 of 2006 1 IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH ITA No.418 of 2006 Date of decision: 28.3.2008 The Commissioner of Income tax, ......Appellant Hisar Versus Smt. Anchi Devi, C/o Vikas w.s.p. Ltd. Siwani (Bhiwani) ......Respondent CORAM:- HON'BLE MR.JUSTICE SATISH KUMAR MITTAL HON'BLE MR.JUSTICE RAKESH KUMAR GARG * * * Present: Mr. Yogesh Putney, Advocate for the appellant-revenue. Mr. Sanjay Bansal, Sr. Advocate instructed by Mr. Prashant Bansal, Advocate and Mr. Parvesh Saini, Advocate for the respondent-assessee. * * * Rakesh Kumar Garg, J . 1. The revenue has filed the present appeal under Section 260A of Income Tax Act, 1961 (hereinafter referred to as the 'Act') against the order dated 6.7.2005 passed by the Income Tax Appellate Tribunal Delhi Bench “A” New Delhi in ITA No.4075/Del/2003 for the assessment year 1998-99 raising the following substantial questions of law- “1. Whether on the facts and circumstances of the case, the ITAT was right in upholding the finding of the Ld. CIT(A) quashing the assessment framed under Section 143(3)/147 by interpreting the main Section 153 (2) of the Income Tax Act, 1961 by reading the proviso in such a manner so as to ascribe a particular meaning to the main provision without appreciating that the proviso only gives an exemption/different interpretation ITA No.418 of 2006 2 in case a particular circumstance exists and since in the instant case, the notice u/s 148 was not served on a date between 1.4.1999 and 1.4.2000, the proviso is not attracted and is irrelevant to the interpretation of ambit in Section 153 (2) of the Income Tax Act, 1961? 2. Whether on the facts and circumstances of the case, the ITAT is right in dismissing the Departmental appeal without appreciating that the amended provisions of Section 153(2) operating from 1.6.2001 is effective only in respect of notices u/s 148 served on or after 1.6.2001 and is prospective in nature?” 2. The assessee filed return of income on 31.10.1998 declaring an income of Rs.46,440/- and an agricultural income of Rs.84,286/-. The return was processed under Section 143 (1)(a) of the Act on 18.5.1999. Subsequently, action under Section 147 of the Act was initiated and a notice under Section 148 of the Act was issued on 8.1.2001 and the same was served upon the assessee on 11.1.2001. In respect thereto, the assessee filed a return of income on 28.2.2001 declaring the same income as shown in the original return and this return was also processed under Section 143(1)(a) of the Act on 30.3.2001 accepting the returned income. Thereafter, notices were issued under Section 143 (2) and Section 142(1) of the Act and the assessment under Section 143(3) read with Section 147 was completed on 14.2.2003 on a total income of Rs.17,01,235. Various additions and disallowances were made in this assessment. 3. Being not satisfied with the order of the Assessing Officer, the assessee filed an appeal before the CIT (Appeals) and besides contesting the disallowances made in the assessment, took up a ground that the assessment was time barred in view of section 153(2) of the I.T.Act and, ITA No.418 of 2006 3 therefore, the same should be quashed. It was contended that under section 153(2), the assessment proceedings have to be completed within one year from the end of the financial year in which the notice under section 148 was served. It was pointed out that the notice was served on the assessee on 11.01.2001, which is a day which fell before 01.06.2001 and, therefore, in such a case, the assessment ought to have been completed on or before 31.03.2002. Since it was completed only on 14.02.2003, the assessment, it was contended was beyond the period of limitation 4. The Commissioner of Income Tax (Appeals) held that since section 153(2) was amended with effect from 01.06.2001 to reduce the time limit available for completion of the assessment from two years to one year from the end of the financial year in which the notice under section 148 was served, the amended provision would operate in the present case, notwithstanding that the notice was served before 01.06.2001, and therefore the assessment ought to have been completed on or before 31.03.2002 and since it was completed only on 14.02.2003, it was beyond the period of limitation. Thus, the CIT (A) applied the amended Sections 153(2) to restrict the time limit available to the Assessing Officer to complete the assessment. The appeal of the assessee was allowed vide order dated 20.6.2003. 5. Feeling aggrieved against this order, the revenue filed an appeal before the Tribunal who vide impugned order dated 6.7.2005 held that the view taken by the CIT(A) that the assessment ought to have been completed on or before 31.3.2002 is correct in law and thus, dismissed the appeal. 