2024 (8) TMI 977 - HC - Income Tax

Delay in issuing the refund of tax - limitation period for remand to be strictly construed as per section 254 r.w.s.153 (3) - HELD THAT - Admittedly, respondents did not file any appeal challenging the order dated 11.10.2019 passed by the Tribunal. The directions given by the Tribunal were to be carried out by the AO within a period of six months, but AO woefully failed to adhere to the stipulated timelines. No action was taken to give effect to the order of the Tribunal within the stipulated period. The statutory limitation period prescribed in sub section (3) of Section 153 also expired on 30.09.2021 i.e. 12 months from the end of the financial year in which the order was passed under Section 254 by the Tribunal. The underlying rationale of the Legislature behind the enactment of Section 153 (3) and setting the limitation therein, cannot be envisaged to expand the time limit for passing of a fresh assessment. In fact, the said provision entails a strict adherence to the time period within which the remand order in the present case should have been passed by the respondents. The notices dated 21.07.2023, 09.08.2023 and 16.08.2023 for initiating fresh assessment were issued much beyond the statutorily prescribed period of limitation. The contention that passing fresh Assessment Order pursuant to the Tribunal s order dated 11.10.2019 is barred under the provisions of Section 153 (3) of the Act is merited and therefore the impugned notices issued by respondent No. 1 dated 21.07.2023, 09.08.2023 and 16.08.2023 cannot be sustained and need to be set aside. Effect of the failure to make an order of assessment within the limitation period, after the earlier assessment made is set aside or nullified in appropriate proceedings - As relying on Shelly Products and Another 2003 (5) TMI 4 - SUPREME COURT since the respondents have failed to comply with the order of the Tribunal in passing a fresh Assessment Order within the stipulated time, we hold that the income as returned by the petitioner, Mr. Ramesh Chawla (HUF) would stand accepted. The logical consequence of refund of amount in excess of admitted liability insofar as the tax paid in the year AY 2004-05 will have to be made good by the respondent Department to the petitioner.

Summary

Issues Involved:

1. Issuance of refund of INR 71,54,104/- along with applicable interest under Section 244A of the Income Tax Act.
2. Quashing of impugned notices dated 21.07.2023, 09.08.2023, and 16.08.2023.
3. Compliance with the Tribunal's directions and the limitation period under Section 153(3) of the Income Tax Act.

Issue-wise Detailed Analysis:

1. Issuance of Refund:

The petitioner sought a writ of mandamus for issuing a refund of INR 71,54,104/- (including interest under Section 244A of the Income Tax Act) for AY 2004-05. The petitioner had filed the return of income declaring INR 45,000/- which was initially accepted. However, reassessment proceedings added INR 1 crore to the income, which was contested through appeals up to the Tribunal. The Tribunal remitted the matter to the AO, who again made the same additions on a protective basis. Despite subsequent appeals and directions from the Tribunal, the AO failed to comply with the Tribunal's directions within the stipulated time. The court held that the failure to pass a fresh assessment order within the limitation period resulted in the acceptance of the income as returned by the petitioner, thereby entitling the petitioner to a refund.

2. Quashing of Impugned Notices:

The petitioner challenged the notices dated 21.07.2023, 09.08.2023, and 16.08.2023, arguing they were time-barred and invalid since no appeal effect order was passed within the time period granted by the Tribunal. The court observed that the AO did not pass any assessment order pursuant to the Tribunal's order dated 11.10.2019, and the statutory limitation period prescribed under Section 153(3) of the Act expired on 30.09.2021. Consequently, the court held that the impugned notices could not be sustained and needed to be set aside.

3. Compliance with Tribunal's Directions and Limitation Period:

The court examined whether the limitation period for remand by the Tribunal should be strictly construed under Section 254 read with Section 153(3) of the Act. The court noted that the AO failed to comply with the Tribunal's directions within the stipulated six months, and no appeal was filed challenging the Tribunal's order. The statutory limitation period for passing a fresh assessment order expired, and the court emphasized strict adherence to this period. The court referred to the Supreme Court's decision in Commissioner of Income Tax, Bhopal vs. Shelly Products, which held that failure to make an assessment within the limitation period results in deemed acceptance of the income as returned by the assessee. Therefore, the court concluded that the income returned by the petitioner must be accepted, and the excess tax paid should be refunded.

Conclusion:

The court allowed the petition, setting aside the impugned notices and directing the respondents to refund the amount of INR 37,73,012/- along with applicable interest within eight weeks. The judgment emphasized the importance of adhering to statutory limitation periods and the consequences of failing to comply with Tribunal directions.