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TMI Blog2021 (9) TMI 202X X X X Extracts X X X X X X X X Extracts X X X X ..... er '1961 Act') has denied additional 3% interest on the allegedly delayed refund of amount relatable to Assessment Year 2008-09. 3. The second respondent having contexted Section 244A(1A) of the Act has styled the operative portion of the impugned order as under: "In this case, the Hon'ble ITAT, Bengaluru has remitted back the issue of Transfer Pricing to the AO for fresh assessment/re-assessment as per Para No. 5 & 6 of the ITAT order. Further, fresh approval has been taken from the Hon'ble Prl. CIT-7, Bengaluru for reference to the Transfer Pricing Officer and the same has been referred. The TPO re-computed the adjustments, based on the directions of Hon'ble ITAT, and TP order was passed on 31.10.2017. As this is the case of fresh assessment/re-assessment, an additional interest u/s 244A(1A) will not be applicable in this case." 4. After service of notice, the respondents having entered appearance through their Panel Counsel resisted the writ petition making submission in justification of the impugned order and the reasons on which it has been structured. 5. FACTS IN BRIEF: (a) Petitioner's return of income for the Assessment Year 2008-09 declaring a total income of R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lly granted; this period being seventeen months, the Assessee quantifies the interest amount at Rs. 58.65 crore. 6. SUBMISSIONS CANVASSED ON BEHALF OF THE ASSESSEE: (a) Section 153(2A) of the Act prior to 2016 amendment encompassed within itself the power to make fresh Assessment Order in terms of orders made in appeal; if recomputation was required for giving effect to these appellate orders, no time limit was prescribed since that was covered by Section 153(6); however, a significant change was brought in by amendment vide Finance Act, 2016 that contemplates two scenarios viz., (i) making of fresh assessment orders pursuant to appellate orders that have set aside or cancelled the assessment, under subsection (3) of section 153, & (ii) giving effect to appellate orders other than those covered by fresh assessment orders in terms of sub-section (5) of section 153; the 2016 Act amended section 244A by introducing sub-section (1A) providing for the grant of additional interest in cases falling u/s 153(5). (b) The orders of the kind made u/s 244A(1A) can be classified into two categories viz. (i) the ones where a fresh assessment/re-assessment needs to be made, & (ii) the others wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in cases where no fresh assessment or re-assessment is contemplated under the appellate orders; since the matter was remitted to the TPO for fresh assessment/re-assessment, case of the petitioner does not fit into section 244A(1A); (c) Section 240 provides that the refund on appeal would arise where an order in appeal on assessment is set aside or cancelled with a direction to undertake a fresh assessment/re-assessment and such a direction is accomplished; although, section 153(5) prescribes a time limit of three months for giving effect to the orders passed under any of the provisions i.e., Ss.250, 254, 260, 262, 263 or 264 of the Act by the Assessing Officer; however, an exception is carved out in cases where a fresh assessment/re-assessment is contemplated; the provisions of section 153(5) and section 244A(1A) employ the expression "wholly or partly" to mean a fresh assessment/re-assessment to be made "wholly or partly" and that the said expression does not qualify "the order to give effect to the order on appeal"; the matter having been remitted to the TPO and to the AO for a de novo consideration though in certain aspects, the assessee is not entitled to the grant of addl. in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... observed in Vestey v. Inland Revenue Commissioners [1979] Ch 177 (197 - 198) "I conceive it to be in the national interest, in the interest not only of all individual tax payers - which includes most of the nation - but also in the interests of the Revenue authorities themselves, that the tax system should be fair... One should be taxed by law, and not be untaxed by concession ... A tax system which enshrines obvious injustices is brought into disrepute with all tax-payers accordingly, whereas one in which injustices, when discovered, are put right (and with retrospective effect when necessary) will command respect and support...". (iv) A Welfare State like ours is constitutionally expected to be fair & reasonable in dealing with the subjects and it must avoid any harassment to the assessee public, without causing any loss to the Exchequer (see Nokia Corporation v. Director of Income-tax [2007] 292 ITR 22 (Delhi HC); the State as constitutionally ordained, needs to conduct itself as a virtuous litigant and should meet honest claims; this view finds resonance in the decision of the Apex Court in State of U.P. v. Manohar [2005] 2 SCC 126; the maxim actus curiae neminem gravabit, i.e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onfined to the definite act of making an order of assessment; in C.A. Abraham v. ITO [1961] 41 ITR 425 (SC), in the context of section 44 of 1922 Act (similar to section 189 of the 1961 Act), it has been held that the term 'assessment' employed therein not only referred to computation of income but included the procedure for declaration & imposition of tax liability and the machinery for enforcement thereof; (iii) It is pertinent to refer to what the Hon'ble Supreme Court observed in Auto & Metal Engineers v. Union of India [1998] 229 ITR 399 (SC): "7. In the Act the provisions regarding procedure for assessment are contained in Chapter XIV (sections 139 to 158). Under the said provisions, the process of assessment involves (i) filing of the return of income u/s. 139 or u/s. 142 in response to a notice issued u/s. 142(1); (ii) inquiry by the Assessing Officer in accordance with the provisions of sections 142 and 143; (iii) making of the order of assessment by the Assessing Officer u/s. 143(3) or section 144; and (iv) issuing of the notice of demand u/s. 156 on the basis of the order of assessment. The process of assessment, thus, commences with the filing of the retur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aside or cancellation of the entire assessment order or would it include even setting aside or cancellation of only a part of the assessment order [as with respect to particular issues, rest having been left intact by the ITAT or the like]; the said provisions cautiously employ the word 'assessment' and not the term 'assessment order'; however, one will have to see the setting in which these provisions actually occur. A summary of the said provision is set out hereunder: Sub- Section Nature of Assessment Proceedings under section Time limit [from the end of the assessment year in which income was first assessable] Time limit [from the end of the Financial Year 153(1) Regular Assessment To pass assessment orders under section 143(1) and 144. 