2012 (7) TMI 694 - HC - Income Tax

Refund of excess tax paid - Assessment proceedings relating to AY 1988-89 - Date of remand back by ITAT to AO 5.7.1994 - No fresh assessment thereafter by the AO - Period of limitation - Section 153(2A) - held that - the Assessing Officer was required to pass a fresh order of assessment which was necessary on account of an order passed by the Tribunal under section 254 of the Act cancelling the assessment framed by the Assessing Officer. The period of limitation prescribed in section 153(2A), therefore, would apply. While such an order was served on the Commissioner on 3.8.1994, within a period of two years of the end of such financial year, a fresh order of assessment had to be passed by the Assessing Officer. The same not having been done, in our view, such proceedings have become time-barred. The assessment placed before the Assessing Officer by the Tribunal s order, therefore, must be treated as having abated. The excess tax paid by the petitioner under original assessment framed by the Assessing Officer must be refunded with consequential effect. By way of abundant caution, it is clarified that the self-assessed tax paid by the petitioner despite no assessment having been framed, cannot be disturbed as held by the Apex Court in case of Commissioner of Income Tax, Bhopal v. M/s Shelly Products and another, (2003 (5) TMI 4 - SUPREME COURT).

Issues Involved:
1. Refund of Rs.9,62,976/- with interest.
2. Quashing and setting aside the assessment proceedings as barred by limitation.
3. Legality of the penalties imposed under sections 271(1)(c) and 273(2)(aa) of the Income Tax Act.
4. Applicability of limitation period for fresh assessment under section 153 of the Income Tax Act.
5. Interpretation of Tribunal's order and its impact on the assessment proceedings.

Detailed Analysis:

Refund of Rs.9,62,976/- with Interest:
The petitioner sought a refund of Rs.9,62,976/- along with interest. The amount included penalties and tax paid pursuant to the original assessment order, which was later contested and remanded by the Tribunal.

Quashing and Setting Aside the Assessment Proceedings as Barred by Limitation:
The petitioner argued that the assessment proceedings initiated by the respondents were barred by limitation. The Tribunal had remanded the matter to the Assessing Officer on 5.7.1994, but no steps were taken for nearly seven years. The petitioner contended that the limitation period for framing a fresh assessment had expired, making any further proceedings invalid.

Legality of the Penalties Imposed:
Penalties were imposed under sections 271(1)(c) and 273(2)(aa) of the Income Tax Act. The Commissioner (Appeals) had deleted these penalties on 24.1.1995, based on the Tribunal's order setting aside the assessment. The Commissioner granted liberty to the Assessing Officer to initiate fresh penalty proceedings if warranted in the fresh assessment order.

Applicability of Limitation Period for Fresh Assessment:
The core issue was whether the fresh assessment proceedings initiated after the Tribunal's remand were within the permissible time limit under section 153 of the Income Tax Act. The petitioner argued that the case fell under sub-section (2A) of section 153, which prescribes a two-year limitation period for completing fresh assessments. The respondents contended that sub-section (3) of section 153 applied, which allows assessments to be completed "at any time."

Interpretation of Tribunal's Order and Its Impact:
The Tribunal had remanded the matter to the Assessing Officer, directing the summoning of two parties for cross-examination and permitting further inquiry into the payment of commissions. The Tribunal's order effectively set aside the original assessment, necessitating a fresh assessment.

Judgment Summary:

1. Refund and Interest: The court noted that the petitioner had already received a refund of Rs.14,66,750/-, which included penalties and interest for delayed refund. Therefore, the primary issue was whether the remaining tax amount should be refunded due to the assessment proceedings being time-barred.

2. Assessment Proceedings Barred by Limitation: The court held that the assessment proceedings for the year 1988-89 were time-barred. The Tribunal's order dated 5.7.1994 was served on the Commissioner on 3.8.1994. As per section 153(2A) of the Act, the fresh assessment had to be completed within two years from the end of the financial year in which the Tribunal's order was received. This was not done, rendering the proceedings invalid.

3. Legality of Penalties: Since the original assessment was set aside and the fresh assessment was time-barred, the penalties imposed under sections 271(1)(c) and 273(2)(aa) also stood nullified.

4. Applicability of Limitation Period: The court clarified that sub-section (2A) of section 153 applied in this case, as it involved a fresh assessment necessitated by the Tribunal's order setting aside the original assessment. The limitation period of two years was applicable, and since the fresh assessment was not completed within this period, it was time-barred.

5. Interpretation of Tribunal's Order: The court interpreted the Tribunal's order as setting aside the original assessment. The Tribunal directed the Assessing Officer to summon witnesses for cross-examination and allowed further inquiry, which implied a fresh assessment was required. Therefore, the limitation period under section 153(2A) applied.

Conclusion:
The court allowed the petition, declaring the assessment proceedings for the assessment year 1988-89 as abated due to being time-barred. Consequently, the excess tax paid by the petitioner under the original assessment must be refunded with consequential effect. The petition was disposed of in these terms.

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