Time Limit for assessment complettion when ITAT simply restored matter to AO without any finding or direction

Time Limit for assessment-When ITAT simply restored matter to AO for fresh adjudication without any finding or direction, section 153(2A) was applicable and the order was subject to time limitation prescribed.

Time Limit for assessment completion u/s 153

ABCAUS Case Law Citation:
ABCAUS 1276 (2017) (06) ITAT

The Grievance:
The appeal of the assessee was directed against the order passed by CIT(A) in holding that the assessment order passed by the Assessing Officer (‘AO’) pursuant to the Hon’ble ITAT’s order was not barred by any limitation and hence was valid.

Assessment Year : 1993-94

Important Case Laws Cited relied upon:
Rajinder Nath Vs. CIT

Brief Facts of the Case:
The assessee was a firm, was had been assessed u/s 143(3) after certain additions/disallowances. The assessee contested the order beore CIT(A) but without any success. The assessee preferred second appeal before Tribunal which had restored back the matter to the file of AO to decide afresh.

In the remanded proceedings,the AO passed an order u/s 143(3) read with section 254. The said order of AO was again challenged by the assessee before CIT(A) on the grounds of limitation as per the provisions of Section 153(2A) and also on merits. The CIT(A) after perusing assessee’s submissions, came to the conclusion that the provisions of subsection 153(3)(ii) read with explanation-2 applied to the case of the assessee and since there was no prescribed time limit, the order of Ld. AO was perfectly in order so far as the ground of limitation was concerned.  but the same got dismissed again.

Against this second dismissal by CIT(A), the assessee went in appeal before the ITAT.

Contentions of the appellant assessee:
The assessee drew attention to the provisions of Section 153(2A) read with second proviso and contended that earlier assessment was set aside by the Tribunal in the first round of appeal and the matter was restored for fresh assessment before AO and therefore, time limit as provided in Section 153(2A) applied in the instant case and since the same had been violated by the AO, the assessment order stood vitiated on grounds of limitation and liable to be quashed.

It was contended that Tribunal’s order in the first rounds of appeal was passed on 10/10/2006 and presuming that the same was received in Financial Year 2006-07, the order of fresh assessment should have been passed within 9 months i.e. by 31/12/2007 as per second proviso as against 30/04/2012 passed by the AO. The consequential order for AY 94-95 was passed by CIT on 13/05/2009 pursuant to directions of Tribunal for 1994-95 and therefore, even taking this date as the relevant date, the order should have been passed latest by 31/12/2010 and since it was beyond limit from any angle and therefore, bad in law.

Contention of the Respondent Revenue:
It was submitted that consequential order was passed pursuant to findings and directions of the Tribunal and therefore, there was no time limit for passing the order as per Section 153(3)(ii) and hence the same was perfectly valid.

Observations made by the Tribunal:
The Tribunal found that the Tribunal had restored the matter to the AO simplicitor for fresh adjudication without any finding or direction since the assessee had challenged the assessment on the ground of principle of natural justice.

Placing reliance on the Supreme Court Judgment explaining the meaning of the expressions ‘findings or directions’ as appearing in the section, the Tribunal opined that since there were no findings or directions by the Tribunal and hence, the provisions of section 153(2A) applied to the assessee and the consequential order was subject to the prescribed time limitation. Thus, the consequential assessment order passed by AO stood vitiated on the grounds of limitation.

Held:
The assessment order was quashed. The appeal of the assessee was allowed on legal grounds.