Income Tax Dept fails to pass Consequential Order for 11 years: Madras HC says Time Limit u/s 153(2A) Elapsed, Ends Proceedings [Read Order]

The Madras High Court observed that the time limit for passing consequential orders under Section 153(2A) of Income Tax Act, 1961 was one year and the same has elapsed. It noted that the department failed to pass the order for the past 13 years.

The appeal was preferred by the assessee M/s MKR Palanisamy & Sons, challenging the order passed by the income tax appellate tribunal on 07.05.2012 for the assessment years 2001-02 to 2007-08.

The matters were remitted to the files of the Assessing Authority for i) determination of jurisdiction and ii) framing of assessments under Section 143(3) read with Section 153 afresh, however no action has been taken by the Department till date, said the court.

The appeal’s question of law was admitted by the court on 28.02.2013.

The assessee put forwarded 3 issues which included treating the assessment orders passed for AYs 2001-02 to 2007-08 as merely irregular and capable of revival, whether the Tribunal could issue appellate directions that effectively defeat the statutory limitation under the first proviso to Section 153B(1) for assessments under Section 153C, and whether the Tribunal was justified in disregarding the decisions of its co-ordinate Bench in connected cases where similar assessments had either been annulled or remanded subject to limitation.

The court heard the submission of Mr.Balaji, the counsel who got the best information form the Chartered Accountant who were appearing for the assessee over the years. It was submitted that the assessee did not receive any notice from the Department for initiation of consequential actions with regards to the order of the Tribunal dated 07.05.2012.

The bench said that it has provided a final call to the department counsel with regards to the information of consequential orders / action taken. However, the counsel has finally submitted that no consequential orders / action with regard to the tribunal was in record.

13 years before, in 2012, the tribunal directed the income tax department to re-do the assessment. Parallely, it also sets aside the assessment orders. However, no action was taken by the department till date.

There is another statute issue that, as per Section 153(2A), the consequential orders must be passed within 1 year under Section 254 of the income tax law. In this case, Justice Dr. Anita Sumanth and Justice K. Govindarajan Thilakavadi observed that the order was passed in May 2012 and the Order should have been received before 31.03.2013. Hence, the period of one year as provided under Section 153(2A) has expired on 31.03.2014. No action was taken.

“Since the limitation for passing of consequential orders has long passed, there is nothing to be served in deciding substantial questions of law in a stale matter” , said the court.

The high court also noted the common or similar issues, where the cases were either withdrawn due to low tax effect or no appeals filed by the department. Therefore, the court viewed that the department will not be affected by the adverse decision and they already dealt with such cases before.

The court, while ending the case, observed that “Hence, even on the ground of uniformity in approach, we are of the view that since the appeals in the case of P.Sundaraj (HUF), Sukumar and Jeevarathinam, assessees in the same group who have suffered similar orders of assessment, the Department has taken a particular stand, there is no necessity to take a deviant view in the present case.”

Accordingly, the bench disposed of the appeal by confirming the order of the appellate tribunal, returning the questions of law as unanswered.

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