2022 (8) TMI 190 - AT - Income Tax

Validity of assessment u/s.144C - Assessment barred by limitation - AO shall forward a draft order of assessment if he proposes to make any variation in the income or loss return by the assessee on or after October 01, 2009 - HELD THAT - Before us, in the present case, the assessment year involved is assessment year 2007-08 and draft assessment order u/s.144C(1) of the Act was framed on 24.12.2010 and served on the assessee on 31.12.2010. The assessee has accepted the draft assessment order and assessee vide letter dated 18.02.2011 requested the AO that they are not filing objection before DRP and they are preferring appeal before CIT(A). ITO, Ward 10(4), New Delhi framed final assessment order u/s.143(3) r.w.s. 144C of the Act dated 22.02.2011. We have reproduced the extract of the provisions of section 153 of the Act as applicable to assessment year 2007-08 in above para 8.2 and the details of particular for assessment year 2007-08 . Thus we are of the view that in term of section 153 of the Act, a final assessment order u/s.143(3) of the Act, in the absence of provisions of section 144C of the Act being held as prospective in term of decision of Hon ble Madras High Court in the case of Vedanta Limited, supra, the assessment should have been framed on or before 31.12.2010 but actually this was framed only on 22.02.2011, which is barred by limitation. Appeal of assessee allowed.

Summary

Issues Involved:
1. Admissibility of additional grounds raised by the assessee.
2. Applicability of Section 144C of the Income Tax Act, 1961.
3. Whether the final assessment order dated 22.02.2011 is barred by limitation.

Issue-wise Detailed Analysis:

1. Admissibility of Additional Grounds:
The assessee moved a petition under Rule 11 of the Income Tax Appellate Tribunal Rules, 1963 for admission of additional grounds, arguing that the assessment order passed by the AO u/s 143(3)/144C of the Act dated 22.02.2011 is barred by limitation. The Tribunal noted that the issue is purely legal, and the facts are available on the assessment and appellate records. Therefore, the additional grounds were admitted for adjudication.

2. Applicability of Section 144C of the Income Tax Act, 1961:
The assessee argued that Section 144C, introduced by the Finance (No.2) Act, 2009, applies prospectively from the assessment year 2011-12, as held by the Hon'ble Madras High Court in Vedanta Limited vs. ACIT. The Tribunal noted that the provision of Section 144C does not merely prescribe procedure but involves a substantive exercise in assessment, granting substantive rights to the parties. The Tribunal relied on the CBDT Circulars and the Madras High Court's decision, concluding that Section 144C is applicable only from the assessment year 2011-12.

3. Whether the Final Assessment Order Dated 22.02.2011 is Barred by Limitation:
The Tribunal examined the time limit for completion of assessments under Section 153 of the Act. For the assessment year 2007-08, the final assessment order should have been framed on or before 31.12.2010. However, the order was passed on 22.02.2011. The Tribunal observed that procedural amendments affecting vested substantive rights are prospective unless explicitly made retrospective. The Tribunal cited various legal precedents, including the Hon'ble Supreme Court's rulings, to support the view that changes in the forum are substantive and not merely procedural. Consequently, the Tribunal held that the final assessment order dated 22.02.2011 is barred by limitation.

Conclusion:
The Tribunal allowed the appeal filed by the assessee, holding that the final assessment order dated 22.02.2011 is barred by limitation. As the additional ground was adjudicated in favor of the assessee, the merits of the case were not examined, rendering them academic.