2018 (8) TMI 1887 - AT - Income Tax

Reassessment u/s 153(2A) - whether the time limit prescribed as per Sec.153(2A) of the Act or as per Sec.153(3) of the Act would be applicable for passing the order pursuant to the orders of the Tribunal? - HELD THAT - We find that the Hon ble Delhi High Court in the case of Nokia India (P) Ltd., 2017 (9) TMI 1298 - DELHI HIGH COURT has held that there is a distinction between assessment that is set aside and an assessment order being set aside. It has held that when the assessment on an issue is set aside and the matter is remanded with a direction that the issue has to be determined afresh, provisions of Sec.153(2A) of the Act get attracted. It has further held that for applicability of Sec.153(2A) of the Act, it is not necessary that the entire assessment order should be set aside. The aforesaid decision of Agra Bench of the Tribunal was followed by the Pune Co-ordinate Bench of the Tribunal in the case of Standard Meters Manufacturing Company 2011 (11) TMI 691 - ITAT PUNE wherein it has held that merely because the entire assessment cannot be cancelled or set aside by the Tribunal, it would not come outside the purview of the time limit prescribed for completion of an assessment or reassessment u/s 153(2A) In view of the aforesaid facts and following the decision of Hon ble Delhi High Court in the case of Nokia India (P) Ltd. 2017 (9) TMI 1298 - DELHI HIGH COURT , we are of the view that Ld.CIT(A) has rightly held that provisions of Sec.153(2A) of the Act was applicable to the present facts and the AO was therefore supposed to pass fresh assessment order within one year from the end of financial year in which the order of the Tribunal was received by Ld.CIT and therefore, the order passed by AO on 07.11.2014 was barred by limitation. Thus, the grounds of Revenue are dismissed. Levy of penalty u/s 271(1)(c) - HELD THAT - The perusal of assessment order passed u/s 143(3) of the Act reveals that in the assessment order AO had recorded satisfaction for furnishing of inaccurate particulars of income. Thereafter, in the penalty order passed u/s 271(1)(c) of the Act, AO had levied penalty for concealing the particulars of income. It is a settled law that while levying penalty for concealing of particulars of income, the AO has to record satisfaction and thereafter come to a finding in respect of one of the limbs, which is specified under section 271(1)(c) of the Act. The first step is to record satisfaction while completing the assessment as to whether the assessee had concealed its income or furnished inaccurate particulars of income. Thereafter, notice u/s 274 r.w.s. 271(1)(c) of the Act is to be issued to the assessee. The Assessing Officer thereafter has to levy penalty under Section 271(1)(c) of the Act for non-satisfaction of either of the limbs. While completing the assessment, the Assessing Officer has to come to a finding as to whether the assessee has concealed its income or furnished inaccurate particulars of income. The Hon ble Bombay High Court in CIT Vs. Shri Samson Perinchery 2017 (1) TMI 1292 - BOMBAY HIGH COURT held that where initiation of penalty is one limb and the levy of penalty is on other limb, then in the absence of proper show cause notice to the assessee, there is no merit in levy of penalty. In the light of the decision of Hon ble Bombay High Court in the case of Samson Perinchery (supra), we are of the view that in the present case, the basic condition for levy of penalty has not been fulfilled and that the penalty order suffers from non-exercising of jurisdiction power and therefore penalty order cannot be upheld. We accordingly set aside the penalty order passed by AO. Thus, the ground of assessee is allowed.

Summary

Issues Involved:
1. Applicability of Section 153(2A) vs. Section 153(3) for passing the assessment order.
2. Legality of the assessment order passed beyond the prescribed time limit.
3. Legality of penalty levied under Section 271(1)(c) of the Income Tax Act.

Detailed Analysis:

Issue 1: Applicability of Section 153(2A) vs. Section 153(3) for Passing the Assessment Order

The primary issue revolves around whether the time limit for passing the assessment order should be governed by Section 153(2A) or Section 153(3) of the Income Tax Act. The Tribunal noted that the assessment was set aside with specific directions to the Assessing Officer (AO) to decide the issue afresh. The Tribunal held that Section 153(2A) applies when an assessment is set aside and the matter is remanded for fresh determination, as supported by the Delhi High Court's decision in Nokia India (P) Ltd. The Tribunal emphasized that for the applicability of Section 153(2A), it is not necessary for the entire assessment order to be set aside; setting aside an issue suffices.

Issue 2: Legality of the Assessment Order Passed Beyond the Prescribed Time Limit

The Tribunal found that the AO passed the order giving effect to the Tribunal's directions beyond the prescribed time limit under Section 153(2A). The Tribunal noted that the order of the Tribunal was received by the Commissioner on 04.09.2012, and thus, the fresh assessment order should have been passed by 31.03.2014. Since the AO passed the order on 07.11.2014, it was held to be barred by limitation and, therefore, bad in law. This conclusion was consistent across multiple assessment years (1999-2000, 2000-01, 2001-02, and 2002-03).

Issue 3: Legality of Penalty Levied Under Section 271(1)(c) of the Income Tax Act

The Tribunal examined the penalty levied under Section 271(1)(c) for the assessment year 2007-08. It was observed that the AO recorded satisfaction for furnishing inaccurate particulars of income in the assessment order but levied the penalty for concealing the particulars of income in the penalty order. The Tribunal referred to the Bombay High Court's decision in CIT Vs. Samson Perinchery, which held that penalty cannot be levied if there is no proper show cause notice specifying the correct limb under Section 271(1)(c). Consequently, the Tribunal set aside the penalty order, deeming it to suffer from a jurisdictional error.

Conclusion:

The Tribunal dismissed the appeals of the Revenue for the assessment years 1999-2000 and 2000-01, confirming that the orders passed by the AO were barred by limitation under Section 153(2A). Similarly, the Tribunal allowed the appeals of the assessee for the assessment years 2001-02 and 2002-03 on the same grounds. For the assessment year 2007-08, the Tribunal allowed the assessee's appeal by setting aside the penalty order under Section 271(1)(c) due to non-application of mind and improper show cause notice.