6. Mr. Yogesh Putney, learned counsel for the revenue has strenuously argued that the amended provisions of Section 153(2) of the ITA No.418 of 2006 4 Act which became operative w.e.f. 1.6.2001 are effective only in respect of the notices under Section 148 served on or after 1.6.2001 and are prospective in nature and since in the instant case, the notice under Section 148 of the Act was served before the amendment took place, the time available to the Assessing officer to complete the assessment should be computed in accordance with the unamended provisions of Section 153 (2) of the Act as it stood before the amendment and so the assessment made on 14.2.2003 was well in time. 7. However, on the other hand, Mr. Sanjay Bansal, Sr. Advocate has argued that the Tribunal was right in holding that the assessment was beyond the period of limitation as in the case of the assessee, notices which were served before 1.6.2001 were not protected or saved by proviso to sub section (2) of Section 153 of the Act which was substituted simultaneously on 1.6.2001 and the period of two years was applicable on the notices issued between 1.4.1999 to 31.3.2000 as has been provided in the proviso to Section 153 (2) of the Act and not on the notices served after 1.4.2000 and before 1.6.2001 i.e. the date when Section 153(2) of the Act was amended by the Finance Act, 2001 by substituting the period from two years to one year. 8. We have heard learned counsel for the parties and perused the record. 9. It is useful to refer Section 153(2) of the Income Tax Act and the proviso to this sub-section as amended w.e.f. 1.6.2001:- [(2)] No order of assessment, reassessment or recomputation shall be made under section 147 after the expiry of [one year] from the end of the financial year in which the notice under Section 148 was served : [Provided that where the notice under section 148 was ITA No.418 of 2006 5 served on or after the 1st day of April, 1999 but before the 1st day of April, 2000, such assessment reassessment or recomputation may be made at any time up to the 31st day of March, 2002]. Prior to the amendment Section 153(2) with proviso reads as under:- “[(2)] No order of assessment, reassessment or recomputation shall be made under Section 147 after the expiry of two years from the end of the financial year in which the notice under Section 148 was served: Provided that where the notice under Section 148 was served on or before 31st day of March 1987, such assessment, reassessment or recomputation may be made at any time up to the 31st day of March 1990.” 10. A perusal of the proviso to the amended Section 153 (2) of the Act clearly provides that the period of two years for completing the assessment has been prescribed only in those cases in which notices were issued between 1.4.1999 and 31.3.2000, meaning thereby that the amended proviso enlarges the period available to the Assessing Officer for completion of the assessment from one year, as available under amended sub-section (2) of Section 153 of the Act, to, two years, where notices under Section 148 were served during such period and the assessment could be completed up to 31.3.2002. Thus, only in such cases where notices have been served between 1.4.1999 and 31.3.2000, the Assessing Officer can avail the time limit of two years from the end of financial year in which notices were served. If the contention of the Department is accepted that even after 1.6.2001, the limit available for completing the assessment would be governed by the law prevalent before 1.6.2001, ITA No.418 of 2006 6 namely, two years from the end of the financial year in which the notice was served, that would completely nullify the effect of amended proviso. There is no provision made in amended Section 153(2) of the Act to provide that the restricted time limit of one year will not apply to all notices issued before 1.6.2001. The only protection given is to the notices issued between 1.4.1999 and 31.3.2000 . The proviso itself in a sense recognises the position that only in very limited cases, the two year time limit is available to the Assessing Officer. Obviously, the legislature in its wisdom thought that in respect of the notices served upon the assessee on or before 1.4.2000, sufficient time would be available to the Assessing Officer to complete the assessment within a period of one year from the end of the financial year in which the notice was served. For example, if the notice under Section 148 of the Act was served upon the assessee on 1.4.2000 itself, the Assessing Officer as per the amended sub-section (2) of Section 153 of the Act would have time upto 31.3.2002 and that would leave him as in the present case 10 months' time from June 2001 to March 2002 to complete the assessment after the amendment came into force. Moreover, in the present case no prejudice has been caused to the revenue by applying the amended provisions of Section 153(2) of the Act in the case of the assessee as the Assessing Officer had sufficient time to complete the assessment. Moreover, the revenue has not pleaded any reasons for not completing the assessment upto 30.3.2002. Even otherwise, the provisions of Section 153(2) of the Act are procedural and are not substantive and it is well settled that procedural law is applicable to pending cases. 11. In view of this, we find no error in the order of the Tribunal and the question raised by the revenue is answered in the affirmative i.e. ITA No.418 of 2006 7 against the revenue and in favour of the assessee. 12. Thus, the appeal filed by the revenue is dismissed. (RAKESH KUMAR GARG) JUDGE March 28, 2008 (SATISH KUMAR MITTAL) ps JUDGE