TMI Blog2023 (10) TMI 850X X X X Extracts X X X X X X X X Extracts X X X X ..... or cancel the subject assessment orders requiring a fresh assessment. The first question is answered accordingly. As apparent that the respondents have issued the impugned notices after the petitioner s applications dated 29.10.2020 as they were of the opinion that they could give effect to the ITAT s orders dated 31.03.2015, but the respondents, consequent to this Court s conclusion that the time for the AO to consider the question of disallowance of the claims of bad debts/ advances written off and under Section 14A of the IT Act stand lapsed as of 31.03.2017, must consider the petitioner s representation dated 29.11.2020 for refund. ORDER [A] The petitions are allowed in part and the impugned notices dated 05.11.2020 and 06.11.2020 are quashed on the ground that they are issued after 31.03.2017 which would be impermissible because of the provisions of Section 153[7] of the Income Tax Act, 1961 as amended by the Finance Act 2016. [B] The respondents are directed to consider the petitioner s representations for refund along with interest in the light of the decision of Shelly Products [ 2003 (5) TMI 4 - SUPREME COURT] The respondents shall so consider the repr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 48,85,308/- Non consideration of brought forward loss Rs. 16,13,58,199/- Taxable Income Rs. 391,70,82,437/- Balance tax payable[including interest] Rs. 22,70,56,315/- (ii) For the Assessment Year 2008-09 Disallowance of Foreign Exchange Fluctuation Loss Rs. 5,68,45,363/- Section 14A of the IT Act Rs. 41,20,34,568/- Bad Debts and Bad Advances written off Rs. 95,39,284/- Disallowance of amalgamation of expenses Rs. 1,69,59,640/- Taxable Income Rs. 575,40,27,792/- Balance tax payable[including interest] Rs. 7,53,16,766 /- (iii) For the Assessment Year 2009-10 Section 14A of the IT Act Rs. 53,53,60,238/- Bad Debts written off Rs. 16,43,981/- Ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... filed its applications dated 21.11.2019 and 29.10.2020. In the first application, the petitioner has just stated that orders to give effect to the ITAT s order are pending, and because it has proved its case, the amount computed [as per the appendix to this application] must be refunded. In its next application, the petitioner has filed a detailed explanation contending that, because the proceedings pursuant to the ITAT s orders dated 31.03.2015 are not concluded, they are rendered time-barred under the provisions of Section 153 of the IT Act and, in view of the decision of the Hon ble Supreme Court in CIT v. Shelly Products [2003] 5 SCC 461 , the amount paid over and above the admitted liability must be refunded. The petitioner has also reiterated its computation. 8. The details of the computation as furnished by the petitioner for each of the subject Assessment Years are set forth as hereinafter. 8. 1 The petitioner s computation of Refund for the AY 2007-08 Particulars Amount Admitted Tax liability with the respective Surcharge and Cess Rs. 1,22,03,55,759/- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... respective Surcharge and cess Rs.1,68,40,01,348/- Deduction Towards Advance Tax, TDS/TCS as per ROI and Self Assessment Tax paid Rs. 1,65,00,00,000/- Rs. 25,22,44,349/- Total Deductions towards Taxes Rs. 1,90,22,44,349/- Excess Tax paid Rs. 21,82,43,001/- The petitioner with the aforesaid amount as the base figure has given credit to certain refunds allowed and demands paid with additions towards interest under Section 244A of the IT Act in claiming refund of Rs. 36,37,90,129/- . [As against a sum of Rs. 21,82,43,000/- claimed in its Return of Income] . 9. The first respondent has issued the impugned notices dated 05.11.2020 and 06.11.2020 after the petitioner s applications dated 21.11.2019 and 29.10.2020. The petitioner is called upon to appear on specific dates, but this Court, on 14.12.2020, has granted stay of the proceedings pursuant to the impugned notices. On 05.01.2023, these three petitions are clubbed because of the similarities in the questions and the interim orde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the IT Act will be twelve [12] months from the end of the month in which the ITAT s order is issued. 13. Sri Percy Pardiwala canvasses that, however as regards the proceedings under Section 153[5] or Section 153[6] of the IT Act pending as of 01.06.2016, in view of the provisions of Section 153[7] of the IT Act, the final time line is until 31.03.2017, and if the concerned order or direction or order is not given effect to before this date, the proceedings stand lapsed [Sri Percy Pardiwala in canvassing this proposition does not insist that the ITAT s order is for a fresh assessment cancelling entirely the subject Assessment Orders.] . The learned Senior counsel argues that in the present case the ITAT s orders dated 31.03.2015 irrefutably are before 01.06.2016 and therefore, the AO, had to give effect to ITAT s orders on or before 31.03.2017 and because this exercise is not completed within this time, the proceedings must lapse. 14. Sri E I Sanmathi, the learned counsel for the respondents, without contesting Sri Percy Pardiwala s reading of the provisions of the substituted Sections 153[3], 153[5], 153[6] and 153[7] of the IT Act, submits that the timeline for conclusion ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... question is almost canvassed as an incidental question because if indeed the ITAT has set aside/cancelled the assessment orders [as against certain directions being issued for consideration of a few aspects] paving way for fresh assessment, the timeline within which the assessment has to be concluded is different be it under the provisions of Section 153 of the IT Act as it stood prior to the Finance Act, 2016 or the substituted provisions. There will have to be elaborate discussion on this aspect when the second question is considered, but to bring out the significance of the first question to the extent that is relevant, this Court must refer to a decision of the Division Bench of the High Court of Delhi in Basu Distributors Private Limited v. Income Tax Officer Ward' [2007 [94] DRJ 495[DB]. This decision is also referred to by another Division Bench of the Delhi High Court in in Nokia India Pvt. Ltd. v. Deputy Commissioner of Income Tax [2017] 298 CTR 0334.]. 