Scope of Section 153(3) of the Income Tax where it does not prescribe the time limit for completion of assessment and reassessment - whether it is unlimited?

Section 153 of the Income Tax Act, 1961 specified that the time limit for completion of assessment or reassessment. But, subsection (3) of section 153 states that the time limit as prescribed u/s 153(1), (1A), (1B) and (2)  shall not be applicable in the following circumstances:

(3) The provisions of sub-sections (1), (1A), (1B) and (2) shall not apply to the following classes of assessments, reassessments and recomputations which may, subject to the provisions of sub-section (2A), be completed at any time

(a) where the assessment, reassessment or recomputation is made on the assessee or any person in consequence of or to give effect toany finding or direction contained in an order under section 250, 254, 260, 262, 263, or 264 [or in an order of any court in a proceeding otherwise than by way of appeal or reference under this Act] ;

(b) where, in the case of a firm, an assessment is made on a partner of the firm in consequence of an assessment made on the firm under section 147.

In the instant case, Honorable High court of Madras has found that:

- In this case, the petitioner has made several representations to the respondent for refund of the amount, inspite of those representations, the respondent has not taken any efforts to proceed under Section 153 (3) of the Act.

- On the part of the respondents there was no due diligence.

Therefore, Madras High Court has held that:

A person who is not vigilant about his right must explain every day delay. As mentioned above, the respondent has not explained the delay satisfactorily and the delay of six years is inordinate and unexplained.  Hence, this Court is of the considered view that though time limit is not prescribed under Section 153 (3) of the Act, the impugned proceedings initiated by the respondent after a lapse of six years cannot be allowed to continue, hence, the impugned order is quashed.  The writ petition is allowed.  No costs.  Consequently, connected miscellaneous petition is closed.

 (For full text of judgment - visit 2007 -TMI - 2288 - HIGH COURT , MADRAS)