TMI Blog2017 (9) TMI 1298X X X X Extracts X X X X X X X X Extracts X X X X ..... do so, the impugned notice dated 14th September 2015 issued by the AO and all proceedings consequential thereto including the order dated 2nd December 2015 passed by the AO are hereby set aside. - Decided in favour of assessee. - W. P. (C) No. 1773/2016 - - - Dated:- 21-9-2017 - S. Muralidhar And Prathiba M. Singh, JJ. For the Petitioner : Mr. Vikas Srivastava, Mr. Jatinder Pal Singh, Mr. Sumit Mangal and Ms. Kanika Jain, Advocates For the Respondent : Mr. Sanjay Jain, ASG with Mr. N. P. Sahni and Mr. Rahul Chaudhary, Senior Standing Counsel JUDGMENT Dr. S. Muralidhar, J. 1. This writ petition by Nokia India Pvt. Ltd. ( Assessee ) seeks the quashing of the notice dated 14th September 2015 issued by the Deputy Commissioner of Income Tax, Circle-18 (2), New Delhi (hereafter the Assessing Officer - AO ) under Section 254 read with Sections 144-C and 143 (3) of the Income Tax Act, 1961 ( Act ) for Assessment Year ( AY ) 2007-08. The Assessee also challenges the consequential order dated 2nd December 2015 passed by the AO rejecting the plea of the Assessee that in terms of Section 153 (2A) of the Act, the proceedings under the aforementioned notice dated 14th S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the ITAT rendered in the aforementioned appeal on 18th May 2012 was as under: a. As regards disallowance of expenditure incurred on issue of mobile handsets on 'free of cost' basis, the ITAT noted that on an identical issue for AY 2000-01 and 2001-02, as well as for AY 2006-07, the ITAT had set aside the assessment order and remanded the matter to the file of the AO. Accordingly, the impugned assessment order was set aside to the file of the AO with the directions to decide the issue afresh after affording the assessee a reasonable opportunity of being heard. b. As regards the applicable rate of depreciation on computer peripherals, the ITAT allowed the Assessee's appeal and directed the AO to allow depreciation on computer peripherals at the rate of 60% instead of 15% as allowed in the original assessment order. c. As regards disallowance of expenditure on account of price protection expenses, the ITAT observed that Since we have admitted additional evidence in respect of other distributors to whom trade price protection has been allowed, we set aside this issue to the file of the AO with the directions to examine the case of the assessee in the light of ad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , the last date for the AO to pass the fresh assessment order was 31st March 2015. The TPO was requested to take the said provision into consideration. 7. On 21st January 2015, the TPO responded to the aforementioned letter of the Assessee. According to the TPO, the limitation for passing the order in the assessment proceedings had to be calculated under Section 153 (3) (ii) of the Act. According to the TPO, the ITAT had only partly restored the original order by giving directions to various authorities for considering certain issues afresh after giving a reasonable opportunity to the Assessee. Referring to paragraph 29 of the ITAT's order which stated that the appeal of the Assessee was being partly allowed for statistical purposes, the TPO stated that the limitation date for completing and passing of the assessment order had to be calculated in terms of Section 153 (3) (ii) of the Act. Alternatively, the TPO stated that, even in terms of Section 153 (2A) of the Act, the proceedings were not time-barred as of 31st January 2015. 8. On 29th January 2015, the Assessee responded to the TPO and a copy thereof was also sent to the AO. The Assessee reiterated that the limitatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be passed till the next date of hearing. That interim order has continued since. Submissions of counsel 13. Mr. Vikas Srivastava, learned counsel appearing for the Assessee, submitted that it was erroneous on the part of the AO to conclude that Section 153 (2A) of the Act applied only where a fresh order had to be passed de novo on fresh inquiry and not when the proceedings were remanded to the AO with directions from the ITAT. According to him, there was no warrant for such an interpretation on a reading of Section 153 as a whole as was further explained by Circular No. 56 dated 19th March 1971 issued by the Central Board of Direct Taxes ( CBDT ). Mr. Srivastava relied on the decision of this Court in Commissioner of Income-tax v. Bhan Textile (P) Ltd [2008] 300 ITR 176 (Del) and distinguished its decision in Basu Distributors (P) Ltd. v. Income Tax Officer [2007] 292 ITR 29 (Del). 14. On the other hand, Mr. Sanjay Jain, learned Additional Solicitor General of India ( ASG ), submitted that Section 153 (2A) of the Act would apply only where the entire assessment was set aside or cancelled. However, as in the present case, where the AO was required to follow certain specif ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 43 or Section 144 at any time after- (a) the expiry of- (i) four years from the end of the assessment year in which the income was first assessable, where such assessment year is an assessment year commencing on or before the 1st day of April, 1967; (ii) three years from the end of the assessment year in which the income was first assessable, where such assessment year is the assessment year commencing on the 1st day of April, 1968; (iii) two years from the end of the assessment year in which the income was first assessable, where such assessment year is an assessment year commencing on or after the 1st day of April, 1969; or (b) the expiry of eight years from the end of the assessment year in which the income was first assessable, in a case falling within clause (c) of sub-section (1) of section 271; or (c) the expiry of one year from the date of the filing of a return or a revised return under sub-section (4) or sub-section (5) of Section 139; whichever is latest. (2) No order of assessment reassessment or recomputation shall be made under Section 147- (a) where the assessment, reassessment or recomputation is to be made under clause ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es of assessments, reassessments and re-computations which may, subject to the provisions of sub-section (2A), be completed at any time. 20. By an amendment brought about by the Finance Act, 2001, the general time limit under Section 153 (2A) was reduced to one year. With effect from 1st July 2012, the time limit was increased to two years in certain TP cases. Finally, by the amendment in 2016, the time limit under Section 153 (2A) has been reduced to 9 months. 