18. The Division Bench, while referring to a decision of the Bombay High Court in Rikhabdas Jhaverchand v. Commissioner of Income Tax [2001] 169 CTR [Bom] 196 ' where it is held that the time line in S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dealt with in the light of its observation after affording to the petitioner adequate opportunity of hearing and to file details required and after considering the submissions already made and in the light of the judicial pronouncements cited . The ITAT has directed the AO to consider the question of disallowance for bad debts/advances being written off and under Section 14A of the IT Act permitting the petitioner to produce further documents, and directing the AO to extend an opportunity of hearing to the petitioner and decide on the afore in the light of the judicial pronouncements. 20. This order is common to all the three subject assessment years, and in fact, it is in view of the ITAT s similar order for the previous assessment years. This Court, in view of the above, can only conclude that it is indubitable that the ITAT s common order dated 31.03.2015 do not set aside or cancel the subject assessment orders requiring a fresh assessment. The first question is answered accordingly, and this Court is of the considered view that the second question must necessarily be examined in the light of this definite opinion. 21. The merits of the respondent s case that the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Where effect to any order, finding or direction referred to in sub-section (5) or sub-section (6) is to passed by the Principal Commissioner or Commissioner, as the case may be. be given by the Assessing Officer, within the time specified in the said sub-sections, and such order has been received or passed, as the case may be, by the income-tax authority specified therein before the 1st day of June, 2016, the Assessing Officer shall give effect to such order, finding or direction, or assess, reassess or recompute the income of the assessee, on or before the 31st day of March, 2017. The Parliament, in incorporating Section 153[7] of the IT Act, is unequivocal that the proceedings to give effect to orders or findings or directions under Sections 250, Section 254, Section 260, Section 263 and Section 264 of the IT Act must be completed before 31.03.2017. 24. The CBDT s Explanatory Note issued vide Circular No. 3/2017 dated 20.01.2017 on the changes brought about by the Finance Act, 2016 removes any doubt about the Parliament s intention in incorporating Section 153[7] of the IT Act. The Explanatory Note, as regards the substitution of the provisions of Section 153 of the IT A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction 153 of the Income-tax Act as they stood immediately before their amendment by the Act shall apply to and in relation to any order of assessment, reassessment or re-computation made before the 1st of June, 2016. 25. This Court must next refer to the reason for the substitutions vide the Finance Act, 2016 as set forth in this Explanatory Note. The reason read as under: It is desirable that proceedings under the Act are finalised more expeditiously as digitisation of processes within the Department has enhanced its efficiency in handling workload. In order to simplify the provisions of existing section 153 of the Income-tax Act by retaining only those provisions that are relevant to the current provisions of the Income-tax Act, section 153 of the Income-tax Act has been amended by substituting the existing section changes in time limit from the existing time limits. It is obvious from the reading of the reasons assigned that the substitution of Section 153 of the IT Act is to ensure that the assessment proceedings are finalized expeditiously and therefore, the timelines are reduced. Crucially, insofar as the proceedings pending as of 01.06.2016 for giving effec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Assessing Authority is denuded of its authority to verify the correctness and completeness of the return, which authority it has while framing a regular assessment. It must accept the return as furnished and shall not in any event raise a demand for payment of further taxes. Accepting the income as disclosed in the return of income furnished by the assessee, it must refund to the assessee any tax paid in excess of the liability incurred by him on the basis of income disclosed. Even if the tax paid is found to be less than that payable, no further demand can be made for recovery of the balance amount since a fresh assessment is barred. In other words, the tax paid by the assessee must be accepted as it is, and in the event of the tax paid being in excess of the tax liability duly computed on the basis of return furnished and the rates applicable, the excess shall be refunded to the assessee, since its retention may offend Article 265 of the Constitution. 28. It is apparent that the respondents have issued the impugned notices after the petitioner s applications dated 29.10.2020 as they were of the opinion that they could give effect to the ITAT s orders dated 31.03.2015, b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nths from the end of the financial year in which the order under section 254 is received by the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner or, as the case may be, the order under section 263 or section 264 is passed by the Principal Commissioner or Commissioner 2. Section 153[5]: Where effect to an order under section 250 or section 254 or section 260 or section 262 or section 263 or section 264 is to be given by the Assessing Officer, wholly or partly, otherwise than by making a fresh assessment or reassessment, such effect shall be given within a period of three months from the end of the month in which order under section 250 or section 254 or section 260 or section 262 is received by the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner, as the case may be, the order under section 263 or section 264 is passed by the Principal Commissioner or Commissioner. 3. Section 153[6] Nothing contained in sub-sections [1] and [2] shall apply to the following classes of assessments, reassessments and recomputation which may, subject to the provisions of sub-sections [3] and [5], be complet ..... X X X X Extracts X X X X X X X X Extracts X X X X
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