TaxTMI 
TaxTMI 
2021 (9) TMI 202
X X X X Extracts X X X X
X X X X Extracts X X X X
....ed its application dated 22.03.2019 filed u/s 244A(1A) of the Income Tax Act, 1961 (hereafter '1961 Act') has denied additional 3% interest on the allegedly delayed refund of amount relatable to Assessment Year 2008-09. 3. The second respondent having contexted Section 244A(1A) of the Act has styled the operative portion of the impugned order as under: "In this case, the Hon'ble ITAT, Bengaluru has remitted back the issue of Transfer Pricing to the AO for fresh assessment/re-assessment as per Para No. 5 & 6 of the ITAT order. Further, fresh approval has been taken from the Hon'ble Prl. CIT-7, Bengaluru for reference to the Transfer Pricing Officer and the same has been referred. The TPO re-computed the adjustments, based on the directions of Hon'ble ITAT, and TP order was passed on 31.10.2017. As this is the case of fresh assessment/re-assessment, an additional interest u/s 244A(1A) will not be applicable in this case." 4. After service of notice, the respondents having entered appearance through their Panel Counsel resisted the writ petition making submission in justification of the impugned order and the reasons on which it has been structured. 5. FACTS....
X X X X Extracts X X X X
X X X X Extracts X X X X
....A(1A) for the period between 28.12.2017 i.e., date of ITAT order and 4.5.2019 i.e., the date on which refund was finally granted; this period being seventeen months, the Assessee quantifies the interest amount at Rs. 58.65 crore. 6. SUBMISSIONS CANVASSED ON BEHALF OF THE ASSESSEE: (a) Section 153(2A) of the Act prior to 2016 amendment encompassed within itself the power to make fresh Assessment Order in terms of orders made in appeal; if recomputation was required for giving effect to these appellate orders, no time limit was prescribed since that was covered by Section 153(6); however, a significant change was brought in by amendment vide Finance Act, 2016 that contemplates two scenarios viz., (i) making of fresh assessment orders pursuant to appellate orders that have set aside or cancelled the assessment, under subsection (3) of section 153, & (ii) giving effect to appellate orders other than those covered by fresh assessment orders in terms of sub-section (5) of section 153; the 2016 Act amended section 244A by introducing sub-section (1A) providing for the grant of additional interest in cases falling u/s 153(5). (b) The orders of the kind made u/s 244A(1A) can be cla....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e ITAT order; the time limit of three months prescribed in Section 153(5) for passing 'giving effect to' orders is applicable only in cases where no fresh assessment or re-assessment is contemplated under the appellate orders; since the matter was remitted to the TPO for fresh assessment/re-assessment, case of the petitioner does not fit into section 244A(1A); (c) Section 240 provides that the refund on appeal would arise where an order in appeal on assessment is set aside or cancelled with a direction to undertake a fresh assessment/re-assessment and such a direction is accomplished; although, section 153(5) prescribes a time limit of three months for giving effect to the orders passed under any of the provisions i.e., Ss.250, 254, 260, 262, 263 or 264 of the Act by the Assessing Officer; however, an exception is carved out in cases where a fresh assessment/re-assessment is contemplated; the provisions of section 153(5) and section 244A(1A) employ the expression "wholly or partly" to mean a fresh assessment/re-assessment to be made "wholly or partly" and that the said expression does not qualify "the order to give effect to the order on appeal"; the matter having been remitted ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... view finds expression in the decision of the Apex Court in ACIT vs. Rajesh Jhaveri Stock Brokers P. Ltd. (2007) 291 ITR 500 (SC). (iii) Walton J. had observed in Vestey v. Inland Revenue Commissioners [1979] Ch 177 (197 - 198) "I conceive it to be in the national interest, in the interest not only of all individual tax payers - which includes most of the nation - but also in the interests of the Revenue authorities themselves, that the tax system should be fair... One should