PRINCIPAL COMMISSIONER OF INCOME TAX-1 vs. SHRINATH CORPORATION

ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE-7(1) (1), 2ND FLOOR, BMTC BUILDING, 6TH BLOCK, 80 FEET ROAD, BANGALORE-560095.

THE PRINCIPAL COMMISSIONER OF INCOME TAX-2 5TH FLOOR, BMTC BUILDING, 6TH BLOCK, 80 FEET ROAD, KORMANGALA, BANGALORE-560 095. …APPELLANTS (BY SRI E.I. SANMATHI, SENIOR STANDING COUNSEL)

M/S. UNITED SPIRITS LTD., UB TOWERS, No.24, VITTAL MALLYA ROAD, BENGALURU-560 001, REPRESENTED BY ITS VICE PRESIDENT. …RESPONDENT

This writ appeal, filed under Section 4 of the Karnataka High Court Act, 1961, by the Revenue, is directed against the order dated 17.08.2023 passed in W.P. No.13953/2020 (T-IT).

The facts, in brief, are that, the respondent–assessee, filed its return of income for the assessment year 2007–08. The Assessing Officer completed the assessment under Section

The learned Single Judge held that, in view of Section 153(7) of the Act, the notice dated 06.11.2020 was barred by limitation and accordingly quashed the same. The learned Single Judge further directed the Assessing Officer to consider the assessee’s claim for refund.

Sri E.I. Sanmathi, learned Senior Standing Counsel appearing for the appellants–Revenue, submits that the order of the Tribunal remanding the matter to the Assessing Officer for fresh consideration is dated 31.03.2015. As per clause (ii) of sub-section (3) of Section 153, as it stood prior to the coming into force of the Finance Act, 2016, the assessment, reassessment or recomputation could be made at any time. The amended sub-section (3) of Section 153 introduced by the Finance Act, 2016 is not applicable to the present case in view of sub-section (9) of the said provision. As per sub-section (9) of Section 153, inserted by the Finance Act, 2016, the assessment pursuant to an order of remand by the Tribunal shall be governed by the provisions as they stood immediately prior to the commencement of the Finance Act, 2016. Therefore, by virtue of sub-section (9), the amended

Smt. Tanmayee Rajkumar, learned counsel appearing for the respondent–assessee, submits that although the order of remand by the Tribunal was passed prior to the coming into force of the Finance Act, 2016, the amended provisions of Section 153, as introduced by the Finance Act, 2016, would nevertheless govern the matter. Learned counsel further submits that sub-section (7) of Section 153 mandates that any order giving effect to a finding or direction referred to in sub- sections (5) or (6) shall be made on or before 31.03.2017, or within the time prescribed under the said sub-sections, whichever is later.

Learned counsel further submits that clause (ii) of sub- section (3) of Section 153 is subject to the provisions of sub- section (2A) of the said Section. It is the submission of the learned counsel that sub-section (3) is not applicable to the present case, whereas sub-section (2A), as it existed prior to the Finance Act, 2016, governs the matter. It is further contended that, since the case involves setting aside of the

Considered the submissions of learned Senior Standing Counsel for the appellants-Revenue and learned counsel for the respondent-assessee.

The assessment year involved is 2007–08. The original assessment order was passed on 31.12.2009. The said assessment was set aside by the Tribunal for de novo consideration by its order dated 31.03.2015. The first notice seeking to give effect to the Tribunal’s order was issued on 06.11.2020. The aforementioned dates are not in dispute.

The reliance placed by the Revenue on sub-section (3) of Section 153, as it stood prior to the Finance Act, 2016, is misplaced for more than one reason. Sub-section (3) is expressly made subject to the provisions of sub-section (2A). Sub-section (2A) governs cases where an order of fresh assessment is to be made in pursuance of an order of the Tribunal setting aside or cancelling an assessment. It prescribes

On the other hand, sub-section (3) is applicable to an assessment, reassessment, or recomputation made in consequence of, or to give effect to, any finding or direction contained in the order of the Tribunal. In the present case, the Tribunal has set aside the assessment for de novo consideration, and accordingly, the applicable provision is sub- section (2A) of Section 153.

The order of the Tribunal was passed prior to the coming into force of the Finance Act, 2016. The remand assessment proceedings were pending as on the date of commencement of the Finance Act, 2016. The Revenue places reliance on sub- section (9) of Section 153 to contend that, in respect of any assessment, reassessment, or recomputation made before 01.06.2016, the provisions of Section 153 as they stood immediately prior to the commencement of the Finance Act, 2016 shall apply. At first blush, the submissions advanced by

Sub-section (5) of Section 153 mandates that the Assessing Officer shall give effect to the order of the Tribunal within a period of three months, in cases where such effect is to be given otherwise than by making a fresh assessment or reassessment. In the present case, the direction issued by the Tribunal is to make a fresh assessment. Hence, sub-section (5) is not applicable.

Sub-section (6) of Section 153 mandates that where an assessment, reassessment, or recomputation is to be made in

A combined reading of sub-sections (7) and (9) of Section 153 reveals an apparent contradiction and gives rise to ambiguity. It is a well-settled principle of interpretation that where a statutory provision suffers from ambiguity, the Statement of Objects and Reasons for the amendment may be referred to as an external aid to ascertain the legislative intent and the purpose sought to be achieved.

For this purpose, reference is made to the Memorandum to the Finance Act, 2016, as issued by the Central Board of Direct Taxes (‘CBDT’), which explains in detail the necessity, scope, and object of the amendment. The Memorandum, on

The contention of the Revenue that the direction of the Tribunal can be given effect to at any time, in terms of sub- clause (ii) of sub-section (3) of Section 153, is without merit and finds no justification. Section 153(1) prescribes the limitation period for passing an order of assessment. The maximum time limit, as applicable during the relevant period, was two years from the end of the assessment year. Similarly,

In the present case, the order of the Tribunal is dated 31.03.2015, and as per the Revenue, the same was served on the Principal Commissioner of Income Tax on 02.06.2015. However, the notice seeking to give effect to the Tribunal’s order was issued only on 21.11.2019, after a lapse of more than four years. Even if the contention of the Revenue that such an order can be given effect to at any time is to be accepted, the inordinate delay of over four years cannot, by any stretch of imagination, be construed as a reasonable period.

The learned Single Judge, upon a proper analysis of the provisions of Section 153, both as they stood prior to and after the amendment by the Finance Act, 2016, rightly held that the assessment pursuant to the directions of the Tribunal ought to have been completed on or before 31.03.2017, and that the impugned notice dated 06.11.2020 is barred by limitation. The direction to consider the claim of refund is a consequential relief arising from the failure to complete the de novo assessment as directed by the Tribunal. The order of the learned Single Judge is well-founded and reasoned. The appellants have not made out any demonstrable ground warranting interference with the same.

The appeal being devoid of merit, stands dismissed.