21 months From AY 2018-19, time limit has been amended to 18 months From AY 2019-20, time limit has been further reduced to 12 months 153(2) Income escapement assessment To assess/reassess/ recompute under section 147 NA 12 months from the end of FY in which notice under section 148 was served. From 1st April 2019, the above time limit has been reduced to 9 months. 153(3) To make fresh assessment pursuant to o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ate of authorization - for search has been issued - whichever is earlier. Further, Explanation 1 below section 153 provides that in computing the period of limitation, time taken for specified processes, as listed therein, should be excluded. Section 153 lays down the time limit to make assessment, reassessment & recomputation under various scenarios; section 153 is substituted by Finance Act, 2016; the brief outline of this section is as under: * Sub-section (1) deals with time-limit for making assessment order under sections 143 or 144. With the advancement of e-assessments, the time limits for doing an assessment are progressively going to be reduced. * Sub-section (2) deals with time-limit for making assessment order under section 147, Section 147 deals with re assessment orders. * Sub-section(3) deals with time-limit for making order of fresh assessment in pursuance of an order under section 254 or section 264, by virtue of which the original assessment is either set aside or cancelled. * Sub-section (4) states that where a reference under section 92CA(1) is made during the course of the proceeding for the assessment or reassessment, the period available for completi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessment powers do avail, as discussed by Calcutta High Court in Karan Chand Thapar vs. ACIT (2005) 276 ITR 105 para 13. (ii) OGE is not a regular assessment as held in the case of Sundaram Finance 417 ITR 679 Mad; passing an Appeal Effect Order is an implied obligation of every authority to comply with the directions of his superior in the hierarchy; this is an inherent aspect of adherence to judicial discipline; OGE to an order on appeal or on revision has to be passed in order to compute the total income and to determine the tax payable by or refundable to the assessee for the assessment year concerned, in the light of additions/disallowances affirmed or varied at every such stage; it may be noted that such OGE could either be adverse or beneficial as it may either result in a tax payable by or refundable to the assessee, as illustrated by the following: (iii) It may be important to note that even before such amendments were made, binding appellate orders used to be given effect to by the Writ Courts on being moved by the assesses grieving against denying or delaying of refund of tax, The Parliament presumably having taken cognizance of the difficulties faced by the prudent as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) The word 'reassessment' is used next to the term 'fresh assessment' in section 153(5), Proviso (a) to section 240 & section 244A(1A); the definition of the term 'assessment' as contained in section 2(8) which merely provides that assessment includes reassessment, shall not ipso facto be applicable in all situations governed by various provisions of the 1961 Act; if the fresh assessment included a fresh reassessment, there was no need for the Parliament to employ the two terms, simultaneously; Lord Hewart C.J. in Spillers Limited Vs. Caradix Assessment Committee & Pritchard, (1931) All E.R. 524 stated: "It ought to be the rule... that words are used in an Act of Parliament correctly and exactly and not loosely and not inexactly..."; section 2 i.e., the Dictionary Clause of the Act employs the usual expression 'unless the context otherwise requires' and this itself indicates that the words used in various provisions of the Act may take their colour from their context and at times, in variance with the statutory definitions; The maxim expressio unius exclusio alterius with all its arguable limitations also lends support to the above view to some extent; Maxwell on "The Inter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... horities which would be done by the lower authority either in part or in whole depending on the issues that are settled by the higher authorities. However, such an exercise cannot be done within the time limits specified in Section 153(5), where there is a fresh assessment or reassessment and in such cases the longer time limits specified in Section 153(3) would apply; a harmonious construction of these provisions would mean as under : a. That in order to give effect to the order of the superior authorities, either wholly or partly in terms of Section 153(5), it should not be a case of reassessment or fresh assessment, which if they are, would otherwise fall into Section 153(3); b. That Section 153(3), when it uses the term 'fresh assessment', would mean that the entire exercise of assessment is to be done afresh as it is used along with the terminology "setting aside or cancelling" which would mean the whole order of assessment being set at naught and not some issues comprised in the assessment order; when the assessment order is set aside on some issues only and confirmed on other, it is not a case of 'setting aside or cancelling the assessment'. c. That Section 153(5) woul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ities