2015 (3) TMI 1291 - HC - Income Tax

Proceedings initiated against the petitioner pursuant to a search - discrepancy in the stock of medicines - reassessment not having been done within the period stipulated by Section 153(2A) - limitation under Section 153(2A) - Held that - The time limit within which the consequential order ought to have been passed is nine months from the date of receipt of a copy of the order. Ext.P5 order is dated 24.1.2007. The respondent has in Ext.P4 stated that Ext.P5 order was received by the said authority on 22.2.2007. Therefore, as per sub section (2A) of Section 153 of the Act the order had to be passed before 22.11.2007. As already noticed above, in the present case no such order was passed by the respondent. Even in a case where only one issue has been directed to be considered afresh, the limitation under Section 153(2A) would apply. It is clear from the passage in 2008 (2) TMI 52 - DELHI HIGH COURT extracted above that, sub section (3) of Section 153 applies to a different situation where only a consequential order has to be passed in implementation of a direction issued by the appellate forum. In the present case, as already found above the direction was to consider the issue afresh. Therefore, Section 153(2A) of the Act is attracted. In view of the above, this is a case in which the Assessing Officer ought to have passed a consequential order within the time limit stipulated. Since no such order was passed the petitioner is entitled to succeed. In view of the above findings the writ petition is allowed. It is held that in so far as the issue that was remitted to the respondent Assessing Officer for fresh consideration, the time bar contained in Section 153(2A) of the Act operates. The petitioner shall therefore be entitled to the refund sought for, in accordance with law. It is made clear that on all other aspects the assessment order is final and binding on the assessee.

Issues Involved:
1. Validity of the rejection of the tax refund application for the assessment year 1996-97.
2. Applicability of Section 153(2A) of the Income Tax Act, 1961.
3. Interpretation of the Tribunal's direction for fresh consideration of an issue and its impact on the assessment order.

Detailed Analysis:

1. Validity of the Rejection of the Tax Refund Application for the Assessment Year 1996-97:
The petitioner, a homeopathy practitioner, challenged the rejection of his tax refund application for the assessment year 1996-97. The rejection was based on discrepancies found during a search at his clinic and residence, leading to additional tax assessments. The petitioner appealed to the Commissioner of Income Tax (Appeals) and the Income Tax Appellate Tribunal, which remitted the issue back to the Assessing Officer for reconsideration. However, no fresh order was passed within the stipulated time, leading to the rejection of the refund application.

2. Applicability of Section 153(2A) of the Income Tax Act, 1961:
The petitioner argued that under Section 153(2A) of the Act, a fresh order should have been passed within nine months following the Tribunal's direction. Since no such order was issued, the petitioner contended that further action was barred by the time limit, and he was entitled to a refund. The respondent countered that Section 153(2A) did not apply as the assessment order was not entirely set aside, but only one issue was directed to be reconsidered. The respondent argued that Section 153(3) applied, which does not prescribe a time limit for passing a modified order.

3. Interpretation of the Tribunal's Direction for Fresh Consideration of an Issue and Its Impact on the Assessment Order:
The Tribunal's direction to reconsider the discrepancy in the stock of medicines was interpreted by the petitioner as setting aside the assessment order for that specific issue, necessitating a fresh assessment within the stipulated time. The respondent, however, maintained that the assessment order was not set aside entirely, and only a modified order was required. The court examined the Tribunal's wording, which directed the Assessing Officer to "decide the issue afresh" and provide the petitioner an opportunity to be heard. This indicated a fresh consideration of the issue, thereby attracting the time limit under Section 153(2A).

Court's Conclusion:
The court held that the Tribunal's direction to reconsider the issue amounted to setting aside the assessment order for that specific issue, thus invoking Section 153(2A). Since no fresh order was passed within the nine-month period, the court ruled that the petitioner's application for a refund was justified. The court cited precedents from the Gujarat High Court and the Punjab and Haryana High Court, which supported the interpretation that even if an assessment order is not explicitly set aside, a direction for fresh consideration triggers the time limit under Section 153(2A).

Final Judgment:
The writ petition was allowed, declaring that the time bar under Section 153(2A) applied to the issue remitted for fresh consideration. The petitioner was entitled to the refund of the excess tax paid, with the assessment order remaining final and binding on all other aspects. The refund was ordered to be processed within three months from the date of receipt of the judgment.

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