Failure Of Dept. To Frame Fresh Assessment Should Not Place Assessee In Disadvantageous Position: Delhi High Court
The Delhi High Court has held that the failure or inability of the department to frame a fresh assessment should not place the assessee in a more disadvantageous position than in what he would have been if a fresh assessment was made.
The bench of Justice Yashwant Varma and Justice Ravinder Dudeja has observed that since the department has failed to comply with the order of the Tribunal in passing a fresh assessment order within the stipulated time, the income as returned by the petitioner, HUF, would stand accepted. The logical consequence of a refund of an amount in excess of admitted liability insofar as the tax paid in the year AY 2004-05 will have to be made good by the Department to the petitioner.
In the year 2008, petitioner was served with notice issued under Section 148 of the Act on the basis of information received that the petitioner has received gifts of Rs. 1 crore from Sh. Harish Kumar.
The department concluded the reassessment proceedings passed under Section 143(3)/147 of the Income Tax Act, assessing the petitioner by making an addition of Rs. 1 crore, holding that the gifts received by the petitioner were not genuine.
The petitioner filed an appeal before the Commissioner of Income Tax (Appeals), but the appeal was dismissed by confirming the addition.
The petitioner filed an appeal before the income tax appellate tribunal. The Tribunal remitted the matter to the file of the Assessing Officer.
As per the directions passed by the Tribunal, petitioner was again assessed, and respondent passed under Section 254/143(3) again made the same additions on a protective basis, raising a tax demand of Rs. 72,29,982/-.
The petitioner challenged the assessment order before CIT(A). However, his appeal was dismissed, holding that the addition of Rs. 1 crore made by the AO under Section 68 on a protective basis was justified.
Despite orders passed by the Tribunal, no action was taken by the department to give effect to the findings and directions of the Tribunal. Petitioner therefore sent a letter to the department for giving appeal effect to the orders of the Tribunal and for issuance of a refund due for the subject AY.
Upon receipt of the letters, the department woke up and issued notices directing the petitioner to file documents in relation to the assessment of Harish Kumar. The petitioner submitted a reply, taking objection that the proceedings initiated have become time-barred, invalid, and void since no appeal effect order was passed within the time period granted by the Tribunal.
Despite the petitioner's response, the department again issued notice to the petitioner for providing documents. Petitioner filed a response to the notice again, reiterating that the proceedings were time-barred.
The petitioner deposited INR 37,73,012/- under protest against the raised demand. Upon failure of the department to grant the refund, the petitioner filed the writ petition to ventilate its grievance against the inaction of the department.
The petitioner contended that the action of the department in not giving appeal effect and not issuing the refund of tax is totally unreasonable and unjustifiable. The time of 12 months, prescribed under Section 153(3) for passing a fresh assessment order for the concerned AY in the light of the Tribunal's order has already expired and therefore the department cannot be allowed to pass a fresh assessment order at this stage.
The department contended that AO has made all possible efforts to comply with the directions of the Tribunal to ascertain the fate of the appeal or finality of the assessment order; however, the details about the filing of the appeal before the Appellate Authority or any finding of the Appellate Authority could not be found nor provided by the assessee. There is no deliberate delay in giving appeal effect, and therefore the writ petition is liable to be dismissed.
The court while allowing the petition held that the department did not file any appeal challenging the order passed by the Tribunal. The directions given by the Tribunal were to be carried out by the AO within a period of six months, but AO woefully failed to adhere to the stipulated timelines. No action was taken to give effect to the order of the Tribunal within the stipulated period. The statutory limitation period prescribed in sub section (3) of Section 153 also expired on 30.09.2021 i.e. 12 months from the end of the financial year in which the order was passed under Section 254 by the Tribunal. The underlying rationale of the Legislature behind the enactment of Section 153(3) and setting the limitation therein, cannot be envisaged to expand the time limit for passing of a fresh assessment. In fact, the provision entails a strict adherence to the time period within which the remand order in the present case should have been passed by the respondents. The notices for initiating fresh assessment were issued much beyond the statutorily prescribed period of limitation and liable to be quashed.
Counsel For Petitioner: Vivek Bansal
Counsel For Respondent: Puneet Rai
Case Title: Ramesh Chawla Versus ITO
Case No.: W.P.(C) 11284/2023 & CM APPL. 43894/2023 (Stay)