2024 (5) TMI 539 - HC - Income Tax

Assessment orders following tribunal remand must comply with Section 153(2A) time limits or become invalid

Joseph Madathiparambil Michael Versus Deputy Commissioner Of Income Tax, Corporate Circle - 1 (1), Kerala, Commissioner Of Income Tax-Appeals, Assistant Commissioner Of Income Tax, Kerala.

Kerala HC held that consequential assessment orders following tribunal remand must comply with Section 153(2A) time limits. The tribunal remanded only ... Limitation for passing a assessment order - Consequential order passed by the assessing authority beyond the time limit specified u/s 153 (2A) - HELD THAT:- We find that the order of the Tribunal dated 24.05.2016 specifically directed the Assessing Authority to re-adjudicate the issue with regard to the claims made by the petitioner assessee u/s 54F. In accordance with the provisions of Section 153 (2A) of the IT Act, the Assessing Authority ought to have passed the consequential order by 31.03.2018 i.e., before the expiry of one year from 31.03.2017. However, Ext. P8 consequential order of the Assessing Authority is dated 17.02.2023 and proceeds on the assumption that there was more than one issue that was remanded to him for de novo adjudication. While it is the submission of the learned Standing counsel for the Income Tax Department that only the issue under Section 54F was remanded for de novo adjudication, we do not find it to be of much relevance to the issue that we are called upon to decide, namely, whether on a limited remand for de novo adjudication of one of many issues that arise for consideration in an assessment, the consequential order passed by the Assessing Authority can be seen as one that would attract the provisions of Section 153 (2A) of the IT Act. Taking note of the Scheme of the statutory provisions as referred to above, as also the inherent object behind those provisions, which is to ensure an expeditious finality to assessments, we are of the view that the consequential orders passed by the Assessing Authority pursuant to the remand had necessarily to be passed within the time prescribed u/s 153 (2A) - As significant in this context that the definition of assessment under the IT Act includes a re-assessment and in the case of the petitioner assessee the remand by the Tribunal warranted a reassessment of the issue in relation to the deductions claimed u/s 54F of the IT Act and the substitution of the revised finding, in place of the original finding on the said issue, in the assessment order that was originally passed. See DR. R.P. PATEL VERSUS ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE-1, KOTTAYAM [2015 (3) TMI 1291 - KERALA HIGH COURT] The time limit specified in Section 153 (2A) of the IT Act is also intended to ensure that amounts due to the Government, if any, are received at the earliest point in time after the remand. If an assessee defaults in payment of the tax dues after the passing of the consequential order giving effect to the terms of the remand, he becomes liable to pay statutory interest from the date on which he ought to have paid the tax in the first instance i.e., along with his return. Thus, an Assessing Authority, who is called upon to adjudicate an issue afresh pursuant to a remand from an Appellate Authority, cannot ignore the time limit specified in the statute for passing the consequential order because any delay would operate to the prejudice of the assessee who would be called upon to pay interest for a longer time period corresponding to the delay - Decided in favour of assessee. Issues Involved:1. Applicability of the limitation period under Section 153 (2A) of the Income Tax Act for passing a fresh assessment order.2. Whether the limitation period applies when the case is remanded on a particular issue without setting aside or canceling the entire assessment order.Summary:1. Applicability of Limitation Period under Section 153 (2A):The petitioner, an assessee under the Income Tax Act, 1961, challenged the Ext. P8 order dated 17.02.2023 issued by the Assessing Authority. The petitioner contended that the order was beyond the time limit specified under Section 153 (2A) of the IT Act as it stood before amendments effective from 01.06.2016. The learned Single Judge referred to a prior judgment in *Patel R.P. (Dr.) v. Assistant Commissioner of Income Tax, Kottayam [2015 (4) KLT SN 97]*, which held that the limitation under Section 153 (2A) applies even if only one issue is remanded for fresh consideration. The issue was referred to the Division Bench for a decision on whether the one-year limitation applies when the remand is only on a particular issue without setting aside the entire assessment order.2. Case Remanded on a Particular Issue:The petitioner filed returns for the assessment year 2007-2008, which were scrutinized, resulting in an assessment order on 31.12.2010. The First Appellate Authority's order dated 28.12.2011 remanded certain matters to the Assessing Officer, who passed consequential orders on 18.01.2012. Both the petitioner and the Department appealed against this order, and the Tribunal's order dated 24.05.2016 remanded the issue of the claim under Section 54F for de novo consideration. The Assessing Authority was required to pass the consequential order within one year as per Section 153 (2A), but the order was not passed until 17.02.2023.3. Statutory Provisions and Interpretation:The court examined the statutory provisions of Section 153 (2A) and (3) of the IT Act, noting that the statute mandates a time-bound completion of assessment following a remand by an Appellate or Revisional Authority. The purpose is to ensure finality and certainty in taxation matters. The court clarified that Section 153 (2A) applies when the Assessing Authority is required to re-adjudicate the issue afresh, whereas it does not apply if the authority merely incorporates the directions of the higher authority without re-adjudication.4. Court's Findings:The court found that the Tribunal's order dated 24.05.2016 required the Assessing Authority to re-adjudicate the issue under Section 54F, and the consequential order should have been passed by 31.03.2018. The Ext. P8 order dated 17.02.2023 was thus beyond the prescribed time limit. The court agreed with the judgment in *Dr. R.P. Patel (supra)* and cited supporting judgments from the Delhi, Bombay, and Madras High Courts.5. Ensuring Timely Assessments:The court emphasized that the time limit in Section 153 (2A) ensures that government dues are received promptly and prevents undue prejudice to the assessee, who would otherwise incur additional interest due to delayed tax payments.Conclusion:The Division Bench answered the issue in favor of the petitioner assessee, quashed the Ext. P8 order, and granted consequential reliefs to the petitioner.