2023 (10) TMI 785 - HC - Income Tax

TP Adjustment - Period of limitation u/s 153(2A) - Scope of amendment w.e.f. 1.4.2016 - retrospective effect - Legislative intention - consequential order passed by the AO after an inordinately delayed period of time - authority as denude of its powers after the prescribed time limit - appeal of the petitioner/assessee was partly allowed and the matter was remitted back to the file of AO with a direction to look into the aspect and take a decision in the matter after verifying the claim of the petitioner/assessee and giving a fair and reasonable opportunity of hearing - HELD THAT - The very purpose of enacting sub-section (2A) goes to show that it has been enacted to meet with a situation where the original assessment order has been set aside/cancelled by the Appellate Tribunal or the Appellate Authority under Section 250 or under Section 254 or under Section 263 or under Section 264. Vide the said amendment in sub-section 3 of Section 153 is concerned with effect from 01.04.2016 onwards, the legislature has brought a time limit for adjudication of a proceeding under sub-section 3 as well which till the amendment was made was not stipulated. If the analogy of the principle contention of the learned counsel for the respondent-Department is to be accepted, then in that event, the very purpose of sub-section (2A) becomes redundant. The contention of Department also would not be sustainable for the reason that if, that would had been the intention of the legislature, then at the time of the amendment brought in to sub-section 3 of Section 153, the legislature would also had deleted the provision of subsection (2A), as it would not be any further required in the light of their contention and in the light of the subsequent amendment brought in to sub-section 3 of Section 153. In the light of above decision of Hon ble High Court of Kerala DR R.P. PATEL 2015 (3) TMI 1291 - KERALA HIGH COURT the contention of Department that Section 153 (2A) of the Act has no application to the present case as the Tribunal had only partially remanded the matter, lacks merit and is untenable. From plain reading of the judicial pronouncements and precedents we are of the considered opinion that the proceedings drawn, admittedly being beyond a period that is prescribed under sub-section (2A) of Section 153 and the consequential orders passed are all beyond the period of limitation prescribed under sub-section (2A) of Section 153. Hence, the same being not sustainable, deserves to be and is accordingly set aside/quashed.

Summary

Issues Involved:
1. Whether the consequential order could have been passed by the Assessing Officer beyond the prescribed period of time as is envisaged under Section 153(2A) of the Income Tax Act.
2. Whether after a remand is made by the Tribunal while allowing an appeal in part, the consequential order that needs to be passed would be one under Section 153(2A) or under Section 153(3) of the Act.

Summary:

Issue 1: Time Limit for Passing Consequential Order
The primary contention was whether the Assessing Officer could pass the consequential order beyond the prescribed period under Section 153(2A) of the Income Tax Act, 1961. The petitioner argued that the proceedings were initiated after a considerable delay, violating the time limit stipulated under Section 153(2A). The respondent-Department countered that the authority was not denuded of its powers after the prescribed time limit and that the term "may" in Section 153(2A) indicated a directory, not mandatory, provision.

Issue 2: Applicability of Section 153(2A) vs. Section 153(3)
The petitioner contended that the remand by the Tribunal required the application of Section 153(2A), which prescribes a time limit for fresh assessments. The respondent-Department argued that Section 153(2A) did not apply since the appeal was only partly allowed and that the term "may" in the provision indicated it was not mandatory. They also claimed that the amended provision under Section 153(3), effective from 01.06.2016, did not apply to the petitioner's case as the assessment year was 2006-2007.

Court's Analysis and Findings:
1. Interpretation of Section 153(2A) and Section 153(3): The court examined the statutory provisions and concluded that Section 153(2A) was enacted to prescribe a time limit for fresh assessments ordered by appellate authorities. The court noted that sub-section (3) of Section 153, both pre- and post-amendment, is subject to sub-section (2A), indicating that the time limit prescribed in sub-section (2A) is mandatory.

2. Judicial Precedents: The court referred to several judicial precedents, including decisions from the High Courts of Gujarat, Delhi, and Kerala, which supported the view that Section 153(2A) applies to cases where the assessment is set aside and remanded for fresh consideration. The court found that these precedents consistently held that the time limit under Section 153(2A) is mandatory.

3. Application to the Present Case: The court concluded that the proceedings initiated and the consequential orders passed by the Assessing Officer were beyond the period prescribed under Section 153(2A). The court found that the contention of the respondent-Department that Section 153(2A) did not apply to partial remands lacked merit.

Conclusion:
The court held that the proceedings and consequential orders were not sustainable as they were beyond the period of limitation prescribed under Section 153(2A). Accordingly, the writ petitions were allowed, and the impugned orders were set aside/quashed. There were no orders as to costs, and any pending miscellaneous petitions were closed.