2008 (3) TMI 39 - HC - Income Tax

Time limit for completion of re-assessment proceedings u/s 147 read with sec. 153(2) period of two years for completing the assessment has been prescribed only in those cases in which notices were issued between 1.4.1999 and 31.3.2000 argument of the revenue that amended provisions of Section 153(2) of the Act which became operative w.e.f. 1.6.2001 are effective only in respect of the notices under Section 148 served on or after 1.6.2001 and are prospective in nature is not acceptable.

Summary

Issues:
1. Interpretation of Section 153(2) of the Income Tax Act, 1961 regarding time limit for completing assessment.
2. Application of amended provisions of Section 153(2) of the Act in relation to notices served before and after the effective date of the amendment.

Analysis:
1. The appeal involved the interpretation of Section 153(2) of the Income Tax Act, 1961, specifically addressing the time limit for completing assessments. The key contention was whether the amended provision, effective from 1.6.2001, should be applied retrospectively to notices served before this date. The dispute centered around the completion date of an assessment for the assessment year 1998-99, with the revenue challenging the CIT(A)'s decision to quash the assessment based on the time limit specified in Section 153(2).

2. The assessee had filed the return of income for the assessment year 1998-99, and subsequent assessment proceedings were initiated under Section 147 of the Act. The notice under Section 148 was served before the amendment to Section 153(2) came into effect on 1.6.2001. The CIT(A) applied the amended provision retrospectively, limiting the time available for assessment completion to one year from the end of the financial year in which the notice was served.

3. The Commissioner held that the amended Section 153(2) should be applied in the case, even though the notice was served before the effective date of the amendment. The CIT(A) emphasized that the amended provision restricted the time limit for assessment completion to one year. The Tribunal upheld this view, dismissing the revenue's appeal and affirming that the assessment should have been completed by 31.3.2002, as per the amended provision.

4. The Tribunal's decision was based on the understanding that the amended proviso to Section 153(2) expanded the time limit to two years only for notices served between 1.4.1999 and 31.3.2000. The Tribunal reasoned that applying the unamended provision, which allowed two years for completion, to notices served before the amendment would negate the effect of the amendment. The Tribunal highlighted that the amended provision did not exempt all notices served before 1.6.2001 from the one-year time limit.

5. Ultimately, the Court found no error in the Tribunal's decision and ruled against the revenue's appeal. It was concluded that the application of the amended Section 153(2) was appropriate in this case, as the Assessing Officer had sufficient time to complete the assessment within the revised time frame. The Court emphasized that procedural laws, like Section 153(2), are applicable to pending cases, and the revenue failed to provide reasons for not completing the assessment within the stipulated time.

6. Therefore, the appeal filed by the revenue was dismissed, affirming the Tribunal's decision regarding the application of the amended provisions of Section 153(2) in determining the time limit for completing the assessment in this case.