The Bombay High Court ruled that assessment must be concluded within twelve months when remanded to AO.
Facts
Petitioner is a company incorporated under the relevant laws of Cayman Island and headquartered in Dubai, United Arab Emirates. Petitioner is engaged in the business of shallow water drilling for clients engaged in the oil and gas industry. Petitioner has been filing its Return of Income under the Income Tax Act, 1961. The petition is concerned with Assessment Year 2014-15.
On 29th November 2014 Petitioner filed its Return of Income for Assessment Year 2014-15 declaring a total loss of Rs.120,18,44,672/-. The loss had been arrived at by exercising its option not to be assessed on the presumptive basis of taxation as per Section 44BB(3) of the Act and computing its income under the regular provisions of the Act. Petitioner’s Return of Income for Assessment Year 2014-15 was selected for scrutiny by issue of notice dated 28th August 2015 under Section 143(2) of the Act. In the course of assessment proceedings, notices were issued under Section 142(1) of the Act along with a detailed questionnaire.
Petitioner submitted its response. Respondent no.1 passed a draft assessment order invoking the provisions of Section 145 of the Act and rejected Petitioner’s books of account.
Submissions
Advocate Mistri for the Petitioner submitted that the Limitation as provided in Section 153 is the outermost limit provided for passing the final assessment order under the Act. The draft assessment order, the DRP’s order on the objections raised by the assessee and the final assessment order ought to have been passed within the said limitation, i.e., by 30th September 2021.
Advocate Suresh Kumar for the Respondents submitted that the time limit given under Section 153 (3) of the Act would be in addition to the time prescribed under Section 144C of the Act.
Decision
The division bench of Justice Firdosh P. Pooniwalla and Justice K.R. Shriram viewed that the assessment has to be concluded within twelve months as provided in Section 153(3) of the Act when there has been remand to the AO by the ITAT under Section 254 of the Act. Within these twelve months prescribed, the AO has to ensure that the entire procedure prescribed under Section 144C is completed and pass a final assessment order.
The bench observed that the Twelve months as provided under Section 153(3) would start from the end of the financial year in which the Principal Commissioner received the order under Section 254 from the ITAT. The assessing officer should have taken steps to pass the final order under Sub-Section (13) of Section 144C within a 12 months period.
The court held that the exclusion of applicability of Section 153, in so far as nonobstante clause in Sub-Section (13) of Section 144C is concerned, it is for limited purpose to ensure that dehors larger time available, an order based on the directions of the DRP has to be passed within 30 days from the end of the receipt of such directions.
It was further observed that a similar non-obstante clause is also used in Section 144C(4) of the Act with the same limited purpose to imply, even though there might be a larger time limit under Section 153, once the matter is remanded to AO by the ITAT under Section 254, the process to pass final order under Section 144C has to be taken immediately.
Case title: Shelf Drilling Ron Tappmeyer Limited v/s Assistant Commissioner of Income Tax
Citation: Writ Petition No.2340 Of 2021
