TaxTMI 
TaxTMI 
2026 (6) TMI 1344
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.... limitation provided for in Section 153 of the Income-tax Act, 1961 (for short "IT Act") for the Assessment Year 2009-10. 3. The Petitioner is a company incorporated in, and is a tax resident of Luxembourg. The Petitioner is engaged in the business of providing marketing activities on a central / group basis to the Marriott chain of hotels worldwide. Initially the Petitioner's group company, i.e., International Hotel Licensing Company S.A.R.L. (for short "IHLC") had entered into an "International Marketing Program Participation Agreement" (for short "IMPPA") with various Indian hotels. These IMPPAs were later on assigned to the Petitioner in July 2008. 4. The Petitioner filed its Return of Income for the A.Y. 2009-10 on 30th October 2009 declaring Nil income. It claimed the receipts of Rs. 1,21,10,667/- in terms of the IMPPA as not taxable in India as per the Act and, accordingly, claimed a refund of the tax deducted at source (for short "TDS") of Rs. 22,36,809/-. In the notes to the computation of income, the Petitioner mentioned that the aforesaid receipts were not chargeable to tax in India. 5. The Petitioner's case was picked up for a scrutiny assessment. The assessmen....
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.... 1 was obligated to pass an order giving effect as per the directions of the CIT(A). Section 153(5) of the IT Act inter-alia provides that where effect to an order passed by the CIT(A) is to be given other than by passing a fresh assessment, then such effect shall be given within a period of three months from the end of the month in which order of the CIT(A) is received by the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner, as the case may be. Further, as per the second proviso to Section 153(5) of the IT Act, where the CIT(A) order requires verification of any issue by way of submission of any document by the Assessee or any other person or where an opportunity of being heard is to be provided to the Assessee, the order giving effect shall be made within the time specified in sub-section (3) of Section 153. In the present case, having regard to the directions of the CIT(A), the time limit as per sub-section (3) would apply i.e. the order should be passed within nine months from the end of the Financial Year in which the order of the CIT(A) is received. 10. In view of the fact that no order giving effect to the order of the CIT(A) wa....
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....ange in basis of taxation and no fresh satisfaction is recorded: While the penalty was initiated on account of the best judgement assessment dated 6th February 2012 wherein the IMPPA receipts were taxed as business income at the rate of 40 percent, the basis of taxation had changed when CIT(A) held that said receipts were in the nature of royalty and the beneficial tax rate would apply. Hence, fresh satisfaction was required to be recorded for initiating penalty proceedings while giving effect to the directions of CIT(A), which was not done. iii. Bar of limitation under Section 275: Penalty proceedings are barred by the period of limitation as provided for in Section 275 of the IT Act. iv. Defect in notice under Section 274: Charge under which the penalty is proposed (i.e. 'concealment of particulars of income' or 'furnishing of inaccurate particulars of income') was not specified in the penalty notice passed under Section 274 dated 6th February 2012. v. Other grounds on merits for non-levy of penalty. 15. Subsequently, Respondent No. 1 passed a penalty order dated 30th March 2023 under Section 271(1)(c) of the IT Act levying a penalty of Rs 12,11,070/....
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.... also the tax payable thereon which entails not only the determination of the tax on the total income either as per the rate prescribed in the Finance Act or provided for in Chapter XII or as per the provision of a Double Taxation Avoidance Agreement. Thereafter, the interest that is payable under the various sections has to be computed and after giving credit for the prepaid taxes, the net demand or refund, as the case may be, is to be quantified and the demand notice has to be issued under Section 156 of the IT Act. The judgment of the Supreme Court in Kalyan Kumar Ray vs. CIT (1991) 191 ITR 634 supports the aforesaid contention, was the submission of the Counsel. 18. The learned Counsel submitted that since the order of the CIT(A) was undisputedly received by Respondent No. 3 on or before 31st March 2019, the time limit for passing the OGE as per Section 153(5) read with Section 153(3) of the IT Act was nine months from the end of the Financial Year in which the order of the CIT(A) was received. Accordingly, the due date for passing the OGE in the present case was 31st December 2019. As no such order was passed till date, the assessment proceedings, consequently, stand abated....
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....sment, since it is only an Administrative Order. Mr. Kumar further pointed out that in case of a delay in passing the order giving effect, the Assessee is granted interest under Section 244A(1A) of the IT Act, and, hence, no prejudice is caused to the Assessee. Thus, he submitted the assessment proceedings would not abate. 22. The learned Counsel for the Petitioner in relation to the argument of the Revenue that an order giving effect is merely an Administrative Order and no adverse consequence would follow for failure to adhere to the timelines, argued that what remains as a final order after giving effect to the orders of the appellate authorities is an order of assessment that is capable of enforcement, and it cannot be termed as an Administrative Order. Reliance was placed on the judgment of this Court in the case of Caltex Oil Refining (India) Ltd. v. CIT [1994] 73 Taxman 231 (Bombay) in this regard. 23. Having considered the rival submissions, and without addressing the other issues raised, the present petition can be disposed of on a limited issue - namely, whether the assessment proceedings stand abated, thereby rendering the penalty proceedings unsustainable. The cor....
