2023 (10) TMI 850 - HC - Income Tax

Validity of scrutiny assessment - timeline within which the assessment has to be concluded - disallowance of bad debts/advances written off and under Section 14A - claims for refund - HELD THAT - ITAT has directed the AO to consider the question of disallowance for bad debts/advances being written off and u/s 14A of the IT Act permitting the petitioner to produce further documents, and directing the AO to extend an opportunity of hearing to the petitioner and decide on the afore in the light of the judicial pronouncements. This order is common to all the three subject assessment years, and in fact, it is in view of the ITAT s similar order for the previous assessment years. This Court, in view of the above, can only conclude that it is indubitable that the ITAT s common order do not set aside or cancel the subject assessment orders requiring a fresh assessment. The first question is answered accordingly. As apparent that the respondents have issued the impugned notices after the petitioner s applications dated 29.10.2020 as they were of the opinion that they could give effect to the ITAT s orders dated 31.03.2015, but the respondents, consequent to this Court s conclusion that the time for the AO to consider the question of disallowance of the claims of bad debts/ advances written off and under Section 14A of the IT Act stand lapsed as of 31.03.2017, must consider the petitioner s representation dated 29.11.2020 for refund. ORDER A The petitions are allowed in part and the impugned notices dated 05.11.2020 and 06.11.2020 are quashed on the ground that they are issued after 31.03.2017 which would be impermissible because of the provisions of Section 153 7 of the Income Tax Act, 1961 as amended by the Finance Act 2016. B The respondents are directed to consider the petitioner s representations for refund along with interest in the light of the decision of Shelly Products 2003 (5) TMI 4 - SUPREME COURT The respondents shall so consider the representations within a period of 3 three months from the date of receipt of a certified copy of this order.

Summary

Issues Involved:
1. Validity of the notices dated 05.11.2020 and 06.11.2020.
2. Timeliness of reassessment proceedings under Section 153 of the IT Act.
3. Entitlement to refund claims and interest.

Summary:

1. Validity of Notices:
The petitioner challenged the notices dated 05.11.2020 and 06.11.2020 issued by the first respondent, arguing they were time-barred. The High Court concluded that these notices were issued after the deadline of 31.03.2017, making them impermissible under Section 153[7] of the Income Tax Act, 1961, as amended by the Finance Act 2016. Therefore, the notices were quashed.

2. Timeliness of Reassessment Proceedings:
The Court examined whether the reassessment proceedings were within the permissible time limits. The ITAT's common order dated 31.03.2015 did not set aside or cancel the assessment orders but directed the AO to reconsider specific aspects. The Court determined that the reassessment had to be completed by 31.03.2017, as per Section 153[7] of the IT Act. Since the reassessment was not completed within this timeframe, the proceedings stood lapsed.

3. Entitlement to Refund Claims and Interest:
The petitioner sought refunds for excess tax paid for the assessment years 2007-08, 2008-09, and 2009-10. The Court referred to the Supreme Court's decision in CIT v. Shelly Products, which held that if an assessment is not completed within the permissible time, the tax paid by the assessee must be accepted as it is, and any excess amount must be refunded. The Court directed the respondents to consider the petitioner's representations for refunds, along with interest, within three months from the receipt of the certified copy of the order.

Order:
[A] The petitions are allowed in part, and the impugned notices dated 05.11.2020 and 06.11.2020 are quashed.
[B] The respondents are directed to consider the petitioner's representations dated 29.10.2020 for refunds along with interest, in light of the Supreme Court's decision in CIT v. Shelly Products, within three months from the receipt of a certified copy of this order.