AO's failure to complete assessment by statutory deadline renders revenue appeals infructuous, mandates refund with interest under Section 153(7)

Delhi HC held that where AO failed to frame final assessment order by statutory deadline of 31 March 2017 following ITAT remit prior to 1 June 2016, revenue cannot retain amounts deposited by assessee pending assessment proceedings. Court applied Section 153(7) of Income Tax Act, ruling that limitation period for assessment had expired, rendering pending appeals infructuous. HC directed refund of deposited amounts with statutory interest, rejecting revenue's argument that pending appeals justified retention of deposits.

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Issues involved:
The issues involved in the judgment are the refund of deposited amounts by the petitioner towards part payment of demand raised in assessment orders for two assessment years, and the delay in finalizing the assessment proceedings leading to the refund claim.

Refund of Deposited Amounts:
The petitioner sought a refund of amounts deposited towards demand raised in assessment orders for two assessment years, along with interest. The refund was requested based on orders of the Income Tax Appellate Tribunal remitting certain aspects to the Transfer Pricing Officer. Despite the remit orders in 2013 and 2014, the Assessing Officer failed to frame a final assessment order by the specified deadline, justifying the refund claim by the petitioner. The court noted the provisions of Section 153 of the Income Tax Act, particularly sub-sections (5), (7), and (8), and ruled in favor of the petitioner, directing the respondents to refund the amounts with interest.

Delay in Finalizing Assessment Proceedings:
The court observed that the Assessing Officer did not finalize the assessment orders by the deadline, leading to the petitioner's claim for a refund. The court highlighted the provisions of Section 153(5) and (7) of the Income Tax Act, emphasizing the timeline for giving effect to orders of remit by the ITAT. Since the remit orders were issued before 1 June 2016, the Assessing Officer was required to finalize the assessment by 31 March 2017. The court found no justification for the respondents to retain the deposited amounts, considering the failure to frame a final assessment order within the stipulated timeline. The court allowed the writ petition, directing the respondents to refund the amounts claimed by the petitioner along with applicable interest.

Separate Judgment by Judges:
The judgment was delivered by Hon'ble Mr. Justice Yashwant Varma and Hon'ble Mr. Justice Purushaindra Kumar Kaurav of the Delhi High Court.

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