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2021 (6) TMI 986 - AT - Income TaxRevision u/s 263 - period of limitation - Whether assessee is an agent of the state government of Maharashtra? - HELD THAT - Only exception for extending the stipulated time period for giving effect to the order passed by the Pr. CIT u/s 263 can be found in the first proviso to sub-section (5) of Sec. 153 of the Act, which contemplates, that in a case effect is to be inter alia given by the A.O to an order passed under Sec. 263, wholly or partly, otherwise than by making a fresh assessment or reassessment, the period therein specified can be extended in a case where a request is made by the A.O to the Pr. CIT or CIT, that for reasons beyond his control, it is not possible for him to give effect to such order within the stipulated time period, pursuant whereto, on satisfaction of the Pr. CIT or CIT an additional period of six months to give effect to the order may be allowed. However, as in the case before us the Pr. CIT had directed the A.O to frame a de novo assessment, therefore, the first proviso to sub-section (5) of Sec. 153 and the extension therein contemplated would not be applicable. As such, in the case before us the de novo assessment as had been directed by the Pr. CIT vide his order passed u/s 263, dated 31.03.2021, without any choice, has to be framed by the A.O within a period of twelve months from the end of the financial year in which order u/s 263 was passed by the Pr. CIT. We find, that the legislature in all its wisdom had expressly vide Explanation 1 to Sec. 153 of the Act carved out certain circumstances wherein the period involved is to be excluded for computing the period of limitation. Although, we find, that as per clause (ii) of Explanation 1 to Sec. 153 of the Act, the period during which the assessment proceedings are stayed by an order or injunction of any court , the period therein involved is to be excluded for the purpose of computing the limitation for framing the assessment, reassessment and re-computation as envisaged in the said statutory provision, however, no such exclusion has been carved out by the legislature in all its wisdom in a case where the assessment proceedings are stayed by an order passed by the Tribunal. Accordingly, it is in the backdrop of the aforesaid mandate of law that we shall herein deal with the request of the assessee for restraining the A.O from framing the de novo assessment in pursuance to the order passed by the Pr. CIT u/s 263, dated 31.03.2021. Adverting to the claim of the assessee that it has a good case on merits, without expressing any opinion, we prima facie find substantial force in the same, for the reason, that the issue involved in the present appeal, viz. as to whether or not the assessee is an agent of the state government of Maharashtra, as claimed by the ld. A.R is squarely covered by the respective orders passed by the Tribunal in the assessee s own case, wherein the respective orders passed by the Pr. CIT-15, Mumbai u/s 263 of the Act, involving identical facts are stated to have been set-aside by the Tribunal. Though, we remain conscious of the fact that circumscribed by the prescribed time limitation for framing of an assessment pursuant to an order passed by the Pr. CIT u/s 263 of the Act, there is an innate limitation on staying of the assessment proceedings, but then, at the same time we cannot also remain oblivious of the fact that in case the aforesaid request of the assessee is rejected at the threshold, the same may result to multiplicity of litigation which could otherwise have been avoided. We, thus, adopting a cautious but not a pedantic approach, though, refrain from restraining the A.O from proceeding with the assessment proceedings, however, at the same time, in all fairness herein direct him not to pass the assessment order giving effect to the order passed by the Pr. CIT u/s 263 for a period of three months from the date of this order or till the disposal of the appeal filed by the assessee before us i.e against the order passed by the Pr. CIT u/s 263, dated 12.03.2021, whichever is earlier.
Issues Involved:
1. Validity of the Principal Commissioner of Income Tax (Pr. CIT) exercising jurisdiction under Section 263 of the Income-tax Act, 1961. 2. Whether the assessee qualifies as an 'agent' of the State Government of Maharashtra under Article 289(1) of the Constitution of India. 3. Whether the Tribunal has the authority to restrain the Assessing Officer (A.O) from passing a de novo assessment order pursuant to the Pr. CIT's order under Section 263. Issue-wise Detailed Analysis: 1. Validity of the Principal Commissioner of Income Tax (Pr. CIT) exercising jurisdiction under Section 263 of the Income-tax Act, 1961: The genesis of the controversy lies in the order passed by the Pr. CIT under Section 263 of the Act, dated 31.03.2021. The original assessment framed by the A.O under Section 143(3) on 29.12.2018 accepted the returned income filed by the assessee company. The Pr. CIT reviewed the assessment records and held that the A.O had erroneously treated the assessee as an 'agent' of the State Government of Maharashtra, thereby wrongly allowing its claim for exemption under Article 289(1) of the Constitution of India. The Pr. CIT observed that the assessee was not an 'agent' of the State Government, and the income accrued was exigible to tax under Article 289(2). Consequently, the Pr. CIT set aside the assessment order as erroneous and prejudicial to the interests of the revenue, directing a de novo assessment. 2. Whether the assessee qualifies as an 'agent' of the State Government of Maharashtra under Article 289(1) of the Constitution of India: The Pr. CIT rejected the assessee's claim that it was acting as an 'agent' of the State Government of Maharashtra and that its receipts were exempt from tax under Article 289(1). The Pr. CIT emphasized that the tasks performed by the assessee could not be equated with those performed by the State Government. The issue of whether Article 289(1) or Article 289(2) applied was pending adjudication before the Hon'ble High Court of Bombay for earlier assessment years. The Pr. CIT noted that the Tribunal's earlier orders in favor of the assessee had not attained finality and were under challenge before the High Court. 3. Whether the Tribunal has the authority to restrain the Assessing Officer (A.O) from passing a de novo assessment order pursuant to the Pr. CIT's order under Section 263: The assessee sought to restrain the A.O from passing the assessment order to avoid multiplicity of litigation. The Tribunal noted that the powers vested under Section 254(2A) were restricted to granting a stay on the recovery of demand, not on restraining the A.O from passing an order. The Tribunal observed that the framing of a de novo assessment must adhere to the time limits specified under Section 153 of the Act. The Tribunal acknowledged the substantial force in the assessee's claim, noting that similar issues had been decided in the assessee's favor in earlier Tribunal orders. However, the Tribunal refrained from restraining the A.O from proceeding with the assessment but directed the A.O not to pass the assessment order for three months from the date of the Tribunal's order or until the disposal of the appeal against the Pr. CIT's order, whichever is earlier. Conclusion: The application filed by the assessee was allowed subject to the Tribunal's observations, providing a temporary relief by directing the A.O to refrain from passing the assessment order for a specified period. This approach aimed to balance the statutory limitations and the potential for avoiding unnecessary litigation.
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