2024 (8) TMI 978 - 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 - Sub Section 3 of Section 153 of the Act stipulates that an order for fresh assessment pursuant to an order under Section 254 or Section 263 or Section 264 of the Act may be made at any time before the expiry of period of nine months. The said provision further encapsulates that the aforesaid period has to be calculated from the end of the financial year in which the order u/s 254 of the Act is received by the authorities mentioned in the said Sections.' 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 timeline. No action was taken by the AO 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 u/s 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 Assessment Order dated 11.08.2023 is thus clearly beyond the statutorily prescribed period of limitation. In view of the above, the contention that passing of a 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 as also the Assessment Order dated 11.08.2023 cannot be sustained and need to be set aside. 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, Ms. Kanika Chawla 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. Refund of INR 69,72,970/- (including interest) for AY 2004-05.
2. Quashing of impugned notices and Assessment Order dated 11.08.2023.
3. Limitation period for passing a fresh assessment order under Section 153(3) of the Income Tax Act, 1961.
4. Compliance with Tribunal's directions within the stipulated timeline.

Detailed Analysis:

Refund of INR 69,72,970/- (including interest) for AY 2004-05:
The petitioner sought a writ of mandamus for issuing a refund of INR 69,72,970/- (including interest under Section 244A of the Income Tax Act, 1961) due for AY 2004-05. The court noted that the petitioner had filed a return of income for AY 2004-05, which was processed and accepted under Section 143(1) of the Act. However, subsequent reassessment proceedings added INR 1 crore to the petitioner's income, deeming the gifts received as non-genuine.

Quashing of Impugned Notices and Assessment Order:
The petitioner also requested the quashing of notices dated 11.05.2023, 07.07.2023, 20.07.2023, 11.08.2023, and the Assessment Order dated 11.08.2023. The court observed that the reassessment proceedings and subsequent appeals led to the Tribunal remitting the matter back to the Assessing Officer (AO) with specific directions to ascertain the status of the appeal or finality of the assessment in the case of the donor, Shri Harish Kumar.

Limitation Period for Passing Fresh Assessment Order:
The core issue was 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 highlighted that Section 153(3) stipulates a nine-month period (extended to twelve months post-April 1, 2019) for passing a fresh assessment order from the end of the financial year in which the order under Section 254 is received. The court found that the AO failed to comply with this timeline, as the statutory limitation expired on 30.09.2021, making the Assessment Order dated 11.08.2023 barred by limitation.

Compliance with Tribunal's Directions:
The Tribunal had directed the AO to ascertain whether the additions made in the hands of Shri Harish Kumar were to be taxed on a protective basis and if any addition had been deleted on merits in his case, no addition could be confirmed against the petitioner. The AO failed to adhere to these directions within the stipulated six-month period. The court cited the Supreme Court's judgment in Commissioner of Income Tax, Bhopal vs. Shelly Products and Another, emphasizing that failure to make an assessment within the limitation period results in deemed acceptance of the return filed by the assessee.

Conclusion:
The court concluded that the respondents failed to comply with the Tribunal's order within the stipulated time, thereby rendering the fresh Assessment Order dated 11.08.2023 invalid. Consequently, the impugned notices and the Assessment Order were set aside. The court directed the respondents to refund INR 36,62,185/- along with applicable interest to the petitioner within eight weeks.

Final Judgment:
The petition was allowed, and the respondents were directed to refund the amount of INR 36,62,185/- along with interest as applicable within eight weeks.