2025 (3) TMI 1284 - HC - Income Tax

Validity of reassessment proceedings as barred by limitation u/s 153(2) - whether the proviso to Section 153 (2) is applicable or whether the time for completing the assessment is a period of 12 months by virtue of Section 153 (2) of the Act as contended on behalf of the Revenue? - HELD THAT - In terms of the proviso to Explanation I to Section 153 of the Act the time-period available for completion of the assessment is less than sixty days after excluding the periods as referred to under Explanation I a period of sixty days would be available to complete the assessment. AO would have sixty days to complete the proceedings. In the present case the interim order which interdicted the AO from proceeding with the reassessment proceedings in respect of AY 2013-14 was passed on 20.12.2019. The said proceedings were otherwise required to be concluded on 31.12.2019. Thus the time-period available to the AO was less than sixty days. Accordingly the proviso to Explanation 1 to Section 153 of the Act is applicable. Thus in terms of the said proviso the AO is required to complete the proceedings within sixty days of the interim order being vacated. The same was vacated on 13.12.2023. Therefore the said period of sixty days expired on 11.02.2024. Notwithstanding that the time for passing an assessment order had expired the faceless assessment unit continued to issue notices u/s 142 (1) of the Act. The petitioner objected to the said notices on the ground that further proceedings were barred by limitation but the same was rejected by a communication dated 21.06.2024. We find merit in the contention that the time-period for concluding the assessment pursuant to the notice dated 20.03.2019 issued under Section 148 in respect of AY 2013-14 has since expired. Accordingly the reassessment proceedings are required to be terminated.

Summary

ISSUES PRESENTED and CONSIDERED

The core legal questions considered in this judgment include:

1. Whether the reassessment proceedings initiated for Assessment Year (AY) 2013-2014 are barred by limitation under Section 153(2) of the Income Tax Act, 1961.

2. Whether the petitioner is entitled to credit for taxes paid for AY 2012-13 and AY 2013-14 under Section 245HAA of the Income Tax Act, and whether a refund should be issued after adjusting against any established tax liability.

ISSUE-WISE DETAILED ANALYSIS

1. Limitation on Reassessment Proceedings for AY 2013-14

Relevant legal framework and precedents: The legal framework involves Section 148 and Section 153 of the Income Tax Act, 1961. Section 148 pertains to the issuance of notice for reassessment, while Section 153 sets the time limits for completing assessments, reassessments, and recomputations. The proviso to Section 153(2) extends the time limit from nine months to twelve months for notices served on or after April 1, 2019.

Court's interpretation and reasoning: The Court examined whether the reassessment proceedings for AY 2013-14 were time-barred under Section 153(2). It considered the interim order dated 20.12.2019, which stayed the proceedings, and the subsequent order dated 13.12.2023, which vacated the stay. The Court noted that the time period available for completing the assessment was less than sixty days after excluding the period during which the proceedings were stayed, thus applying the proviso to Explanation 1 of Section 153.

Key evidence and findings: The Court found that the interim order was vacated on 13.12.2023, and the sixty-day period for completing the assessment expired on 11.02.2024. Despite this, the faceless assessment unit continued to issue notices, which the petitioner objected to as being time-barred.

Application of law to facts: The Court applied the proviso to Explanation 1 of Section 153, determining that the reassessment proceedings should have been completed within sixty days of the interim order being vacated, which was not done.

Treatment of competing arguments: The Revenue argued that the time for passing an order had not expired by virtue of Section 153(6), which the Court found inapplicable as no findings or directions were issued by any court as contemplated under the section.

Conclusions: The Court concluded that the reassessment proceedings for AY 2013-14 were barred by limitation and required termination.

2. Credit for Taxes Paid and Refund

Relevant legal framework and precedents: Section 245HAA of the Income Tax Act pertains to credit for taxes paid in the context of settlement applications.

Court's interpretation and reasoning: The Court did not make a specific ruling on the entitlement to tax credit or refund but noted that the petitioner is not precluded from making an application for claiming the refund, which should be considered in accordance with the law.

Key evidence and findings: The petitioner's applications for settlement for AYs 2012-13 and 2013-14 were rejected by the Settlement Commission, and the challenge to this rejection was dismissed.

Application of law to facts: The Court reserved all rights and contentions regarding the refund and directed that any application made should be considered according to the law.

Treatment of competing arguments: The Court did not delve deeply into competing arguments regarding the refund, focusing instead on the procedural aspect of making an application.

Conclusions: The Court allowed the petitioner to make an application for a refund, which should be evaluated in accordance with legal provisions.

SIGNIFICANT HOLDINGS

The Court's significant holdings include:

- The reassessment proceedings for AY 2013-14 are barred by limitation as per Section 153(2) of the Income Tax Act, requiring termination of such proceedings.

- The Court preserved the petitioner's right to apply for a refund of taxes paid, with such applications to be considered in accordance with the law.

- The Court's reasoning emphasized the application of the proviso to Explanation 1 of Section 153, which extends the time available to complete assessments when the period is less than sixty days after excluding the stay period.

The petition was allowed, and pending applications were disposed of accordingly.