Non Compliance with Section 153(3) of Income Tax Act: Delhi High Court bars Passing of Fresh Assessment Order [Read Order]

In a recent ruling of Delhi High Court the writ petition filed was allowed owing to lack of compliance with provisions of Section 153(3) of Income tax Act and barred the fresh assessment order passed by the respondent.

The petitioner Kanika Chowla represented by Advocate Vivek Bansal had filed a for return of income under section 139(1) of the Income Tax Act, 1961. In that the total income for the assessment year 2004-05 was INR 90,100/. The same was processed and was accepted.

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In the year 2008 the petitioner was served with a notice on the basis of the information received that the petitioner had received gifts of Rs.1 Crore from Harish Kumar.

The Respondent, Income tax Officer, Delhi, Ward 45(1) concluded the reassessment proceedings and assessed petitioner at Rs.1,00,90,100/ and an addition of Rs.1 Crore holding that the gifts received by the petitioner were not genuine.

The petitioner aggrieved by this filed an appeal before the Commissioner of Income Tax ( Appeals )

 ( CITA ), but the appeal was dismissed confirming the addition.

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The petitioner then filed an appeal before the Income Tax Appellate Tribunal. The tribunal remitted the matter to the file of the Assessing Officer ( AO ). Pursuant to which the petitioner was again assessed and made the same additions  on protective basis, raising a tax demand of Rs. 72,36,015/.

Petitioner challenged the assessment order before CIT(A), the appeal was dismissed justifying the addition made by the AO. Aggrieved by the order the petitioner preferred appeal before the Tribunal. The Tribunal restored the matter to the file of the AO with certain findings and directions. The Tribunal

directed the AO to comply with directions within a period of six months from the date of receipt of the order.

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Despite orders passed by the tribunal no action was taken by the respondent. Therefore the petitioner sent a letter to the respondent  for giving appeal effect to the orders of the Tribunal and for issuance of refund for the subject AY. Upon whose receipt a notice was issued by the respondent asking to provide assessment records in the case of Harish Kumar asking him to submit the relevant documents.

Petitioner again sent a follow up letter requesting to pass an appeal effect order to the Tribunal’s order and issue refund due to the petitioner. Respondent again issued notices directing the petitioner to provide documentary evidence and also issued a demand notice raising a demand of Rs. 73,10,948/.

Petitioner deposited INR 36,62,185/- under protest against the raised demand. The petitioner deposited INR 36,62,185/- under protest against the raised demand. The respondent passed the assessment order without any change in the assessed income, with petitioner’s income assessed at Rs. 1,00,90,100/.

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A writ petition was filed by the petitioner upon failure of the respondent to grant refund. The counsel of petitioner composed of Advocate Vivek Bansal submitted that the action of respondent in not giving effect to appeal and not issuing refund is unreasonable and also stated that the reassessment order is barred by limitation.

On the contrary respondent’s counsel submitted that the AO had complied with directions of the tribunal in the process of assessment. They also argued that there was no deliberate delay in giving appeal effect therefore the writ petition should be dismissed.

The division bench comprising Justice Yashwant Varma and Justice Ravinder Dudeja observed that the respondents did not file an appeal challenging the order passed by the tribunal. The AO had failed in adhering to the directions of tribunal within the prescribed timeline. AO took no effort to give effect to the order of tribunal confining to the limitation period.

As the provisions of  Section 153(3) entails strict adherence to the limitation period, this cannot be envisaged to expand the time limit of passing of fresh assessment. Therefore the passing of fresh assessment order is barred under Section 153(3). Thus the impugned notices issued by the respondent and the assessment order is set aside.

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Hence, since the respondents have failed to comply with the order of the Tribunal in passing a fresh Assessment Order within the stipulated time, the income as returned by the petitioner Kanika Chawla shall be accepted. The excess amount of admitted liability paid as tax in the year AY 2004-05 shall be made good by the respondent department to the petitioner.

The Impugned notices and assessment order are set aside. Respondents are directed to refund Rs. 36,62,185/ along with interest within eight weeks from date of order. The petition was allowed on the aforesaid terms.

To Read the full text of the Order CLICK HERE

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