2016 (5) TMI 324 - AT - Income Tax

Tribunal bars fresh assessment under Income Tax Act, sets aside original assessment

The Tribunal held that the fresh assessment framed on 25.3.2009 is barred by limitation under Section 153(2A) of the Income Tax Act, 1961. The Tribunal's ... Limitation under section 153(2A) of the Income Tax Act - setting aside/restoration of assessment pursuant to appellate order - fresh assessment made in pursuance of an order under section 254 - scope of section 153(3) - assessment to give effect to a finding or directionLimitation under section 153(2A) of the Income Tax Act - setting aside/restoration of assessment pursuant to appellate order - fresh assessment made in pursuance of an order under section 254 - scope of section 153(3) - assessment to give effect to a finding or direction - Fresh assessment dated 25.3.2009 framed pursuant to the Tribunal's order is barred by limitation under section 153(2A) and is a nullity. - HELD THAT: - The Tribunal's order dated 28.9.2007 remitted the matters to the file of the Assessing Officer so that the issues (including confrontation of comparable cases and opportunity to adduce evidence) could be decided afresh; this mandate amounted to setting aside the earlier assessment insofar as determination of total income was concerned and required a fresh assessment exercise. Where a tribunal or appellate order nullifies the earlier determination of total income and directs re-determination, the exercise constitutes a fresh assessment brought within the ambit of section 153(2A). The characterization of the order as a mere 'direction' to give effect under section 153(3) is not tenable where the appellate order effectively annuls the earlier assessment and requires de novo determination; to hold otherwise would defeat the legislative purpose of imposing a time limit to prevent indefinite postponement of fresh assessments. Applying these legal principles to the facts - the Tribunal's order was received by the department before 12.12.2007 and therefore, if section 153(2A) applies, the last date for completion was 31.12.2008; the Assessing Officer's order dated 25.3.2009 was therefore beyond that period and is time barred - accordingly declared nullity. [Paras 2, 3]Cross objection allowed; the fresh assessment dated 25.3.2009 is barred by limitation under section 153(2A) and declared a nullity; appeals dismissed as infructuous.Final Conclusion: The Tribunal held that the remand/restoration to the Assessing Officer amounted to setting aside the earlier assessment and therefore the fresh assessment dated 25.3.2009 was time barred under section 153(2A) and declared nullity; the cross objection of the assessee is allowed and the pending appeals stand dismissed as infructuous. Issues Involved:1. Whether the assessment framed is barred by limitation under Section 153(2A) of the Income Tax Act, 1961.2. Whether the Tribunal's order effectively set aside the assessment, necessitating a fresh assessment within the prescribed time limit.3. Whether the provisions of Section 153(3) apply, which do not stipulate any time limit for completion of assessment.Issue-Wise Detailed Analysis:1. Limitation under Section 153(2A):The primary issue raised by the assessee was that the assessment framed on 25.3.2009 is barred by limitation under Section 153(2A) of the Income Tax Act, 1961. The original assessment was completed under Section 143(3), determining a total income of Rs. 47,94,060/-. On appeal, partial relief was granted, and the matter was further appealed to the Tribunal, which restored the two additions to the file of the Assessing Officer (AO) for fresh decision. The AO passed a fresh assessment order on 25.3.2009, repeating the same additions. The assessee argued that the fresh assessment should have been framed on or before 31.12.2008, as per Section 153(2A), and thus, the assessment framed on 25.3.2009 is barred by limitation. The Tribunal found that the assessment framed on 25.3.2009 was indeed barred by limitation, as the Tribunal's order had effectively set aside the original assessment, necessitating a fresh assessment within the prescribed time limit.2. Tribunal's Order Setting Aside the Assessment:The Tribunal's order dated 28.9.2007 restored the issues to the AO for fresh decision, indicating that the original assessment was effectively set aside. The Tribunal noted that the comparable cases relied upon by the AO were not confronted to the assessee for rebuttal, and the assessee was not given an adequate opportunity to explain his case. The Tribunal directed the AO to decide the issues afresh, following the principles of natural justice. The Tribunal emphasized that the order was for a fresh assessment, as it required the AO to re-determine the total income by following due process. The Tribunal held that the fresh assessment framed on 25.3.2009 was barred by limitation under Section 153(2A), as the order was received by the department on or before 12.12.2007, making the last date for completion of the assessment 31.12.2008.3. Applicability of Section 153(3):The AO argued that the Tribunal's order did not set aside the assessment but only restored it for verification, and thus, Section 153(3), which does not stipulate any time limit, should apply. The Tribunal disagreed, stating that the Tribunal's order effectively nullified the original assessment and required a fresh assessment. The Tribunal noted that Section 153(3) applies to situations where specific directions are given for assessments related to other years or persons, not to cases where the entire assessment is set aside for fresh determination. The Tribunal emphasized that the purpose of Section 153(2A) is to prevent indefinite delays in completing assessments and to ensure timely resolution of cases. The Tribunal concluded that the fresh assessment framed on 25.3.2009 was barred by limitation under Section 153(2A), and the AO's argument relying on Section 153(3) was untenable.Conclusion:The Tribunal held that the fresh assessment framed on 25.3.2009 is barred by limitation under Section 153(2A) of the Income Tax Act, 1961. The Tribunal's order effectively set aside the original assessment, necessitating a fresh assessment within the prescribed time limit. The Tribunal dismissed the appeals of both the assessee and the revenue as infructuous, as the assessment was declared a nullity. The cross objection of the assessee was allowed, and the order was pronounced on 23.03.2016.