2019 (6) TMI 481 - HC - Income Tax

Revision u/s 263 - delay of 8 years and 7 months for initiation of proceedings initiated u/s 143(3) pursuant to direction by CIT - limitation u/s 153(2A) - whether the revision sought to be made under the impugned notice by the Assessing Authority, would fall u/s 153(2A) or 153(3)? - HELD THAT - In the instant case in hand, the Commissioner had given certain directions with determined findings and thereby, directed the AO to carry out such directions. In consequence to these findings and directions of the Commissioner, AO will be required to exercise his powers u/s 153 (3) and not u/s 153 (2A). As such, it cannot be said that the impugned proceedings now initiated by the AO is barred by limitation u/s 153(2A) . The first ground raised by the learned counsel for the petitioner is answered accordingly. Consequence of the delay of 8 years and 7 months - inordinate and unreasonable - One of the settled proposition of law, as decided in various decisions of the Hon'ble Apex Court as well as many High Courts is that where no limitation is prescribed for completion of reassessment, such process must be completed within a reasonable time and this proposition would depend on the facts and circumstances of each and every case. In Mohamad Kavi Mohamad Amin v. Fatmabai Ibrahim 1996 (8) TMI 537 - SUPREME COURT observed that where no time limit is prescribed for exercise of a power under a statute, it does not mean that it can be exercised at any time; such power has to be exercised within a reasonable time. According to the respondents, after the Commissioner had passed orders u/s 263, the Assessee had consistently changed its name on various occasions which resulted in the delay. A further vague reason has also been stated in the counter that after the original assessment order was passed, appeals came to be filed before the CIT and ITAT. Thereafter, when the Assessee sought for refund, the old files of the Assessee were retrieved. Such an explanation cannot be at any stretch of imagination deemed to be sufficient cause for the delay. Insofar as the consistent change of the Assessee's name is concerned, it is nobody's case that the PAN number of the Assessee was also undergoing a change. When the relevant files and documents pertaining to the PAN number of the Assessee was before the AO, we are unable to comprehend as to how the change in names could result in delay of more than 8 years. Hence, the reason of change in name of the Assessee, cannot be accepted as a sufficient cause for the delay and consequently, could only be termed as 'inordinate' or 'unreasonable'. The second reasoning that the Assessee's files were traced only when they made a claim for refund goes to show that the respondents were admittedly sleeping over the matter. The very fact that they had commenced tracing of the old files of the Assessee, when they had filed their claim of refund would amount to an admission on the part of the Department that they were not proceeding any further in the matter. Accordingly, this reason will also not amount to a satisfactory explanation for the delay. When the delay by itself is 8 years and 7 months without any reasonable explanation whatsoever, it can be termed as 'inordinate'. Though there is no limitation prescribed u/s 153(3) for reassessment or recomputation, in view of the unreasonable delay in initiating the proceedings, the impugned notice dated 18.09.2003 is liable to be set aside. This Court, holds that the impugned notice which seeks to give effect to an order u/s 263 for revision u/s 143(3) falls u/s 153(3). However, the delay of 8 years and 7 months in initiating such proceedings is inordinate and therefore fatal to the Department. Accordingly, the impugned notice passed by the first respondent is set aside.

Issues Involved:
1. Applicability of Section 153(2A) vs. Section 153(3) of the Income Tax Act.
2. Reasonableness of the delay in initiating reassessment proceedings.

Issue-wise Detailed Analysis:

1. Applicability of Section 153(2A) vs. Section 153(3) of the Income Tax Act:

The petitioner argued that the order of the Commissioner under Section 263 of the Act, which proposed to revise the assessment, should be subject to the two-year limitation period under Section 153(2A). The petitioner contended that since the order of the Commissioner amounted to setting aside/cancelling the assessment, any reassessment should be completed within two years.

The Department countered that Section 153(2A) was not applicable and that the revision was being made under Section 153(3), which does not prescribe a limitation period. The Department argued that the delay was due to repeated changes in the name of the assessee and changes in assessment circles.

The court examined the provisions of Section 153(2A) and 153(3). Section 153(2A) applies when an assessment is set aside or cancelled, requiring a fresh assessment within two years. Section 153(3) allows reassessment at any time to give effect to any finding or direction in an order under Section 263.

The court found that the Commissioner's order under Section 263 did not set aside or cancel the assessment but provided specific directions and findings for reassessment. Therefore, Section 153(3) was applicable, not Section 153(2A). The court concluded that the impugned proceedings initiated by the Assessing Officer were not barred by limitation under Section 153(2A).

2. Reasonableness of the Delay in Initiating Reassessment Proceedings:

The petitioner argued that the delay of 8 years and 7 months in initiating reassessment proceedings was unreasonable and inordinate. The petitioner cited various judicial decisions to support the proposition that reassessment should be completed within a reasonable time, even if no specific limitation period is prescribed.

The Department explained that the delay was due to changes in the assessee's name and the retrieval of old files when the assessee filed a claim for a refund. The court found these explanations insufficient and deemed the delay as inordinate and unreasonable. The court noted that the PAN number of the assessee remained unchanged, and the change in names should not have caused such a significant delay.

The court cited various judicial precedents, including decisions from the Supreme Court and High Courts, which held that statutory powers must be exercised within a reasonable time. The court concluded that the delay of 8 years and 7 months was inordinate and unexplained, making the reassessment proceedings illegal.

Conclusion:

The court held that the impugned notice seeking to give effect to the order under Section 263 for revision under Section 143(3) fell under Section 153(3) of the Act. However, the delay of 8 years and 7 months in initiating such proceedings was inordinate and fatal to the Department. Consequently, the impugned notice dated 18.09.2003 was set aside, and the Department was restrained from initiating any further proceedings for fresh assessment for the Assessment Year 1990-91. The writ petition was ordered accordingly, with no costs.

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