be taxed by law, and not be untaxed by concession ... A tax system which enshrines obvious injustices is brought into disrepute with all tax-payers accordingly, whereas one in which injustices, when discovered, are put right (and with retrospective effect when necessary) will command respect and support...". (iv) A Welfare State like ours is constitutionally expected to be fair & reasonable in dealing with the subjects and it must avoid any harassment to the assessee public, without causing any loss to the Exchequer (see Nokia Corporation v. Director of Income-tax [2007] 292 ITR 22 (Delhi HC); the State as constitutionally ordained, needs to conduct itself as a virtuous litigant and should meet honest cl....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e debated questions; in Sir Rajendranath Mukerjee v. CIT, (1934) 2 ITR 71 (PC), it has been held under the erstwhile Income Tax Act, 1922 that the word 'assessment' is not confined to the definite act of making an order of assessment; in C.A. Abraham v. ITO [1961] 41 ITR 425 (SC), in the context of section 44 of 1922 Act (similar to section 189 of the 1961 Act), it has been held that the term 'assessment' employed therein not only referred to computation of income but included the procedure for declaration & imposition of tax liability and the machinery for enforcement thereof; (iii) It is pertinent to refer to what the Hon'ble Supreme Court observed in Auto & Metal Engineers v. Union of India [1998] 229 ITR 399 (SC): "7. In the Act the provisions regarding procedure for assessment are contained in Chapter XIV (sections 139 to 158). Under the said provisions, the process of assessment involves (i) filing of the return of income u/s. 139 or u/s. 142 in response to a notice issued u/s. 142(1); (ii) inquiry by the Assessing Officer in accordance with the provisions of sections 142 and 143; (iii) making of the order of assessment by the Assessing ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d with laying down time limits which have to be adhered to by the assessing officers. (ii) In the light of the above, a question arises as to whether the terms 'setting aside' or 'cancelling' an assessment employed in the subject provisions, do mean setting aside or cancellation of the entire assessment order or would it include even setting aside or cancellation of only a part of the assessment order [as with respect to particular issues, rest having been left intact by the ITAT or the like]; the said provisions cautiously employ the word 'assessment' and not the term 'assessment order'; however, one will have to see the setting in which these provisions actually occur. A summary of the said provision is set out hereunder: Sub- Section Nature of Assessment Proceedings under section Time limit [from the end of the assessment year in which income was first assessable] Time limit [from the end of the Financial Year 153(1) Regular Assessment To pass assessment orders under section 143(1) and 144. 21 months From AY 2018-19, time limit has been amended to 18 months From AY 2019-20, time limit has been further reduced to 12 months ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ve effect to such orders within time specified u/s 153(5) & (6) and such orders are passed/ received by income-tax authorities before 1-6-2016 Effect to be given before 31.03.2017 153(8) Revival of order passed u/s. 153A(2) or 153(1) 1 month from the end of month of revival or within 21 months from the date of authorization - for search has been issued - whichever is earlier. Further, Explanation 1 below section 153 provides that in computing the period of limitation, time taken for specified processes, as listed therein, should be excluded. Section 153 lays down the time limit to make assessment, reassessment & recomputation under various scenarios; section 153 is substituted by Finance Act, 2016; the brief outline of this section is as under: • Sub-section (1) deals with time-limit for making assessment order under sections 143 or 144. With the advancement of e-assessments, the time limits for doing an assessment are progressively going to be reduced. • Sub-section (2) deals with time-limit for making assessment order under section 147, Section 147 deals with re assessment orders. • Sub-section....
