TaxTMI 
TaxTMI 
2017 (9) TMI 1298
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....The Petitioner, which is engaged in manufacture and sale of mobile handsets, filed its return of income for the AY 2007-08 on 1st November 2007 declaring an income of Rs. 8,10,62,32,096/-. Since, during the AY in question, the Assessee was involved in international transactions with its Associated Enterprise ('AE'), a reference was made by the AO to the Transfer Pricing Officer ('TPO'). 3. The Assessee filed objections to the report of the TPO before the Dispute Resolution Panel (DRP) contesting the transfer pricing (TP) adjustment by which the returned income of the Assessee stood enhanced. These objections were disposed of by the DRP. On the basis of the directions issued by the DRP, the AO completed the assessment by passing an assessment order under Section 143 (3) read with Section 144C (13) of the Act on 29th September 2011. The total income of the Petitioner was assessed at Rs. 12,37,03,19,800/-. 4. In the aforementioned final assessment order, the AO made the following disallowances and additions to the income of the Petitioner:- S. No. Nature of Addition made Amount of addition (INR) 1 Addition on account of disallowance of Marketing Expen....
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....the assessment order needs to be aside to the file of the assessing officer who will refer the matter to DRP for providing necessary opportunity of being heard. We order accordingly." e. As regards working capital adjustment for computing the arm's length price ('ALP') of the international transaction, the ITAT noted that for AY 2006-07, the ITAT had remanded the matter to the file of the AO/TPO for re-consideration in light of the fact that the said adjustment had been allowed to the Assessee in the earlier AYs. Accordingly, the ITAT set aside the matter to the file of the AO with the direction to examine the case of the assessee and decide the issue afresh in accordance with the provisions of law. The AO was asked to provide the Assessee the necessary opportunity of being heard. f. As regards the addition on account of Advertising, Marketing and Promotion ('AMP') expenses, it was noted by the ITAT that both the parties agreed that the issue be set aside in the light of the amended provisions of Section 92B of the Act. Accordingly, the ITAT "set aside the matter to the file of the AO with the directions to decide the issue afresh after affording the assessee a reasonable opp....
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....as required to be passed within two years from the end of the financial year in which the order of the ITAT had been received by the Commissioner. It was therefore contended that since the proceedings had become time-barred on 31st March 2015, any notice issued thereafter would be without jurisdiction. 10. By the impugned order dated 2nd December 2015, the AO disposed of the above objections by holding that the case was not covered under Section 153 (2A) of the Act which, according to the AO, was applicable only when a fresh order of assessment has to be made pursuant to an order in appeal or revision. Since the assessment had not been totally set aside or cancelled by the ITAT and, in fact, had been partly upheld on certain issues, the objection regarding limitation was not valid. It was further pointed out that the Revenue was also in appeal before the High Court against the relief allowed by the ITAT as well as to some of the issues restored by the ITAT to the AO/TPO and even to the DRP. 11. The Assessee states that, despite requesting for a copy of a memorandum of appeal stated to be filed by the Revenue in this Court, it was not provided to the Assessee. A letter was issued ....
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....me for another assessment year' used in Explanation 2 to Section 153 and 'an assessment of such income on such other person' used in Explanation 3 to Section 153 showed that not only cases of re-computation but also cases of assessment/reassessment on specified aspects are governed by Section 153 (3) (ii) of the Act. Relying on the decision in Basu Distributors (supra), Mr. Jain submitted that the distinction was made by this Court between a situation where the ITAT remands the matter to the AO by setting aside the order under appeal simpliciter and a situation where the assessment order is partially set aside with remand only on 'select issues or aspects of assessment'. According to him, the expression 'fresh assessment' used in Section 153 (2A) indicates a situation tantamount to the cancellation or setting aside of the entire assessment and not where some part of the assessment order was upheld. According to him, the ratio of the decision in Bhan Textile (supra) was, in fact, helpful to the Revenue. 16. Mr. Jain painstakingly took the Court through each of the directions issued by the ITAT to emphasize that the setting aside and remanding of the matter to the AO was only in res....
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....ssments and recomputations which may be completed at any time- (i) where a fresh assessment is made under Section 146 ; (ii) where the assessment, reassessment or recomputation is made on the assessee or any person in consequence of or to give effect to any finding or direction contained in an order under Section 250, 254, 260, 262, 263 or 264 or in an order of any court in a proceeding otherwise than by way of appeal or reference under this Act; (iii) where the case of a firm, an assessment is made on a partner of the firm in consequence of an assessment made on the firm under section 147. Explanation....." 18. The Taxation Laws (Amendment) Act, 1970 inserted sub-section (2A) in the Act with effect from 1st April, 1988 and it reads as under: "(2A) Notwithstanding anything contained in sub-sections (1) and (2), in relation to the assessment year commencing on the 1st day of April, 1971, and any subsequent assessment year, an order of fresh assessment under section 146 or in pursuance of ah order, under section 250; section 254, section 263 or section 264, setting aside or cancelling an assessment, may be made at any time before the expiry of two years from the end of the fina....
