2025 (2) TMI 120 - AT - Income Tax

Assessment order passed under sections 263/143(3)/147 becomes nullity when served after limitation period expires under Section 153

The ITAT Kolkata held that an assessment order passed under sections 263/143(3)/147 on 30.12.2015 was barred by limitation as it was served on the ... Order passed u/s 263/143(3)/ 147 as barred by limitation - HELD THAT:- The order passed by the ld. AO u/s 263/143(3)/147 of the Act dated 30.12.2015 should have been served upon the assessee on or before 31.12.2015, in terms of provision of Section 153 of the Act. However, the said was order served upon the assessee on 05.01.2016 by hand delivery and the assessee claimed the same to be hopelessly barred by limitation and accordingly non-est and ex-facie nullity in the eyes of law. We have also called for some clarification on the issue from the ld. CT(DR) who filed before us the letter from AO dated 02.09.2024 stating therein that the assessment order was passed on 31.12.2015 whereas the assessment order mention the date of passing the assessment order as 30.12.2015. AO further mentioned in the order that assessment order the day of passing the order was Thursday and 2nd and 3rd January, 2016 were holidays being Saturday and Sunday and thereafter the order was served on 5th January,2016. Thus, we are of the considered opinion that order was barred by limitation as it should have served on the assessee on or before 31.12.2015 Appeal of the assessee is allowed on legal issue. ISSUES PRESENTED and CONSIDEREDThe primary issue considered was whether the assessment order dated 30.12.2015, served on the assessee on 05.01.2016, was barred by limitation under Section 153 of the Income Tax Act, and thus null and void. Additionally, the case examined the validity of the imposition of a penalty under Section 271(1)(c) of the Act, contingent upon the validity of the assessment order.ISSUE-WISE DETAILED ANALYSIS1. Limitation of the Assessment OrderRelevant Legal Framework and Precedents:The legal framework revolves around Section 153 of the Income Tax Act, which prescribes the time limit within which an assessment order must be served to the assessee. The assessee relied on precedents such as the decisions in PCIT vs. Nidan and CIT vs. BJN Hotels Ltd., which emphasize that an assessment order must be communicated to the assessee within the prescribed period to be valid.Court's Interpretation and Reasoning:The Tribunal interpreted Section 153 to mean that the assessment order must not only be passed but also served on the assessee within the limitation period. The Tribunal noted that the order was dated 30.12.2015 but was served on 05.01.2016, beyond the permissible period.Key Evidence and Findings:The Tribunal considered the acknowledgment slip indicating the service date as 05.01.2016 and the explanation from the Department that weekends and holidays delayed the service. However, the Tribunal found this insufficient to justify the delay in service.Application of Law to Facts:The Tribunal applied the legal principles from the cited precedents, concluding that the assessment order was barred by limitation as it was not served within the statutory period.Treatment of Competing Arguments:The Department argued that the service was reasonable given the holidays and relied on decisions like CIT vs. Mohammed Meeran Shahul Hameed. However, the Tribunal distinguished these cases based on facts and found them inapplicable to the present circumstances.Conclusions:The Tribunal concluded that the assessment order was barred by limitation and thus null and void, relying heavily on the precedents set by the Orissa and Karnataka High Courts.2. Imposition of Penalty under Section 271(1)(c)Relevant Legal Framework and Precedents:The imposition of a penalty under Section 271(1)(c) is contingent upon the validity of the assessment order. If the underlying assessment is invalid, the penalty cannot be sustained.Court's Interpretation and Reasoning:Since the Tribunal quashed the assessment order as time-barred, it logically followed that the penalty order, being consequential, must also be quashed.Key Evidence and Findings:No additional evidence was required as the penalty's validity was directly linked to the assessment order's validity.Application of Law to Facts:By applying the principle that a penalty cannot stand if the assessment order is invalid, the Tribunal quashed the penalty order.Treatment of Competing Arguments:There were no substantial competing arguments regarding the penalty, as its fate was tied to the assessment order's validity.Conclusions:The penalty order was quashed due to the invalidity of the assessment order.SIGNIFICANT HOLDINGSPreserve verbatim quotes of crucial legal reasoning:The Tribunal stated, 'We hold that the assessment order is barred by limitation and is accordingly quashed as nullity and non-est.'Core principles established:The principle that an assessment order must be communicated to the assessee within the statutory period to be valid was reinforced. The Tribunal also upheld the principle that a penalty order cannot survive if the related assessment order is invalid.Final determinations on each issue:The Tribunal determined that the assessment order was barred by limitation and thus quashed it. Consequently, the penalty order under Section 271(1)(c) was also quashed.