2026 (3) TMI 1125 - HC - Income Tax

Limitation on reassessment: procedural remand without a substantive finding does not extend reassessment limitation, so reassessment is time barred.

Re assessment proceedings for AY 2015 16 are time barred because the provisos governing limitation and the additional sixty day extension yield a last ... Limitation period to pass the re-assessment order pursuant to the provisions of Section 153 - Applicability of extended limitation under Section 153(6)(i) - meaning of 'finding' and 'direction' for limitation purposes - limitation under the first proviso to Section 153(2) read with Explanation 1 proviso Meaning of 'finding' and 'direction' for limitation purposes - Whether the High Court's remand order dated 29.08.2023 contained any 'finding' or 'direction' within the meaning of clause (i) of Section 153(6) so as to attract the extended limitation period - HELD THAT: - The Court examined the expressions 'finding' and 'direction' as requiring a decision or express direction necessary for disposal of the particular case and capable of controlling or governing subsequent assessment steps. A remand order prescribing procedural timelines (supply of reasons, opportunity to file objections, disposal of objections, and a four week bar before passing assessment) does not constitute a 'finding' necessary for disposal nor an express 'direction' as contemplated by clause (i) of Section 153(6). As held by this court in Wavy Construction LLP vs. ACIT [2024 (12) TMI 1274 - BOMBAY HIGH COURT] the Revenue can seek to take recourse to sub-section (6)(i) of Section 153 of the IT Act so as to avail all the benefits of the extended period as stipulated by such provision, only in the event when such assessment, reassessment and recomputation is being made qua the Assessee “in consequence of or to give effect to any finding or direction” of any Court, as relevant in the present facts. Relying on the principles in Murlidhar Bhagwan Das [1964 (1) TMI 5 - SUPREME COUR], Rajinder Nath [1979 (8) TMI 3 - SUPREME COUR] and related authorities, the Court held that the remand and procedural timetable were not of the character that creates the 'consequence' required by sub section (6)(i) and therefore cannot extend limitation under that provision [Paras 16, 21, 22, 23, 24] The order dated 29.08.2023 did not contain any 'finding' or 'direction' within the meaning of Section 153(6)(i); therefore the extended limitation under Section 153(6)(i) is not attracted. Limitation under the first proviso to Section 153(2) read with Explanation 1 proviso - Whether the re-assessment proceedings were barred by limitation under the first proviso to Section 153(2) read with the first proviso to Explanation 1 to Section 153 - HELD THAT: - Having held that Section 153(6)(i) was inapplicable, the Court applied the ordinary limitation regime under the first proviso to Section 153(2) read with the first proviso to Explanation 1 and computed the relevant excluded period arising from the earlier writ proceedings. The Court concluded that, upon applying the applicable exclusions and the additional 60 day extension under the proviso, the last date for passing the reassessment order had expired prior to any final assessment being passed. Consequently, the reassessment proceedings are time barred (see paras. 11-12, 25). [Paras 11, 12, 25] Applying the first proviso to Section 153(2) read with the first proviso to Explanation 1, the limitation to pass the reassessment order had expired and the reassessment proceedings are barred by limitation. Final Conclusion: The writ petition was allowed on the ground that the reassessment proceedings are time barred: the High Court's remand order did not attract the extended limitation under Section 153(6)(i), and therefore limitation under the first proviso to Section 153(2) read with Explanation 1 proviso governed and had expired, rendering reassessment impermissible. Issues: Whether the re-assessment proceedings initiated by notice dated 04.02.2020 for Assessment Year 2015-16 are barred by limitation under the first proviso to Section 153(2) read with the first proviso to Explanation 1 to Section 153 of the Income-tax Act, 1961, and whether the extended limitation under Section 153(6)(i) applies by reason of the High Court's order dated 29.08.2023 (i.e., whether that order contains any 'finding' or 'direction' within the meaning of Section 153(6)(i)).Analysis: The legal framework comprises Section 148 (notice for reopening), Section 153(2) and Explanation 1 provisos (ordinary limitation and exclusions/extensions) and Section 153(6)(i) (extended limitation where assessment is in consequence of or to give effect to a finding or direction contained in specified orders). For Section 153(6)(i) to apply, the prerequisite is that the principal order must contain a 'finding' or 'direction' that is necessary for disposal of the relevant case and that governs or controls the course of assessment, reassessment or recomputation. Orders that merely remand the matter with timelines, permit filing of objections, direct personal hearing or lay down procedural steps without expressing findings or mandatory directions do not qualify. Applying these principles, the High Court's order dated 29.08.2023 only remitted the matter to the Assessing Officer with timelines for supply of reasons, filing and disposal of objections, and for personal hearing; it expressly disclaimed any observation on merits. Such procedural remand does not amount to a 'finding' or 'direction' within the meaning of Section 153(6)(i). Computing limitation with exclusion period and the additional sixty-day extension as per the provisos yields the last date for passing assessment as 19.02.2024, by which no assessment order was passed; accordingly the re-assessment is time-barred.Conclusion: The re-assessment proceedings are barred by limitation; Section 153(6)(i) does not apply because the High Court's order dated 29.08.2023 contains no 'finding' or 'direction' as required; the writ petition is allowed in favour of the petitioner (assessee) and the rule is made absolute disposing the petition on the ground of limitation.