Income Tax Act| Section 153 Limitation Is Binding Despite Section 144C Being A 'Complete Code’: Rules Bombay HC
The Bombay High Court, in the batch of petitions by Shelf Drilling group companies, rejected Revenue’s plea that Madras High Court’s Roca Bathroom ruling [(2022) 140 taxmann.com 304 (Madras)] is per incuriam for holding that Section 153 prevails over and subsumes Section 144C time-limits.
While accepting that Section 144C is a complete code for the special procedure of conducting assessments, the High Court remarked that “that cannot be considered to mean that overall time limits prescribed have been given a go-by in the process”.
Accepting the Assessee’s submission that wherever the legislature intended extra time to be provided, it is expressly provided in Section 153 i.e., for passing fresh order under Section 92CA pursuant to ITAT remand order, the Division Bench comprising of Justice K.R. Shriram and Justice Firdosh P. Pooniwalla observed that “the assessment has to be concluded within twelve months as provided in Section 153(3) of the Act when there has been remand to the AO by the ITAT under Section 254 of the Act. Within this twelve-month prescribed, the AO must ensure that the entire procedure prescribed under Section 144C is completed and pass a final assessment order”.
Senior Advocate J.D. Mistri appeared for the Assessees while the Revenue was represented by Advocate Suresh Kumar.
In the brief facts of the case, the Assessee was subjected to assessment for AY 2014-15 under Section 144C pursuant to which ITAT remanded the case back on Oct 4, 2019, to AO for fresh adjudication where AO only passed a draft assessment order on Sep 28, 2021, within Section 153(3) time-limit i.e. Sep 30, 2021, extended from Mar 31, 2021, due to Notifications issued under Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020.
On the submission of the Revenue Department that in case of ITAT remand order for fresh adjudication, the AO is unfettered by limitation as no time-limit is prescribed under Section 144C(1), the Bench stated that if Revenue's submission is accepted, “it would run counter to the avowed object of provisions that were considered while framing the provisions of Section 144C of the Act. Having set time limits every step of the way, it does not stand to reason that proceedings on remand to the AO may be done at leisure sans the imposition of any time limit at all.”
After a comprehensive analysis of Sections 144C and 153, the Bench held that the provisions of Section 153 are not excluded by the operation of Section 144C and highlights the instances where time limits are extended under various sub-sections of and Explanation 1 to Section 153.
With regard to time limits prescribed under Section 144C(4)/(13) with a non-obstante clause, the High Court clarified that it is for the limited purpose of ensuring that AO acts within 30 days for the stipulated action regardless of the larger time available under Section 153.
The High Court also remarked that “The Section and Sub-Section have to be read as a whole with connected provisions to decipher the meaning and intentions”.
In the connected matters where the original assessment was required to be completed for AY 2018-19, the High Court held that interpretation on the applicability of Section 153 vis-a-vis Section 144C as given in the lead case would apply.
Accordingly, the High Court concluded that no final assessment order can be passed in the present case as the same is time-barred, and thus, the return of income as filed by the Assessees must be accepted.
Cause Title: Shelf Drilling Ron Tappmeyer Limited and Ors. v. ACIT and Ors.
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