By TIOL News Service

NEW DELHI, MAR 04, 2016: THE issue is - Whether once the assessment gets time-barred, a major right accrues in favour of the assessee and it cannot be taken away by the Revenue. YES is the verdict of the Larger Bench.

Facts of the case

The assessee had filed quarterly returns in respect of certain Assessment Years. In terms of Section 11(3) of the Act, time-limit for completing the assessment provided therein was three years from the end of the year. But no assessment was made in respect of any of the three Assessment Years by the stipulated dates. The Assessing Officer, however, sent notices to the assessee after the expiry of three years. The assessee took an objection. When the objection was taken by the assessee that the notices were time barred, the Excise and Taxation Commissioner, Patiala passed orders granting extension of time. Reason given for extension of time was that the case of the assessee for the year 1999-2000 was pending with the Tribunal. This order of extension was challenged along with the order of assessment passed by the Assessing Officer.

The Tribunal, however, dismissed the appeal of the assessee holding that since there was a power of extension conferred upon the Commissioner under Section 11(10) of the Act, the Commissioner was within his powers to extend the period.

The assessee took up the matter further by filing appeals before the High Court. Here, the assessee succeeded in its submission as the High Court of Punjab and Haryana held that once the period of limitation expires, the immunity from subjecting itself to the assessment sets in and the right to make assessment gets extinguished. Therefore, when the period of limitation prescribed in the Act for passing the assessment order expires, thereafter, the Commissioner is debarred from exercising his powers under sub-section (10) of Section 11 of the Act and cannot extend the period of limitation for the purposes of assessment.

In appeal by the Revenue the Apex Court held that,

++ though provisions of the Punjab Act are couched in different language from Karnataka Act or Gujarat Act, the essence of these provisions is same. Insofar as scheme of Punjab Act is concerned, the assessment order is to be normally passed within a period of three years. At the same time, power is given to the Commissioner under Section 11(10) of the Act to extend the said period of three years. Once such an extension is given, the order is passed even beyond the period of three years. Significantly, no upper limit is fixed while giving such extension which means that the power can be exercised for extending the period for any length of time, subject however to the condition that the Commissioner is bound to record the reasons justifying such an extension. Obviously, when the Commissioner passes such an order and give reasons, not only he would have to justify his action of extending time but also the period by which the time is extended. In the Karnataka Legislation, the power is of 'deferment'. In that Legislation as well, the Assessment Order is to be passed within three years as sub-section (5) of Section 12 of Karnataka Sales Tax Act stipulates that no assessment shall be made after a period of three years from the date on which the return under sub-section (1) of that order is submitted by a dealer subject to two provisos mentioned therein;

++ in essence, the purport and objective behind the provisions in Punjab Act as well as in Karnataka Act remains the same. By making any order of deferment under sub-section (6) of Section 12 of Karnataka Sales Tax Act, the Joint Commissioner is, in fact, achieving the same purpose of granting more time to the Assessing Officer to pass the Assessment Order. Same is the purpose behind sub-section (11) of Section 10 of the Punjab Act. In view thereof, it may not be appropriate to go into the nuanced distinction between "deferment" and "extension" as per the definitions contained Black's Law Dictionary in the given situation, which is dealt with in the instant appeals;

++ upon the lapse of the period of limitation prescribed, the right of the Department to assess an assessee gets extinguished and this extension confers a very valuable right on the assessee;

++ if one is to go by the aforesaid dicta, with which we entirely agree, the same shall apply in the instant cases as well. In the context of the Punjab Act, it can be said that extension of time for assessment has the effect of enlarging the period of limitation and, therefore, once the period of limitation expires, the immunity against being subject to assessment sets in and the right to make assessment gets extinguished. Therefore, there would be no question of extending the time for assessment when the assessment has already become time barred. A valuable right has also accrued in favour of the assessee when the period of limitation expires. If the Commissioner is permitted to grant the extension even after the expiry of original period of limitation prescribed under the Act, it will give him right to exercise such a power at any time even much after the last date of assessment. In the instant appeals itself, when the last dates of assessment were 30th April, 2004, 30th April, 2005, 30th April, 2006 and 30th April, 2007, order extending the time under Section 11(10) of the Act were passed on August 17, 2007, August 17, 2007, August 17, 2007 and May 25, 2007 respectively. Thus, for the Assessment Year 2000-2001, order of extension is passed more than three years after the last date and for the Assessment Year 2001-2002, it is more than two years after the last date. Such a situation cannot be countenanced as rightly held by the High Court. When the last date of assessment in respect of these Assessment Years expired, it vested a valuable right in the assessee which cannot be lightly taken away. As a consequence, sub-section (11) of Section 10 has to be interpreted in the manner which is equitable to both the parties. Therefore, the only way to interpret the same is that by holding that power to extend the time is to be exercised before the normal period of assessment expires.

(See 2016-TIOL-23-SC-CT-LB)