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....l is received by the Commissioner or, as the case may be, the order in revision is passed by the Commissioner. Such fresh assessments may be completed within the above-mentioned time limit even if the time limit specified in sub-section (1) or sub-section (2) of section 153 for the completion of assessment or reassessment has expired. Under the existing provisions of section 153(3), such fresh assessments are not subject to any time limit. The time limit laid down under new sub-section (2A) of section 153 will be operative only in relation to assessments for the assessment year 1971-72 or any subsequent years." (emphasis supplied) Analysis and reasons 22. Having perused the impugned order of the ITAT carefully and the operative portions qua which the assessment order was set aside and the matter remanded to the AO, the Court is unable to agree with the contention of learned ASG that the aforementioned order of the ITAT did not constitute a complete setting aside of the assessment with directions to the AO to pass a fresh order. The Court does not agree with the submission of the learned ASG that the AO was 'chained' by the ITAT's directions and could not have passed a fresh a....
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.... now to the judicial precedents, the Court proposes to first discuss the decision in Basu Distributors (supra) since considerable reliance was placed on said decision by the learned ASG. There, the ITAT had allowed the Assessee's appeal and directed that "It is imperative in the interest of justice and fair play to set aside and restore the matter to the AO for re-consideration after giving sufficient reasonable opportunity to the Assessee to furnish necessary details, explanations and evidences in support of the above and to pass fresh order as per law, rule and CBDT circulars." 26.2 The fact situation in the context of which the above directions were issued was that the AO had made additions to the returned income of the Assessee pertaining to cash payments made to Ritz Theatres (P) Ltd. ('Ritz') and to Honey Enterprises ('HE') which, according to the AO, were in violation of Section 40A (3) of the Act. The grievance of the Assessee was that sufficient opportunity had not been given to it to place the complete facts and therefore, offer the necessary explanation and evidence regarding such cash payment. The ITAT agreed with this contention of the Assessee and therefore passed a ....
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....Reverting to the facts of the case at hand it is manifestly clear that in substance the entire assessment had not been set aside. The Assessee's contention was that Section 40A(3) had not been violated in its spirit since no expenditure exceeding Rupees Twenty Thousand had been incurred in cash; these were incurred by effecting entries in the Books of Accounts and hence were as undisputable as payments made by Account Payee Cheques or Account Payee Bank Draft. It was only on this restricted aspect of the assessment that the Tribunal had remanded the case to the AO. The entire assessment exercise, therefore, had not been undertaken de novo, thereby, rendering Section 153 (2A) of the Act inapplicable to the case. 22. We conclude by holding that a writ petition under Articles 226 and 227 of the Constitution is always maintainable if the High Courts find that any authority is acting contrary to the powers bestowed upon it. Writ petitions, therefore, cannot be dismissed per se. The objection on this score cannot be appreciated; the Revenue would be justified in contending that in the facts of the case invoking the extraordinary Jurisdiction of this Court was not called for. Conside....
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....set aside and the AO is asked to undertake "a de novo enquiry, in which case every aspect, computation and dimension is open for consideration." Other decisions 29. Turning now to the other decision of this Court, i.e. Bhan Textile (supra), it requires to be noticed at the outset that although for some reason, the Court in Bhan Textile (supra) did not refer to the earlier decision in Basu Distributors (supra), its interpretation of Section 153 (2A) did not contradict the interpretation in Basu Distributors (supra). In Bhan Textile (supra), the Court observed that the setting aside of the assessment order became necessary as the AO did not give an opportunity to the Assessee to place its evidence on record. The CIT (A) had in effect cancelled the assessment order although those specific words were not used. This Court held that, in such a situation, "Section 153 (2A) is clearly applicable." This decision, therefore, fully supports the case of the Assessee. 30. A similar view has been taken by the Gujarat High Court in Instruments and Control Co. v. Chief Commissioner of Income-tax [2012] 349 ITR 571 (Guj). There, the Gujarat High Court discussed the entire scheme of Section 153 a....
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....understood to have set aside the assessment under challenge. The Tribunal, otherwise in law, could not have remitted the proceedings to the Assessing Officer for fresh consideration after summoning two witnesses and carrying out such probe as may be necessary. We may record that such commissions paid to the two agencies was the sole dispute between the assessee and the Department. In the original assessment, the Assessing Officer discussed only this issue and made corresponding disallowance. In essence, thus, the Assessing Officer was required to pass a fresh order of assessment which was necessary on account of an order passed by the Tribunal under section 254 of the Act cancelling the assessment framed by the Assessing Officer. The period of limitation prescribed in section 153(2A), therefore, would apply. While such an order was served on the Commissioner on 3.8.1994, within a period of two years of the end of such financial year, a fresh order of assessment had to be passed by the Assessing Officer. The same not having been done, in our view, such proceedings have become time-barred. The assessment placed before the Assessing Officer by the Tribunal's order, therefore, must....