Assessment order passed beyond Section 153(3) limitation period declared invalid and set aside

Delhi HC held that an assessment order passed beyond the statutory limitation period under Section 153(3) of the Income Tax Act is invalid. The Tribunal had directed the Assessing Officer to pass a fresh assessment within six months following its order dated 11.10.2019, but the AO failed to comply within the stipulated timeline. The statutory limitation period of nine months from the end of the financial year also expired on 30.09.2021. The court set aside the assessment order dated 11.08.2023 as time-barred, accepted the petitioner's returned income, and directed the department to refund excess tax paid.

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Issues Involved:
1. Refund of INR 69,72,970/- (including interest) for AY 2004-05.
2. Quashing of impugned notices and Assessment Order dated 11.08.2023.
3. Limitation period for passing a fresh assessment order under Section 153(3) of the Income Tax Act, 1961.
4. Compliance with Tribunal's directions within the stipulated timeline.

Detailed Analysis:

Refund of INR 69,72,970/- (including interest) for AY 2004-05:
The petitioner sought a writ of mandamus for issuing a refund of INR 69,72,970/- (including interest under Section 244A of the Income Tax Act, 1961) due for AY 2004-05. The court noted that the petitioner had filed a return of income for AY 2004-05, which was processed and accepted under Section 143(1) of the Act. However, subsequent reassessment proceedings added INR 1 crore to the petitioner's income, deeming the gifts received as non-genuine.

Quashing of Impugned Notices and Assessment Order:
The petitioner also requested the quashing of notices dated 11.05.2023, 07.07.2023, 20.07.2023, 11.08.2023, and the Assessment Order dated 11.08.2023. The court observed that the reassessment proceedings and subsequent appeals led to the Tribunal remitting the matter back to the Assessing Officer (AO) with specific directions to ascertain the status of the appeal or finality of the assessment in the case of the donor, Shri Harish Kumar.

Limitation Period for Passing Fresh Assessment Order:
The core issue was whether the limitation period for remand by the Tribunal should be strictly construed under Section 254 read with Section 153(3) of the Act. The court highlighted that Section 153(3) stipulates a nine-month period (extended to twelve months post-April 1, 2019) for passing a fresh assessment order from the end of the financial year in which the order under Section 254 is received. The court found that the AO failed to comply with this timeline, as the statutory limitation expired on 30.09.2021, making the Assessment Order dated 11.08.2023 barred by limitation.

Compliance with Tribunal's Directions:
The Tribunal had directed the AO to ascertain whether the additions made in the hands of Shri Harish Kumar were to be taxed on a protective basis and if any addition had been deleted on merits in his case, no addition could be confirmed against the petitioner. The AO failed to adhere to these directions within the stipulated six-month period. The court cited the Supreme Court's judgment in Commissioner of Income Tax, Bhopal vs. Shelly Products and Another, emphasizing that failure to make an assessment within the limitation period results in deemed acceptance of the return filed by the assessee.

Conclusion:
The court concluded that the respondents failed to comply with the Tribunal's order within the stipulated time, thereby rendering the fresh Assessment Order dated 11.08.2023 invalid. Consequently, the impugned notices and the Assessment Order were set aside. The court directed the respondents to refund INR 36,62,185/- along with applicable interest to the petitioner within eight weeks.

Final Judgment:
The petition was allowed, and the respondents were directed to refund the amount of INR 36,62,185/- along with interest as applicable within eight weeks.

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