2020 (9) TMI 1053 - HC - Income Tax

Period of limitation to pass assessment order in case of remand proceedings u/s 153 - extension of time to complete the assessment under Section 153(6)(i) - whether the Assessing Officer would be able to complete the assessment before the expiry of twelve months from the end of the month in which the order passed by this Court remanding the matter back to the Assessing Officer or not? - HELD THAT - Karnataka High Court in the case of T.M. Kousali v. Sixth Income Tax Officer 1984 (3) TMI 11 - KARNATAKA HIGH COURT had an occasion to consider Section 153(3)(2) as it was in existent for the relevant period which was equivalent to Section 153(6) of the Act, 1961 as on today. It after considering the decision of this Court in case of Additional CIT v. New Jehangir Vakil Mills Co. Ltd. 1979 (2) TMI 100 - GUJARAT HIGH COURT held that the proceedings would not be barred by limitation, in view of the Section 153(3)(ii) of the Act, 1961, existing at the relevant time. An order of any Court means an order of any and every Court of the country. - The hierarchy in status of the Court in the country is not decisive. As provided in Section 153(6) of the Act, that there must be a Court, and there must be an order of the Court. Therefore, when this Court remands the matter, it is an order of the Court which would extend the limitation for completing the assessment by the Assessing Officer for another twelve months. Contention canvassed on behalf of the revenue that order of any Court in a proceeding otherwise than by way of an appeal or reference under the Act, like order passed under the Land Acquisition matter, etc., is only required to be taken into consideration for the purpose of enabling the AO to pass order of assessment, reassessment, etc., before the expiry of twelve months from the end of the month in which such order is received or passed cannot be accepted, because order of remand which may be passed by this Court would be an order of any Court in a proceeding, otherwise than by way of appeal or reference under the Act, 1961. Therefore matter is remanded back to the Assessing Officer to pass fresh denovo assessment order, after providing all the details and information in possession of Assessing Officer.

Issues Involved:
1. Violation of principles of natural justice in the assessment order.
2. Maintainability of the petition under Article 226 despite the availability of an alternative remedy.
3. Validity of the assessment order and subsequent recovery actions.
4. Limitation period for passing a fresh assessment order upon remand.

Detailed Analysis:

1. Violation of Principles of Natural Justice:
The petitioners argued that the impugned assessment order dated 30.12.2019 was passed without providing an opportunity of hearing and without considering the replies and documents submitted online. The court found that the respondent did not provide the petitioner with the information in possession of the Assessing Officer, which was the basis for making additions. This omission constituted a breach of the principles of natural justice, rendering the assessment order ex parte and in the nature of a best judgment assessment under Section 144 of the Income Tax Act, 1961, despite being passed under Section 143(3), which requires an opportunity for the assessee to rebut proposed additions.

2. Maintainability of the Petition Under Article 226:
The respondent contended that the petition was not maintainable due to the availability of an alternative remedy under the Income Tax Act. However, the court referred to the Supreme Court's decision in Whirlpool Corporation v. Registrar of Trade Marks, which established that a writ petition is maintainable in cases of violation of fundamental rights, principles of natural justice, or lack of jurisdiction. Given the breach of natural justice in this case, the court held that the petition was maintainable under Article 226.

3. Validity of the Assessment Order and Subsequent Recovery Actions:
The court determined that the impugned assessment order was invalid due to the violation of principles of natural justice. Consequently, the subsequent recovery actions, including the bank attachment notices and the recovery of ?15,50,657.60 from the petitioners' bank account, were also invalid. The court directed the respondent to lift the attachment on the bank account and refund the appropriated amount.

4. Limitation Period for Passing a Fresh Assessment Order Upon Remand:
A significant issue was whether the Assessing Officer could pass a fresh assessment order within the limitation period prescribed under Section 153 of the Income Tax Act. The court referred to Section 153(6)(i), which allows the Assessing Officer to complete the assessment within twelve months from the end of the month in which the court's order is received. The court also cited relevant case law, including the Supreme Court's decision in The Director of Inspection of Income Tax (Investigation) v. M/s. Pooran Mal & Sons, which supported the view that the limitation period is extended upon remand by the court. The court concluded that the Assessing Officer would have twelve months from the receipt of the court's order to pass a fresh assessment.

Conclusion:
The court quashed the impugned assessment order and remanded the matter back to the Assessing Officer to pass a fresh de novo assessment order within twelve months from the end of the month in which the court's order is received. The court also directed the respondent to lift the bank attachment and refund the appropriated amount. The petition was allowed, and the rule was made absolute to the extent specified.

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