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....period of three months from the end of the month in which order under section 250 or section 254 or section 260 or section 262 is received by the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner, as the case may be, the order under section 263 or section 264 is passed by the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner, as the case may be : Provided that where it is not possible for the Assessing Officer or the Transfer Pricing Officer, as the case may be, to give effect to such order within the aforesaid period, for reasons beyond his control, the Principal Commissioner or Commissioner on receipt of such request in writing from the Assessing Officer or the Transfer Pricing Officer, as the case may be, if satisfied, may allow an additional period of six months to give effect to the order: Provided further that where an order under section 250 or section 254 or section 260 or section 262 or section 263 or section 264 requires verification of any issue by way of submission of any document by the assessee or any other person or where an opportunity of being heard is to be prov....
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....ing an assessment pursuant to the order of the CIT(A), is as under: Particulars Date Order passed by the CIT(A), in appeal against the final assessment order 31.12.2018 Financial Year in which the relevant authority received the CIT(A) order FY 2018-19 Limitation as per Section 153(5) read with Section 153(3) of the IT Act is maximum of nine months from end of the FY in which the PCCIT / CCIT / PCIT / CIT received the CIT(A) order 31.12.2019 27. Mr. Kumar has not disputed the fact that no order giving effect to the CIT(A) order is passed till date. However, he contends that there is no change in the taxable income, only the characterisation of such receipts and the applicable rate of tax came to be modified by the CIT(A). Further, the direction to verify and allow the credit for the tax is only an administrative exercise. Thus, non-passing of the order giving effect would not have any adverse consequences. 28. We are unable to accept the contentions urged on behalf of the Revenue. The CIT(A) has altered the very basis of taxation and directed application of the beneficial rate of taxation applicable to royalty. Consequently, even though the assessed in....
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....e assessment under section 143 or 144. It is that assessment which is the subject-matter of appeal. The appellate authority, on an appeal against an order of assessment, has power to confirm, reduce, enhance or annul the assessment or to set aside the assessment and refer the case back to the ITO for making a fresh assessment in accordance with the directions given by such authority (section 251). Evidently the effect of an appellate order is that the assessment either stands confirmed, reduced or enhanced or it stands annulled or set aside. In case of confirmation, reduction or enhancement the original order of assessment stands modified to the extent of the directions given by the appellate authority. In the case of annulment, the order becomes non est. In case an order is set aside, the authority has to start the entire process afresh and make a fresh order of assessment complying with the directions given by the appellate authority. It is, thus, clear that what remains as a final order after giving effect to the orders of the appellate authorities is an order of assessment under section 143 or 144. It cannot be anything else." (emphasis supplied) 29. Further, Respon....
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....yable) should be done on the same sheet of paper, the sheet that is superscribed "assessment order". It does not prescribe any form for the purpose. It will be appreciated that once the assessment of the total income is complete with indications of the deductions, rebates, reliefs and adjustments available to the assessee, the calculation of the net tax payable is a process which is mostly arithmetical but generally time-consuming. If, therefore, the Income tax Officer first draws up an order assessing the total income and indicating the adjustments to be made, directs the office to compute the tax payable on that basis and then approves of it, either immediately or some time later, no fault can be found with the process, though it is only when both the computation sheets are signed or initialled by the Income-tax Officer that the process described in section 143(3) will be complete." (emphasis supplied) 30. As far as the consequence of not passing the order giving effect within the time limit as provided for in Section 153 of the IT Act is concerned, an identical controversy arose before this Court in the case of Laqshya Media Limited v. Asst/Dy. CIT [WP no. 468 of 202....
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.... the basis of return furnished and the rates applicable, the excess shall be refunded to the assessee, since its retention may offend Article 265 of the Constitution." .... 22. We are therefore of the view that the return of income filed by the Petitioner for the year under consideration (AY 2014-15) has to be accepted as such." 31. Further, we disagree with the contention advanced by Mr. Kumar that the assessment proceedings do not abate merely because the Assessee is entitled to interest under Section 244A(1A) of the IT Act for any delay in passing the OGE. Section 244A(1A) operates solely for the benefit of an Assessee by providing compensatory interest, where there is a delay on the part of the Department in granting a refund. It is probably meant to cover a case where an order is passed in time, but the refund is not granted. However, the grant of such interest cannot validate or cure a belated Assessment Order. Further, in a situation where demand is sought to be raised, the Department cannot impose a tax liability if the OGE is not passed within the period of limitation provided for. It is a settled principle that the Department cannot take advantage ....