or Tribunals in exercise of appellate powers. Failure to do so will result in chaos in the administration of justice..... [vide Para 7] Whenever an appellate authority passes an order, there are three possibilities. Firstly, the appellate authority may confirm the whole or part of the order passed by the lower authority. Secondly, the whole or part of the order may be quashed or additions may be deleted. Thirdly, the whole or part of the issue raised may be set aside for fresh examination with or without any specific directions. Whenever some additions are confirmed or deleted, the issues become final as far as the Assessing Officer is concerned. Only course open to him is to carry out the directions given by the Commissioner (Appeals). Of course, if the assessing authority is not satisfied with the order of the Commissioner (Appeals), he can prefer an appeal before the Tribunal but, at the same time, the appeal effect has to be given. There is a practice that appeal effect orders are passed under section 250, read with section 143(3), and issues which have become final are dealt in such order and accordingly, fresh demand, if any, is raised. There is no bar in the Act fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that if proceedings are not initiated within the time prescribed, the remedy is lost and the assessee would acquire an indefatigable right; such a right accruing by the lapse of time cannot be at the mercy of the officials, who do not discharge their duties within the prescribed period or a reasonable time; in the matter of limitation, question of prejudice does not arise vide M. Janardhana Rao Case 273 ITR 50 SC; if no action is taken within the prescribed time limit, the authority in a sense becomes functus officio and thus lacks jurisdiction to take the action in the concerned matter. (ii) The above principle would apply even to passing of fresh assessment or OGEs where different time limits are prescribed u/s. 153(3/(5)(6); in Freight Systems (India) Pvt. Ltd [TS-143-HC-2021(MAD)-TP], the Hon'ble Madras High Court quashed the final assessment order dated 29.10.2010 for AY 2006-07 as being barred by limitation u/s.153(2A) [presently section 153(3)]; similar view is expressed by a Bench of this Court in Paul Noel Rodrigues [2015] 57 taxmann.com 12 (Karnataka); an assessee may challenge an adverse OGE as being barred by time; while the similar principle applies to favourable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be discerned from the Memorandum explaining the provisions of the Finance Bill, 2016, the relevant extract of which reads as under: "Payment of interest on refund ....... It is also proposed to provide that where a refund arises out of appeal effect being delayed beyond the time prescribed under sub-section (5) of section 153, the assessee shall be entitled to receive, in addition to the interest payable under sub-section (1) of section 244A, an additional interest on such refund amount calculated at the rate of three per cent per annum, for the period beginning from the date following the date of expiry of the time allowed under sub-section (5) of section 153 to the date on which the refund is granted. It is clarified that in cases where extension is granted by the Principal Commissioner or Commissioner by invoking proviso to sub-section (5) of section 153, the period of additional interest, if any, shall begin from the expiry of such extended period." Similar legislative intent is forthcoming from the Notes on Clauses to the Finance Bill, 2016 and paragraph 60.4 of the Circular No. 3 of 2017 dated 20.01.2017. (iii) Interest u/s 244A(1A) would not accrue in cases of fresh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble and non eligible units was allowed in favour of assessee. 5. Issue of computation of profits of overseas development centre (ODC), was remitted to the record of AO and assessee was directed to file relevant details as required by AO so that AO can ascertain the market value of goods and services transferred. 6. Issue of eligibility of interest income, rental income and other income u/s. 10A was remitted to AO by following earlier decision in assessee's own case. In earlier decision, issue of scrap sales and issue of interest were decided in favour of assessee and issue of other income was remitted as no details were available. While issue of interest is clearly in favour of assessee and issue of other income is a case of set aside for further verification, and it is not clear as regards guidelines to AO on rental income. 7. Issue of taxability of interest received u/s. 244A was remitted to the record of AO for limited purpose of computation of interest. 8. Issue of deemed export turnover for purpose of section 10A was held against the assessee. 9. Issue of exclusion of VAT/GST from export turnover was held against the assessee. 10. Issue of exclusion of communicatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to pass OGE within the time specified thereunder read with II Proviso thereto; in respect of issues which are set aside [ie., Sl.Nos. 1, 2 & 7],the AO had to pass OGE following the principles already settled; accordingly, it has to be held that the AO was required to pass OGE within the time specified u/s. 153(5); in respect of issues which are set aside (i.e., Sl.Nos.1, 2 & 7 above), the AO ought to have passed an assessment order u/s 153(5) following the principles already laid down by the superior forum. IX. As to Revenue's other contention being unsustainable: (i) Even according to the argued case of the Revenue, regardless of its sustainability only that part of the order giving effect to ITAT order which relates to the Transfer Pricing Adjustment constitutes a fresh assessment; as a corollary of that, the balance portion of the order which otherwise warranted giving effect to the ITAT order, does not amount to a fresh assessment or reassessment; both the TPA and the other substantial portion of giving effect were completed by one order giving effect to ITAT, dated 28.12.2017; if refund was granted immediately thereafter, the claim for additional interest in terms of section ..... X X X X Extracts X X X X X X X X Extracts X X X X
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