2025 (5) TMI 1670 - HC - Income Tax

Time-Barred Tax Assessment Invalidates Original Proceedings, Mandates Refund Processing Under Section 153 with Applicable Interest

Schneider Electric India Pvt Ltd Versus Deputy Commissioner Of Income Tax Circle 22 2 New Delhi & Anr.

The HC ruled that assessment proceedings for AY 2005-06 were time-barred under Section 153 of the Income Tax Act. The AO failed to pass a consequential ... Assessment proceedings as barred by limitation - period to pass the order on remand by ITAT - despite the lapse of more than six (6) years from the date of the ITAT’s order, the AO has failed to pass the said consequential/appeal effect order - direct the Respondents to grant refund of taxes paid/ deposited/adjusted in the case of Petitioner for AY 2005-06, along with applicable interest under Section 244A (1) and 244A (1A) - HELD THAT:- Concededly, the issue is covered by the decision of this court in Indian Renewable Energy Development Agency Ltd. [2023 (12) TMI 935 - DELHI HIGH COURT] and the decision in Aricent Technologies (Holdings) Ltd. [2023 (3) TMI 220 - DELHI HIGH COURT] The time period for passing the assessment order has since lapsed and, therefore, the return filed by the petitioner is required to be considered as accepted. Revenue shall process the petitioner’s claim for refund in accordance with law, bearing in mind the aforesaid position as expeditiously as possible, preferably within a period of twelve weeks from date. 1. ISSUES PRESENTED and CONSIDEREDThe core legal questions considered by the Court are:Whether the assessment proceedings for the Assessment Year (AY) 2005-06 are barred by limitation under the provisions of the Income Tax Act, 1961, particularly Section 153 as it stood prior to amendment by the Finance Act, 2016;Whether the Assessing Officer (AO) was obligated to pass a consequential/appeal effect order within the prescribed time limit following the remand by the Income Tax Appellate Tribunal (ITAT);Whether the failure of the AO to pass the consequential order within the statutory time frame results in acceptance of the return filed by the petitioner by operation of law;Whether the petitioner is entitled to a refund of taxes paid along with applicable interest under Sections 244A(1) and 244A(1A) of the Income Tax Act;Interpretation and application of the time limits prescribed under Section 153(2A) and (3) of the Income Tax Act, as applicable prior to June 1, 2016, in the context of orders passed by appellate authorities and remand proceedings.2. ISSUE-WISE DETAILED ANALYSISIssue 1: Limitation on Assessment Proceedings under Section 153 of the Income Tax ActRelevant legal framework and precedents: Section 153 of the Income Tax Act prescribes time limits for completion of assessment proceedings. Prior to its substitution by the Finance Act, 2016 (effective 01.06.2016), sub-sections (2A) and (3) mandated that where an appellate order (including that of the ITAT) is received, the AO must pass the consequential order giving effect to the appellate findings within one year from the end of the financial year in which the appellate order was received by the Principal Commissioner or Commissioner.The Court relied on precedents, notably the decisions in Indian Renewable Energy Development Agency Ltd. v. Pr. CIT(LTU) New Delhi and Aricent Technologies (Holdings) Ltd. v. Assistant Commissioner of Income Tax, which interpret these provisions strictly and hold that failure to pass the consequential order within the prescribed period results in the proceedings becoming time-barred.Court's interpretation and reasoning: The Court interpreted the statutory time limit as mandatory and non-extendable. The AO received the ITAT's remand order on 11.01.2016; accordingly, the AO was required to pass the consequential order by 31.12.2018 (one year from the end of FY 2017-18). The AO's failure to do so, despite lapse of over six years, rendered the assessment proceedings barred by limitation.Key evidence and findings: The petitioner filed the original return on 30.10.2005. The assessment order was passed on 10.12.2008, followed by appellate proceedings resulting in the ITAT's order dated 11.01.2016 directing the AO to reconsider the issues afresh. Despite repeated requests by the petitioner (letters dated 10.07.2019 and 10.03.2021), the AO neither passed the consequential order nor processed the refund.Application of law to facts: The Court applied the statutory time frame strictly, holding that the AO's inaction beyond the prescribed period extinguished the AO's jurisdiction to pass any further order for AY 2005-06. Consequently, the petitioner's originally filed return stands deemed accepted under law.Treatment of competing arguments: The Revenue did not contest the limitation bar in light of the binding precedents. The Court observed that the Revenue's failure to act within the statutory time frame cannot be remedied by any extension or condonation.Conclusions: The assessment proceedings for AY 2005-06 are time barred under Section 153(2A) and (3) as they existed prior to June 2016. The petitioner's return is deemed accepted.Issue 2: Entitlement to Refund and Interest under Sections 244A(1) and 244A(1A)Relevant legal framework: Sections 244A(1) and 244A(1A) of the Income Tax Act provide for payment of interest on refunds due from the Income Tax Department where refunds are delayed beyond prescribed periods.Court's interpretation and reasoning: Since the assessment proceedings are time barred, the petitioner's return is accepted, entitling the petitioner to a refund of taxes paid in excess along with applicable interest under the said provisions.Key evidence and findings: The petitioner's claim for refund was supported by the deletion of certain additions by the CIT(A) and the ITAT's remand order. The AO's failure to pass the consequential order or process the refund despite repeated requests substantiated the petitioner's entitlement.Application of law to facts: The Court directed the Revenue to process the refund claim expeditiously, preferably within twelve weeks from the date of the order, ensuring payment of interest as per law.Treatment of competing arguments: No substantive opposition was raised by the Revenue against the refund and interest claim once limitation was established.Conclusions: The petitioner is entitled to refund of taxes paid along with interest under Sections 244A(1) and 244A(1A).Issue 3: Effect of ITAT's Remand and Obligations of the AORelevant legal framework and precedents: Section 250 of the Income Tax Act empowers the AO to pass consequential orders giving effect to appellate orders. The ITAT's remand order directs the AO to reconsider certain issues afresh.Court's interpretation and reasoning: The Court held that the AO was under a statutory obligation to pass the consequential order within the prescribed time limit post receipt of the ITAT's order. The failure to do so not only violates the statutory mandate but also causes prejudice to the assessee.Key evidence and findings: The AO did not pass any consequential order despite the ITAT's direction dated 11.01.2016 and repeated communications from the petitioner.Application of law to facts: The Court emphasized that the AO's failure to act within the statutory period leads to the assessment proceedings becoming time barred, and the original return must be accepted.Treatment of competing arguments: The Revenue's inaction was not justified, and no valid reason was provided for delay.Conclusions: The AO's obligation to pass the consequential order within the statutory time is mandatory and non-extendable; failure results in acceptance of the return.3. SIGNIFICANT HOLDINGSThe Court held: 'The time period for passing the assessment order has since lapsed and, therefore, the return filed by the petitioner is required to be considered as accepted.'It was further held: 'The Revenue shall process the petitioner's claim for refund in accordance with law, bearing in mind the aforesaid position as expeditiously as possible, preferably within a period of twelve weeks from date.'Core principles established include:The statutory time limits prescribed under Section 153(2A) and (3) of the Income Tax Act, as applicable prior to June 2016, are mandatory and non-extendable.Failure of the AO to pass consequential orders within the prescribed period following appellate remand results in the assessment proceedings becoming barred by limitation.The return originally filed by the assessee stands deemed accepted upon expiry of the limitation period.The assessee is entitled to refund of taxes paid along with interest under Sections 244A(1) and 244A(1A) where the refund is delayed by the Revenue.Final determinations on each issue are consistent with the petitioner's contentions, leading to dismissal of the Revenue's claims and directing refund with interest.