2023 (8) TMI 460 - HC - Income Tax

Validity of assessment u/s 144C - applicability of time limit prescribed u/s 153 - HELD THAT - As the assessment has to be concluded within twelve months as provided in Section 153(3) of the Act when there has been remand to the AO by the ITAT u/s 254 of the Act. Within this twelve months prescribed, the AO has to ensure that the entire procedure prescribed u/s 144C is completed and pass a final assessment order. For this the AO has to be prompt in passing an order contemplated u/s 144C(1) of the Act and not wait to be reminded like in this case and still take almost two years to start the process. Sub-Section (13) of Section 144C provides that an assessment officer shall, upon receipt of the directions, issued under Sub-Section (5), in conformity with the directions complete, notwithstanding anything to the contrary contained in Section 153, the assessment without providing any further opportunity of being heard to the assessee, within one month from the end of the month in which such direction is received. What is contemplated u/s 144C (13) is the passing of the final assessment order. Twelve months as provided u/s 153(3) would start from the end of the financial year in which the Principal Commissioner received the order u/s 254 from the ITAT. The assessing officer should have taken steps to pass the final order under Sub-Section (13) of Section 144C within 12 months period. The exclusion of applicability of Section 153, in so far as non-obstante clause in Sub-Section (13) of Section 144C is concerned, it is for limited purpose to ensure that dehors larger time available, an order based on the directions of the DRP has to be passed within 30 days from the end of the receipt of such directions. The Section and Sub-Section have to be read as a whole with connected provisions to decipher the meaning and intentions. A similar non-obstante clause is also used in Section 144C(4) of the Act with the same limited purpose to imply, even though there might be a larger time limit under Section 153, once the matter is remanded to AO by the ITAT under Section 254, the process to pass final order under Section 144C has to be taken immediately. The object is to conclude the proceedings as expeditiously as possible. There is a limit prescribed under the statute for the AO and therefore, it is his duty to pass an order in time. After 30th September 2021, the AO will have no authority to pass any final assessment order in this Case. We cannot accept the submissions of Shri Suresh Kumar that passing of draft assessment order before 30th September 2021 would suffice. We find support for this view in Roca Bathroom (SB) 2021 (4) TMI 355 - MADRAS HIGH COURT and Roca Bathroom (DB) 2022 (6) TMI 848 - MADRAS HIGH COURT Since no final assessment order can be passed in the present case as the same is time barred, the Return of Income as filed by Petitioner be accepted.

Issues Involved:
1. Limitation period for passing the final assessment order.
2. Applicability of Section 144C and Section 153 of the Income Tax Act, 1961.
3. Validity of the draft assessment order.
4. Compliance with procedural requirements under the Income Tax Act.

Detailed Analysis:

1. Limitation Period for Passing the Final Assessment Order:
The primary issue is whether the final assessment order was passed within the limitation period prescribed under Section 153 of the Income Tax Act, 1961. The Petitioners argued that the limitation expired on 30th September 2021, and any final assessment order passed after this date is time-barred. The court agreed with the Petitioners, stating, "After 30th September 2021, the AO will have no authority to pass any final assessment order in this Case."

2. Applicability of Section 144C and Section 153 of the Income Tax Act:
The court examined whether the time limits prescribed under Section 153 are applicable when Section 144C is also involved. The court concluded, "the time limit prescribed under Section 153 of the Act would prevail over and above the assessment time limit prescribed under Section 144C of the Act." The court emphasized that the entire procedure, including the draft assessment order and final assessment order, must be completed within the twelve months period provided under Section 153(3) of the Act.

3. Validity of the Draft Assessment Order:
The court scrutinized the draft assessment order dated 28th September 2021 and concluded that merely passing the draft assessment order within the limitation period does not suffice. The court stated, "We cannot accept the submissions of Shri Suresh Kumar that passing of draft assessment order before 30th September 2021 would suffice."

4. Compliance with Procedural Requirements under the Income Tax Act:
The court examined whether the procedural requirements under the Income Tax Act were followed. The court found that the Assessing Officer (AO) did not act promptly and took almost two years to start the process, which led to the delay in passing the final assessment order. The court noted, "the AO has to be prompt in passing an order contemplated under Section 144C(1) of the Act and not wait to be reminded like in this case and still take almost two years to start the process."

Conclusion:
The court ruled that since no final assessment order was passed within the prescribed limitation period, the Return of Income as filed by the Petitioners should be accepted. The court stated, "since no final assessment order can be passed in the present case as the same is time-barred, the Return of Income as filed by Petitioner be accepted." This ruling applies to all the related writ petitions, including Writ Petition Nos. 2340 of 2021, 3059 of 2021, and 3060 of 2021. The court disposed of the petitions, allowing the Petitioners' returns to be accepted while permitting the Revenue to take any other steps in accordance with the law.

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