X X X X Extracts X X X X
X X X X Extracts X X X X
....¢ It is a fundamental principle that income tax is payable on real income, vide Apex Court decision in Poona Electric Co. Vs. CIT (1965) 57 ITR 521. • This real income can be brought to tax through assessment contemplated under the Act. • The basic principle is that ordinarily assessments cannot be done piecemeal. • There are a few exceptions to the rule of "no piecemeal assessment' as in the case where income has escaped assessment where reassessment powers do avail, as discussed by Calcutta High Court in Karan Chand Thapar vs. ACIT (2005) 276 ITR 105 para 13. (ii) OGE is not a regular assessment as held in the case of Sundaram Finance 417 ITR 679 Mad; passing an Appeal Effect Order is an implied obligation of every authority to comply with the directions of his superior in the hierarchy; this is an inherent aspect of adherence to judicial discipline; OGE to an order on appeal or on revision has to be passed in order to compute the total income and to determine the tax payable by or refundable to the assessee for the assessment year concerned, in the light of additions/disallowances affirmed or varied at every such stage; it may be note....
X X X X Extracts X X X X
X X X X Extracts X X X X
....6. * Section 153(3) post substitution by Finance Act, 2016 with effect from 01.06.2016. The term 'fresh assessment' as employed in the above sections is accompanied by the term 'setting aside or cancelling an assessment'; it may further be noted that section 153(6) is subject to the provisions of sections 153(3) & 153(5); therefore, the 'assessment, reassessment or recomputation' as referred to in sections 153(6) would not include the 'fresh assessment' as contemplated in sections 153(3) & 153(5); the following table is illustrative: (iii) The word 'reassessment' is used next to the term 'fresh assessment' in section 153(5), Proviso (a) to section 240 & section 244A(1A); the definition of the term 'assessment' as contained in section 2(8) which merely provides that assessment includes reassessment, shall not ipso facto be applicable in all situations governed by various provisions of the 1961 Act; if the fresh assessment included a fresh reassessment, there was no need for the Parliament to employ the two terms, simultaneously; Lord Hewart C.J. in Spillers Limited Vs. Caradix Assessment Committee & Pritchard, (1931) All E.R. 524 stated: "It ought to be the ru....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... assessment; section 153(3) uses the term "fresh assessment" in pursuance of the orders passed setting aside or cancelling an assessment; therefore, this term "fresh assessment", though not defined, contemplates a new assessment consequent to the higher authorities cancelling or setting aside the assessment; Section 153(5), talks of giving effect to an order passed by the higher authorities, wholly or partly, otherwise than by making a fresh assessment or reassessment. The words "wholly or partly" obviously pertain to giving effect to the order of the higher authorities which would be done by the lower authority either in part or in whole depending on the issues that are settled by the higher authorities. However, such an exercise cannot be done within the time limits specified in Section 153(5), where there is a fresh assessment or reassessment and in such cases the longer time limits specified in Section 153(3) would apply; a harmonious construction of these provisions would mean as under : a. That in order to give effect to the order of the superior authorities, either wholly or partly in terms of Section 153(5), it should not be a case of reassessment or fresh assessme....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... "No particular procedure has been given in the Act or the Rules to carry out the appeal effect. Wherever no particular procedure has been given in the Act or the Rules, then naturally the authorities have to adopt a procedure or practice, which is practical, adheres to the well-settled legal principle and does not cause prejudice to the assessee or the Government. One of the basic principle in the administration of justice in India, where hierarchy of courts is existing, is that it is mandatory on the subordinate Tribunal or authorities to carry out the directions given to them by the superior authorities or Tribunals in exercise of appellate powers. Failure to do so will result in chaos in the administration of justice..... [vide Para 7] Whenever an appellate authority passes an order, there are three possibilities. Firstly, the appellate authority may confirm the whole or part of the order passed by the lower authority. Secondly, the whole or part of the order may be quashed or additions may be deleted. Thirdly, the whole or part of the issue raised may be set aside for fresh examination with or without any specific directions. Whenever some additions are confirme....