21. The reason behind the introduction of sub-section (2A) to Section 153 of the Act can be gleaned from para 22 of the Circular No. 56 dated 19th March 1971 issued by the CBDT which reads as under: Time limit for completion of assessments set aside in appeal or reopened under section 146 22. Section 153, relating to time limits for completion of assessments and reassessments has been amended so as to provide a time limit for completion of fresh assessments, to be made in cases where : (i) the original assessment made under section 144 has been cancelled by the Income Tax Officer on an application by the assessee under Section 146; or (ii) the original assessment is set aside or cancelled in appeal by the A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ability of sub-section (2A) only to such cases where the entire original assessment order is set aside. It was noted that, Under the existing provisions of section 153 (3), such fresh assessments are not subject to any time limit. Indeed, Section 153, as it stood at that time, did not prescribe any time limits. Section 153 (3) (ii), in particular, did not require the order passed thereunder to be issued within any particular time limit. Further there is a distinction between an 'assessment' that is set aside and an 'assessment order' being set aside. When the assessment on an issue is set aside and the matter remanded, with a direction that the issue has to be determined afresh, Section 153 (2A) of the Act would get attracted. 24. What is important to note is that, along with the insertion of sub-section (2A), sub-section (3) underwent a simultaneous change. It was expressly made subject to the provisions of sub-section (2A). This meant that Section 153 (3) would thereafter apply only to such cases where Section 153 (2A) did not apply. In other words, in all instances of an AO having to pass a fresh assessment order upon remand where Section 153 (2A) would ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ora of precedents on the aspect of law which has engaged our attention, we are of the view that Section 153(2A) is not attracted in the facts of the present case; no period of limitation is prescribed as per the provisions of Section153(3)(ii). It is trite that Parliament is continuously concerned with the evils or undesirability of the proverbial sword hanging over the head of an Assessee. Parliament has therefore set-down the parameters within which an assessment must be completed and over the years has shortened the span of time in this regard. It has, however, carved out an exception to the rule where a specific, limited or restricted direction is passed by an Appellate Authority which is of the opinion that it would not be possible to decide the appeal before it without a clarification on this point. The Appellate Authority has also the power to set aside the Assessment Order and direct a de novo enquiry, in which case every aspect, computation and dimension is open for consideration. This partakes of the nature of an assessment which is akin to the original assessment and, therefore, the period of limitation applicable to the original assessment must apply to the fresh assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t petitions after considerable delay in the vain attempt to avoid payment of Income Tax on technicalities which do not exist in their favour. We would have dismissed the writ petitions with heavy costs but decline from doing so because the Revenue has unreasonably raised preliminary objection pertaining to the maintainability of the writ petitions. 27. From para 20 of the aforementioned judgment, it is plain that the ITAT had in fact set aside the entire assessment order and directed a de novo enquiry. The Court noted that where the remand is on a selected issue or aspect of the assessment, the uncertainty or discomfort of the sword of uncertainty provides no peril to the assessee. The enquiry to be undertaken by the AO upon evidence being furnished by the Assessee was indeed a fresh enquiry and if no time limit was prescribed for that exercise, the Assessee would undoubtedly have the sword of uncertainty hanging. Considering the additions made, there was, in fact, no other substantive issue that had to be examined afresh by the AO. Therefore, the Court, in terms of its own analysis of Section 153 (2A) in the aforementioned decision, required a fresh assessment order to be m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... i), (ii) and (iii) of section 153, the limitation prescribed under sub-section (2A) of section 153 would not apply and the expression assessment, reassessment and re-computation be completed at any time may enable the revenue to continue the proceedings of assessment even beyond the period prescribed under sub-sections (1) and (2) of section 153 of the Act and would also ;not be hindered by the prescription of limitation under section (2A) of section 153 of the Act. 31. The facts and conclusion of that case are set out by the Gujarat High Court in paras 24 and 25 of the above decision as under: 24. With this background in mind, we may revert back to the facts of the case. The Tribunal on an appeal filed by the assessee, upheld the assessee's contention that the commission was disallowed in case of two agencies, placing reliance on statements recorded behind the back of the assessee without affording the cross-examination of such witnesses. It was on this count that the Tribunal remitted the matter to the file of Assessing Officer with direction to summon those two parties again and allow the assessee an opportunity to cross-examine them so that true facts may emerge ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd Jain v. ITO [1984] 145 ITR 676 (P H), and the Karnataka High Court in CIT v. Paul Noel Rodrigues [2015] 231 Taxman 811 (Kar), all hold likewise. The Kerala High Court in Patel R.P. v. ACIT 2015 (5) KHC 370 held that Section 153 (2A) of the Act would apply even where more than one issue is involved i.e. even where one of the issues has been remanded to the AO for a fresh determination. 33. The analysis of the terms finding and directions by the Supreme Court in Rajinder Nath (supra) was in the context of Section 153 (3) (ii) of the Act at a time when Section 153 (2A) of the Act had not been introduced since the relevant AY in that case was 1956-57. The said decision is, therefore, not of help to the Revenue. Conclusion 34. For all the aforementioned reasons, the Court holds that, in the present case, the assessment proceedings had to necessarily be completed by the AO within the time limit specified in Section 153 (2A) of the Act. Inasmuch as the AO failed to do so, the impugned notice dated 14th September 2015 issued by the AO and all proceedings consequential thereto including the order dated 2nd December 2015 passed by the AO are hereby set aside. 35. The writ ..... X X X X Extracts X X X X X X X X Extracts X X X X
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