2023 (10) TMI 785 - HC - Income Tax

Reassessment and TP adjustment quashed as time-barred; Section 153(2A) applies despite later Section 153(3) amendment

HC held that the reassessment proceedings and consequential TP adjustment order passed by the AO were barred by limitation under Section 153(2A) of the ... 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. Issues: (i) Whether a consequential assessment order passed after the time period prescribed by Section 153(2A) of the Income-tax Act, 1961 is valid; (ii) Whether a remand by the Appellate Tribunal which directs fresh consideration on any issue attracts Section 153(2A) or falls under Section 153(3) of the Income-tax Act, 1961.Issue (i): Whether a consequential assessment order passed beyond the period prescribed by Section 153(2A) is sustainable.Analysis: Section 153(2A) prescribes a specific time limit for passing a fresh assessment where an assessment is set aside or cancelled by specified appellate orders. The statutory scheme of Section 153, read with the amendment to subsection (3), demonstrates the legislature's intent to subject fresh assessments pursuant to appellate setting aside to the time limit in subsection (2A). Judicial precedents interpret this time limit as operative and capable of rendering delayed consequential orders time-barred.Conclusion: The consequential assessment order passed beyond the period prescribed by Section 153(2A) is time-barred and not sustainable; conclusion is in favour of the assessee.Issue (ii): Whether a partial remand by the Tribunal that requires fresh consideration of any issue falls within Section 153(2A) or within Section 153(3).Analysis: The purpose and textual interplay between subsections (2A) and (3) indicate that subsection (2A) governs cases where a fresh assessment is necessitated by an appellate setting aside, even if only certain issues are remitted for fresh consideration. Amendment to subsection (3) making it subject to subsection (2A) reinforces that where a remand results in a fresh assessment on any issue, subsection (2A)'s time limit applies; subsection (3) applies where only consequential compliance, not a fresh assessment, is required.Conclusion: A remand directing fresh consideration of any issue attracts Section 153(2A); conclusion is in favour of the assessee.Final Conclusion: The delayed consequential orders impugned were beyond the limitation prescribed by Section 153(2A) and are set aside; the writ petitions are allowed.Ratio Decidendi: Where an appellate order remits any issue for fresh consideration such that a fresh assessment is required, the time limit prescribed by Section 153(2A) of the Income-tax Act, 1961 applies and a consequential assessment made after that period is time-barred.