By TIOL News Service

NEW DELHI, OCT 15, 2018: THE ISSUE IS - Whether the non-obstante clause u/s 153 which prescribes specific period of limitation to complete search assessment in case of block period, overrides the general period of limitation. YES IS THE VERDICT.

Facts of the case:

The assessees are individuals and the block assessment was completed pursuant to search & seizure operations u/s 132. Not satisfied, they approached the CIT(A) who granted partial relief. The matter was then taken before the ITAT, where it was remitted back to the file of AO for de novo completion. The concerned AO sought tax effect by re-computing the income u/s 153A by following the ITAT’s order of Feb 18, 2016. Relying upon the said order, the assessment proceedings were taken up after remand by the AO who completed them on Dec 22, 2017. It was therefore urged on behalf of the assessee relying upon the Full Bench decision in Odeon Builders Pvt. Ltd. vs. Pr. Commissioner of Income Tax-4, that the subject order was per se illegal & void. It was contended that apart from the AO’s order made after the ITAT’s decision on Feb 18, 2016, there was other evidence as well, in the form of reply to the assessee’s ITR queries, where the Department had clearly admitted that the order was served by hand to the Departmental Representative on Mar 30, 2016. Taking recourse to the then existing proviso to Section 153(2A), it was urged that time available then to the AO was only up-to Dec 31, 2016, for working out of the remand and completing the assessment.

The Revenue however urged that the subject order was made within the prescribed time frame, and the assessee could not be heard to complain as they did not attend to the queries and co-operate in an assessment proceeding which got delayed.

High Court held that,

++ the question as to what would be the starting point of limitation with respect to any proceedings which are to be initiated by the Revenue Department or any steps to be taken by it, was the precise issue of point of determination by this Court in Odeon Builders case, wherein it was concluded that limitation begins from the point of time when the Departmental representative receives the copy of a decision or an order of the ITAT. The evidence on record in this case clearly establishes that the concerned DR nominated by the Revenue Department has received a copy of the ITAT order only on Mar 30, 2016. The Starting point of limitation therefore was only Mar 31, 2016. The next question is whether the non-obstante clause u/s 153 which prescribes a specific period of limitation to complete a search assessment for the block period concerned, could override the general period of limitation. In this context, the Court notices that Section 153 generally talks of various periods of limitation. It prescribes that no order of assessment shall be made either u/s 143 or Section 144 any time after expiry of twenty one months from the end of the assessment year in which the income was first assessable. The exception carved by way of Section 153(2) relates to reassessment and states that in cases covered by it, the period is reduced to nine months from any of financial year in which the notice for re-assessment is served;

++ during the relevant period when the assessment was completed, the period prescribed was nine months. The special provision u/s 153B in the opinion of this Court carves out a special period of limitation without which search/block assessments would not be completed. The entire provisions under Chapter XIV relating to block assessment, have been termed by the Supreme Court to be a complete code. At the same time, a specific period of limitation prescribed is for completion of original block assessments for the search and seizure proceedings. The period for issuing notice and completion of block assessment for all the concerned years is within two years. Now, in the opinion of this Court, to apply that general two years limitation, the block reassessment proceeding after remand is not a feasible proposition. In Principal Commissioner of Income Tax vs. PPC Business and Products P. Ltd., (2017) 398 ITR 71 (Del.), this Court emphasized the need to initiate the proceedings wherever the Revenue wished to proceed further in case of search & seizure within the time and underlined that in case the assessments are not initiated and completed within the time prescribed, the valuable right accrues to the assessee. The general provision of two years, in the opinion of the Court, has been provided with one important objective i.e. to cater to a specific situation where upon search & seizure operation, if new material is found, already completed assessments are revisited;

++ the only provision that prescribed a period of limitation in respect of remands at the relevant time at least in this case is Section 153(2A). In that sense, that period of limitation prescribed for completion of remand constituted a special provision, which applies to every class of remand regardless whether they originate from assessments/re-assessments/revisions or search and seizure assessments. In these circumstances, completion of assessment proceedings for block period by the subject order was clearly beyond the period of limitation. As noticed, the last date by which the remand order could have been worked out validly was Dec 31, 2016. Therefore, the order pursuant to the remand and all consequential actions are hereby quashed.

(See 2018-TIOL-2160-HC-DEL-IT)