2016 (5) TMI 324 - AT - Income Tax

Validity of assessment u/s 153 - Time limit for completion of assessments and reassessments - whether the assessment is barred by limitation of time in terms of section 153(2A) and is a nullity? - Held that - We find from the findings given by the tribunal in its order dated 28.9.2007 it had not given any direction or finding to the Learned AO to give effect to its order , but instead had set aside the entire assessment to make it afresh by following due process of law for the purpose of examination of some witnesses in line with the principles of natural justice. The Tribunal may indicate certain lines of enquiry or other exercises for conforming to natural justice or conducting the assessment on the right procedure. That does not mean that the Tribunal s order is not for a fresh assessment. It had effectively asked the Learned AO to make fresh exercise of assessment determining the total income. The tribunal s order indicated as a guideline for the proper manner in which the assessment in the case ought to have been made. There was no finding or direction given thereon. The tribunal remitted the assessment for determining afresh the issues raised by the Learned AO in the assessment appealed against. Since there were no other additions or issues in dispute except the two additions ( i.e addition on account of gross profit and bogus purchases) made in the earlier assessment, the order asking for deciding the issues afresh and recomputing the total income repeating the procedure of assessment correctly amounts to a fresh assessment. We hold that the assessment means in the context of the scheme of the Act the determination of the total income to be brought to the charge of tax. The total income is the sole object of the whole exercise commencing from assessee s filing of return and ending with the completion of assessment. Now looking at the impugned issue from this perspective, when the tribunal asked the Learned AO to determine the total income by re-deciding the issues involved in the additions made therein, it implies indisputably a mandate for fresh determination of the total income. When the order of the Tribunal nullifies the total income assessed or determined in the original order of an assessment, it definitely means the setting aside of the original order and a fresh assessment determining the total income. In effect, the tribunal s order annihilates the earlier assessment as the total income determined by it no more subsists. The fresh assessment framed by the Learned AO on 25.3.2009 is barred by limitation in terms of section 153(2A) of the Act. We hold that the fresh assessment dated 25.3.2009 is declared as a nullity. Accordingly , the cross objection of the assessee is allowed

Issues Involved:

1. Whether the assessment framed is barred by limitation under Section 153(2A) of the Income Tax Act, 1961.
2. Whether the Tribunal's order effectively set aside the assessment, necessitating a fresh assessment within the prescribed time limit.
3. Whether the provisions of Section 153(3) apply, which do not stipulate any time limit for completion of assessment.

Issue-Wise Detailed Analysis:

1. Limitation under Section 153(2A):

The primary issue raised by the assessee was that the assessment framed on 25.3.2009 is barred by limitation under Section 153(2A) of the Income Tax Act, 1961. The original assessment was completed under Section 143(3), determining a total income of ?47,94,060/-. On appeal, partial relief was granted, and the matter was further appealed to the Tribunal, which restored the two additions to the file of the Assessing Officer (AO) for fresh decision. The AO passed a fresh assessment order on 25.3.2009, repeating the same additions. The assessee argued that the fresh assessment should have been framed on or before 31.12.2008, as per Section 153(2A), and thus, the assessment framed on 25.3.2009 is barred by limitation. The Tribunal found that the assessment framed on 25.3.2009 was indeed barred by limitation, as the Tribunal's order had effectively set aside the original assessment, necessitating a fresh assessment within the prescribed time limit.

2. Tribunal's Order Setting Aside the Assessment:

The Tribunal's order dated 28.9.2007 restored the issues to the AO for fresh decision, indicating that the original assessment was effectively set aside. The Tribunal noted that the comparable cases relied upon by the AO were not confronted to the assessee for rebuttal, and the assessee was not given an adequate opportunity to explain his case. The Tribunal directed the AO to decide the issues afresh, following the principles of natural justice. The Tribunal emphasized that the order was for a fresh assessment, as it required the AO to re-determine the total income by following due process. The Tribunal held that the fresh assessment framed on 25.3.2009 was barred by limitation under Section 153(2A), as the order was received by the department on or before 12.12.2007, making the last date for completion of the assessment 31.12.2008.

3. Applicability of Section 153(3):

The AO argued that the Tribunal's order did not set aside the assessment but only restored it for verification, and thus, Section 153(3), which does not stipulate any time limit, should apply. The Tribunal disagreed, stating that the Tribunal's order effectively nullified the original assessment and required a fresh assessment. The Tribunal noted that Section 153(3) applies to situations where specific directions are given for assessments related to other years or persons, not to cases where the entire assessment is set aside for fresh determination. The Tribunal emphasized that the purpose of Section 153(2A) is to prevent indefinite delays in completing assessments and to ensure timely resolution of cases. The Tribunal concluded that the fresh assessment framed on 25.3.2009 was barred by limitation under Section 153(2A), and the AO's argument relying on Section 153(3) was untenable.

Conclusion:

The Tribunal held that the fresh assessment framed on 25.3.2009 is barred by limitation under Section 153(2A) of the Income Tax Act, 1961. The Tribunal's order effectively set aside the original assessment, necessitating a fresh assessment within the prescribed time limit. The Tribunal dismissed the appeals of both the assessee and the revenue as infructuous, as the assessment was declared a nullity. The cross objection of the assessee was allowed, and the order was pronounced on 23.03.2016.

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