X X X X Extracts X X X X
X X X X Extracts X X X X
....it is stated: "At the same time, we have to bear in mind that the policy of law is that there must be a point of finality in all legal proceedings, that stale issues should not be reactivated beyond a particular stage and that lapse of time must induce repose in and set at rest judicial and quasi-judicial controversies as it must in other spheres of human activity"; arguably, limitation may have arbitrariness in its fixation but has to be strictly construed without equitable consideration vide R. Rudraiah v. State of Karnataka (1998) 3 SCC 23; similarly, in C. Ramaiah Reddy 339 ITR 210 Kar, a Bench of this court has observed that if proceedings are not initiated within the time prescribed, the remedy is lost and the assessee would acquire an indefatigable right; such a right accruing by the lapse of time cannot be at the mercy of the officials, who do not discharge their duties within the prescribed period or a reasonable time; in the matter of limitation, question of prejudice does not arise vide M. Janardhana Rao Case 273 ITR 50 SC; if no action is taken within the prescribed time limit, the authority in a sense becomes functus officio and thus lacks jurisdiction to take the acti....
X X X X Extracts X X X X
X X X X Extracts X X X X
....hey have been brought into effect from 01.06.2016. Both sections 153(5) and 244A(1A) deal with giving effect to orders u/s. 250 or section 254 or section 260 or section 262 or section 264. The said sections deal with giving effect to orders passed under the sections mentioned therein, either wholly or partly. The said sections make exception to making of fresh assessment or reassessment. Section 244A(1A) provides for interest for the period beginning from the date following the date of expiry of the time allowed u/s. 153(5) to the date on which the refund is granted. (ii) The legislative intention in enacting section 244A(1A) can be discerned from the Memorandum explaining the provisions of the Finance Bill, 2016, the relevant extract of which reads as under: "Payment of interest on refund ....... It is also proposed to provide that where a refund arises out of appeal effect being delayed beyond the time prescribed under sub-section (5) of section 153, the assessee shall be entitled to receive, in addition to the interest payable under sub-section (1) of section 244A, an additional interest on such refund amount calculated at the rate of three pe....
X X X X Extracts X X X X
X X X X Extracts X X X X
....r 29.3.19 (ii) A careful analysis of the order of ITAT dated 4.1.2018 would reveal that the ITAT dealt with several issues differently, some having been remitted for reconsideration and the conclusions on other left intact; the same may be summarised as follows: On TP issue, following earlier order, issue was remitted to the file of TPO to follow the directions given for earlier AYs Sl.Nos: 1. On 14A issue, issue was set aside to the record of AO to re-examine the same in the light of orders of ITAT in assessee's own case for earlier assessment years. 2. Issue of set off of loss was allowed in favour of assessee. 3. Issue of depreciation of software was allowed in favour of assessee. 4. Issue of allocation of corporate expenses between eligible and non eligible units was allowed in favour of assessee. 5. Issue of computation of profits of overseas development centre (ODC), was remitted to the record of AO and assessee was directed to file relevant details as required by AO so that AO can ascertain the market value of goods and services transferred. 6. Issue of eligibility of interest income, rental income an....
X X X X Extracts X X X X
X X X X Extracts X X X X
....not stated that the appeal is allowed for "statistical purposes"; thus, it is a case where the ITAT has held some issues definitively, and on some other, it had remitted the matter to the AO/TPO for a limited consideration afresh; in respect of issues in Sl.Nos.1, 2 & 7 in the above summary, there is virtually a direction warranting OGE; it is quiet clear from the facts of the case that the respondents have not undertaken any fresh assessment or reassessment; the ITAT has not directed assessment or reassessment at all, but it only asked the TPO to follow its directions in the earlier year; in respect of other issues definitive answers having been given, it cannot be a case of setting aside entire assessment; it is a case of setting aside an assessment only on specific issues; as already discussed above, in respect of issues where there is a definitive holding, section 153(5) would apply and the AO has to pass OGE within the time specified thereunder read with II Proviso thereto; in respect of issues which are set aside [ie., Sl.Nos. 1, 2 & 7],the AO had to pass OGE following the principles already settled; accordingly, it has to be held that the AO was required to pass OGE within t....