2017 (5) TMI 355 - AT - Income Tax

Annulling reassessment order - period of limitation - whether order passed after expiry of limitation provided in section 153(3)? - whether for computing period of limitation, period during which the assessment proceedings is stayed shall be included or period consumed in communication of Hon ble High Court s order to the AO shall also to be excluded? - Held that - A perusal of the above details would indicate that 194 days are available to the AO from 29.7.2013. But he passed the assessment order after more than 200 days. The AO was of the opinion that time limit for passing the assessment order would commence from the date of communication of the order. It has been observed that this order was communicated to him on 14.2.2014 and he was to pass an order within 60 days from this date. Accordingly, he has passed it on 26.2.2014. But this interpretation of the Explanation (1)(ii) appended to section 153(1) has not been approved by the ld.CIT(A). The finding of the ld.CIT(A) is based upon orders of the ITAT, wherein the Tribunal has considered scope of Explanation (1)(ii) to section 153(1) of the Income Tax Act. This Explanation has fallen for consideration before the Hon ble High Allahabad Court in CIT Versus Drs. X-Ray and Pathology Institute Pvt. Ltd. 2013 (11) TMI 19 - ALLAHABAD HIGH COURT as held as soon as the order was vacated, the limitation will restart and will exhaust itself on the period of limitation provided under the Act assessment Barred by limitation Decided against the Revenue.

Summary

Issues Involved:
1. Validity of the reassessment order passed beyond the limitation period specified under section 153(2) of the Income Tax Act, 1961.
2. Interpretation of the period of limitation under Explanation (ii) to section 153(1) of the Income Tax Act, 1961.

Detailed Analysis:

1. Validity of the reassessment order passed beyond the limitation period specified under section 153(2) of the Income Tax Act, 1961:

The Revenue appealed against the order of the CIT(A) which annulled the reassessment order on the grounds that it was passed after the expiry of the limitation period provided in section 153(3) of the Income Tax Act, 1961. The assessee filed its return of income on 31.10.2005 and revised it on 4.5.2006. The initial assessment under section 143(3) was completed on 25.3.2008. The AO reopened the assessment and issued a notice under section 148 on 30.3.2012. The reassessment order was eventually passed on 26.2.2014. The assessee challenged the reopening of the assessment, and the Gujarat High Court passed an interim order on 18.3.2013, restraining the AO from passing the final order without the court's leave. The High Court disposed of the writ petition on 29.7.2013. The CIT(A) observed that the reassessment order was time-barred as it was passed beyond the limitation period.

2. Interpretation of the period of limitation under Explanation (ii) to section 153(1) of the Income Tax Act, 1961:

The core issue was whether the period during which the assessment proceedings were stayed by the court should be excluded from the limitation period and whether the time consumed in the communication of the High Court's order to the AO should also be excluded. The CIT(A) held that the limitation period should be computed from the date of the pronouncement of the High Court's order, not from the date of its communication to the AO. The CIT(A) relied on the ITAT's decisions in the cases of Dilip Dahanukar Vs. ACIT and Bharat V. Patel Vs. ACIT, which supported this interpretation. The Revenue's contention, based on the Supreme Court's decisions in Auto & Metal Engineers Vs. UOI and VLS Finance Ltd. Vs. CIT, was that the period of limitation should start from the date of receipt of the High Court's order by the AO. However, the CIT(A) rejected this argument, noting that the concept of communication of the order cannot be imported into the computation of the limitation period under Explanation (ii) to section 153(1).

The Tribunal agreed with the CIT(A) and cited the Allahabad High Court's decision in CIT Vs. Chandra Bhan Bansal, which held that the limitation period should be computed from the date of the court's order, not from the date of its communication. The Tribunal also noted that the High Court's order was passed in the presence of the Revenue's counsel, making the date of communication irrelevant. The Tribunal concluded that the reassessment order was indeed time-barred and dismissed the Revenue's appeal.

Conclusion:

The Tribunal upheld the CIT(A)'s decision to annul the reassessment order, confirming that the limitation period should be computed from the date of the court's order and not from the date of its communication. The appeal of the Revenue was dismissed.