2025 (5) TMI 1671 - HC - Income Tax

Time-Barred Tax Assessment: Taxpayer Wins as Officer Misses Limitation Period, Refund Claim Validated Under Section 153

The HC ruled that assessment proceedings for AY 2006-07 are time-barred under Section 153 of the Income Tax Act due to the Assessing Officer's failure to ... Refund of taxes paid/ deposited/adjusted along with applicable interest u/s 244A (1) and 244A (1A) - HELD THAT:- According to the petitioner, the period to pass the order on remand by the ITAT expired on 31.03.2015, however, no order was passed by the AO till the date. Thus, the assessment proceedings in respect of AY 2006-07 are time barred. 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 CONSIDERED- Whether the assessment proceedings for Assessment Year (AY) 2006-07 are barred by limitation under Section 153 of the Income Tax Act, 1961, given the delay in passing the consequential order after remand by the Income Tax Appellate Tribunal (ITAT).- Whether the Assessing Officer (AO) is obligated to pass the consequential/appeal effect order within the prescribed time limit as per the provisions of Section 153 (2A) and (3) of the Act, as applicable before the Finance Act, 2016 amendments.- Whether the petitioner is entitled to a refund of taxes paid/deposited/adjusted for AY 2006-07 along with applicable interest under Sections 244A(1) and 244A(1A) of the Act, given the time-barred nature of the assessment proceedings.2. ISSUE-WISE DETAILED ANALYSISLimitation of Assessment Proceedings under Section 153 of the Income Tax ActThe legal framework governing the limitation period for assessment proceedings is primarily Section 153 of the Income Tax Act, 1961. Sub-sections (2A) and (3) of Section 153, as they stood prior to the Finance Act, 2016 amendments effective from 1 June 2016, prescribed that the AO must pass an order giving effect to the findings or directions contained in an appellate order (such as those of the ITAT) within one year from the end of the financial year in which the appellate order was received by the relevant Commissioner.In the present case, the ITAT set aside the original assessment order and remanded the matter to the AO by order dated 23 November 2012, directing the AO to pass a de novo order after affording due opportunity to the petitioner. The petitioner contends that the AO was required to pass the consequential order by 31 March 2015 (one year from the end of the financial year 2014-15), but failed to do so even after more than twelve years since the ITAT's order.The Court noted that the delay in passing the consequential order renders the assessment proceedings time-barred under Section 153. The limitation period prescribed by the statute is mandatory and the failure to adhere to it results in the assessment order losing legal efficacy.The Court relied on binding precedents, including decisions of this Court in Indian Renewable Energy Development Agency Ltd. v. Pr. CIT(LTU) and Aricent Technologies (Holdings) Ltd. v. Assistant Commissioner of Income Tax, which have consistently held that the AO is bound to pass the appeal effect order within the prescribed limitation period, failing which the assessment proceedings become barred by limitation.The Court rejected any contention that the AO's failure to pass the order could be condoned or extended beyond the statutory period, emphasizing the strict statutory mandate under Section 153.Entitlement to Refund and Interest under Sections 244A(1) and 244A(1A)Given that the assessment proceedings for AY 2006-07 are time-barred and the original return filed by the petitioner stands accepted by operation of law, the petitioner is entitled to claim refund of the taxes paid or adjusted against the demand raised in the assessment order.Sections 244A(1) and 244A(1A) of the Income Tax Act provide for payment of interest on refunds due to the taxpayer. The Court observed that since the petitioner's refund claim arises from the time-barred assessment proceedings, the petitioner is entitled to receive the refund amount along with applicable interest as mandated by law.The Court directed the Revenue to process the petitioner's refund claim expeditiously, preferably within twelve weeks from the date of the order, thereby ensuring that the petitioner's statutory rights are upheld.Application of Law to Facts and Treatment of Competing ArgumentsThe petitioner's factual position was that despite the ITAT's remand order in 2012, the AO failed to pass the consequential order within the statutory limitation period. The Revenue did not dispute the delay but refrained from processing the refund or passing the consequential order.The Court found the petitioner's contentions consistent with the statutory framework and binding judicial precedents. The Revenue's inaction was held to be untenable in law. The Court underscored the principle that limitation periods prescribed under the Income Tax Act are mandatory and cannot be extended by administrative inaction.The Court's reasoning was rooted in statutory interpretation and adherence to precedent, rejecting any arguments that could justify the delay or non-compliance by the AO.3. SIGNIFICANT HOLDINGS'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.''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 limitation period prescribed under Section 153(2A) and (3) of the Income Tax Act (pre-amendment) for passing consequential orders after appellate remand is mandatory and binding.Failure to pass the consequential order within the prescribed limitation period renders the assessment proceedings time-barred, resulting in deemed acceptance of the original return.The taxpayer is entitled to claim refund of taxes paid or adjusted along with interest under Sections 244A(1) and 244A(1A) when the assessment proceedings become time-barred.The Revenue is obligated to process refund claims expeditiously once the limitation period has expired and the assessment proceedings are barred.The Court's final determination was that the assessment proceedings for AY 2006-07 are barred by limitation, the petitioner's return is deemed accepted, and the Revenue must grant the refund with applicable interest forthwith.