2023 (12) TMI 1380 - HC - Income Tax

Validity of assessment proceedings are time-barred - release the refunds along with interest in accordance with Section 244A as returned assessment should be accepted - petitioner states that as the limitation period to pass such orders, as per the statutory timelines prescribed u/s 153(3) read with Section 153(4) and Section 153(5) of the Act have expired, the assessment proceedings have become time-barred HELD THAT - In the event, the AO has not passed the assessment orders in accordance with the orders of remand passed by the ITAT within the time stipulated under Section 153(3) read with Section 153(4) and Section 153(5) of the Act, the returned assessments are directed to be accepted on the said issues. AO shall also release the refunds, if any, along with applicable interest in accordance with Section 244A of the Act within a further period of eight weeks. This Court clarifies that it has passed this order, as it is settled law that assessment is complete only when the AO passes an assessment order determining the total income and the demand notice determining the tax payable by the assessee is issued. See Kalyan kumar Ray v. CIT 1991 (8) TMI 291 - SUPREME COURT .

Issues:
1. Whether the assessment proceedings for multiple Assessment Years are time-barred.
2. Whether the returned assessment should be accepted and refunds released.
3. Failure of Assessing Officer to pass orders as per directions from ITAT.
4. Applicability of statutory timelines under Section 153 of the Income Tax Act.
5. Requirement for the AO to pass assessment orders in accordance with ITAT directions.
6. Release of refunds along with interest in accordance with Section 244A of the Act.
7. Legal implications of completing assessment only upon issuance of assessment order and demand notice.

Analysis:

The petitioner filed writ petitions seeking a declaration that assessment proceedings for several Assessment Years were time-barred and that the returned assessment should be accepted, with refunds released. The petitioner argued that the Assessing Officer (AO) failed to pass orders as directed by the Income Tax Appellate Tribunal (ITAT) within the statutory timelines specified under Section 153 of the Income Tax Act. The petitioner relied on a previous judgment where it was held that failure to pass a final assessment order within the prescribed period renders the assessment proceedings time-barred.

The ITAT had remanded certain issues to the AO/Transfer Pricing Officer for determination and deleted certain additions, but the AO failed to pass any order in compliance with the ITAT directions. The petitioner contended that since the limitation period for passing such orders had expired, the assessment proceedings were time-barred. The court referred to a previous judgment to support the petitioner's argument and directed the AO to pass appeal effect orders within eight weeks. If the AO failed to pass assessment orders within the stipulated time, the returned assessments were to be accepted, and refunds, if any, were to be released along with applicable interest as per Section 244A of the Act.

The court emphasized that assessment is complete only when the AO issues an assessment order determining the total income and a demand notice determining the tax payable. The respondent sought more time to obtain instructions, but the court, having previously adjourned the matter for the same reason, declined further adjournment. Consequently, the court disposed of the writ petitions and applications with directions for the AO to comply with the ITAT orders within the specified timelines, failing which the returned assessments would be accepted, and refunds released accordingly.

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