2025 (2) TMI 937 - AT - Income Tax

Validity of reassessment order as barred by limitation - arguments advanced by the assessee that the since the extended time limit of 12 months is not available in the case of Non-Resident as per sec.153(4) AO ought to have complete the assessment as per the provisions of sec.153(2) which is one year from the end of the financial year in which notice u/sec.148 was served - HELD THAT -Since in the case of the assessee who is a Non-Resident during the impugned A.Ys. 2013-2014 and 2014- 2015 the Assessing Officer has completed the assessment on 25.05.2022 beyond the period of one year from the end of the financial year in which notice issued u/sec.148 dated 29.03.2021 therefore the assessment order passed by the Assessing Officer cannot be sustainable in the eye of law. As relying on SHRI MIR IBRAHIM ALI 2024 (12) TMI 193 - ITAT HYDERABAD we quash the assessment order passed by the Assessing Officer and allow the additional grounds raised by the assessee. Penalty u/sec.271(1)(c) on account of concealment of particulars of income is to be deleted.

ISSUES PRESENTED and CONSIDERED

The core legal questions considered in this judgment include:

Whether the assessment order passed by the Assessing Officer is barred by limitation under section 153(2) of the Income Tax Act, 1961.
Whether the extended time limit for completion of assessment under section 153(4) is applicable in the case of a non-resident individual.
Whether the penalty imposed under section 271(1)(c) for concealment of income is valid when the quantum appeal is allowed.

ISSUE-WISE DETAILED ANALYSIS

1. Limitation of Assessment Order under Section 153(2)

Relevant Legal Framework and Precedents: Section 153(2) of the Income Tax Act mandates that an assessment or reassessment must be completed within one year from the end of the financial year in which the notice under section 148 was served. The Tribunal referenced the decision in the case of Shri Mir Ibrahim Ali, which held that the extended period under section 153(4) does not apply to non-residents unless there is a reference to the Transfer Pricing Officer (TPO).
Court's Interpretation and Reasoning: The Tribunal agreed with the assessee's argument that the assessment order was passed beyond the permissible time limit. The notice under section 148 was issued on 29.03.2021, and the assessment should have been completed by 31.03.2022. However, the order was passed on 25.05.2022, thus exceeding the limitation period.
Key Evidence and Findings: The Tribunal found no reference to the TPO, which would have allowed for an extended time limit. This absence was crucial in determining the applicability of section 153(4).
Application of Law to Facts: The Tribunal applied section 153(2) strictly, finding the assessment order void due to being time-barred.
Treatment of Competing Arguments: The Revenue's argument that the assessee was an "eligible assessee" under section 144C(15) was rejected due to the lack of a TPO reference.
Conclusions: The assessment order was quashed as it was barred by the limitation period prescribed under section 153(2).

2. Applicability of Extended Time Limit under Section 153(4)

Relevant Legal Framework and Precedents: Section 153(4) provides an extended time limit for assessments involving a TPO reference. The Tribunal's decision in Shri Mir Ibrahim Ali was pivotal, establishing that this extension does not apply to non-residents without a TPO reference.
Court's Interpretation and Reasoning: The Tribunal emphasized that the extended period under section 153(4) is not applicable in the absence of a TPO reference, aligning with the precedent set in previous cases.
Conclusions: The Tribunal concluded that the extended time limit was not available, reinforcing the decision that the assessment order was time-barred.

3. Penalty under Section 271(1)(c)

Relevant Legal Framework and Precedents: Section 271(1)(c) deals with penalties for concealment of income. The Tribunal noted that penalties are generally not sustainable if the underlying assessment is quashed.
Court's Interpretation and Reasoning: Given the quashing of the assessment orders for being time-barred, the penalties for concealment of income were also invalidated.
Conclusions: The penalties imposed under section 271(1)(c) were cancelled as the quantum appeals were allowed.

SIGNIFICANT HOLDINGS

Preserve Verbatim Quotes of Crucial Legal Reasoning: "Since the extended time limit of 12 months is not available in the case of Non-Resident as per section 153(4) of the Act, the Assessing Officer ought to have completed the assessment as per the provisions of section 153(2) of the Act which is one year from the end of the financial year in which notice u/s 148 was served."
Core Principles Established: The Tribunal reinforced the principle that the extended time limit under section 153(4) does not apply to non-residents without a TPO reference, and assessments must adhere to the standard limitation period under section 153(2).
Final Determinations on Each Issue: The Tribunal quashed the assessment orders for being time-barred and invalidated the penalties imposed under section 271(1)(c) due to the quashing of the underlying assessments.

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