FACTS OF THE CASE

The petitioner, Readers Digest Book and Home Entertainment (India) Pvt. Ltd., had filed income tax returns for Assessment Year 2011-12 declaring nil income. The return was selected for scrutiny and referred to the Transfer Pricing Officer (TPO) under Section 92CA of the Income-tax Act, 1961, for international transaction adjustments. The Transfer Pricing Officer issued an order on 30 January 2021 proposing adjustments, leading to framing of the final assessment order significantly beyond the statutory period.

Earlier, the original assessment order dated 29 January 2016 was set aside by the Income Tax Appellate Tribunal (ITAT) on 20 December 2018 and remitted for fresh adjudication. The Revenue’s appeal against that order was dismissed by the High Court and later the Supreme Court dismissed the Special Leave Petition. When the final assessment was ultimately passed on 13 February 2023, the petitioner challenged the order as barred by time under the statutory limitation provisions of Section 153(3) of the Act.

ISSUES INVOLVED

  1. Whether the final assessment order dated 13 February 2023 was time-barred under Section 153(3) of the Income-tax Act, 1961?
  2. Whether the extension under Section 153(4) and the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 (“TOLA”) could validate the delayed assessment beyond the prescribed time?
  3. Whether adjustments of refunds for earlier years against a perceived demand for AY 2011-12 were legally sustainable? 

PETITIONER’S ARGUMENTS

  • The final assessment was passed well after the nine-month limitation period fixed by Section 153(3), starting from the date when the ITAT order dated 20 December 2018 was received on 31 January 2019.
  • Even with extensions available under Section 153(4) and TOLA relief up to 30 September 2021, the assessment should have been completed by that date and not on 13 February 2023.
  • Adjustments of refunds relating to AYs 2008-09, 2009-10, and 2010-11 against the purported demand for 2011-12 were improper as demand ceased to exist upon setting aside the original assessment in 2018. 

RESPONDENT’S ARGUMENTS

  • The limitation period should be reckoned from the date when the Special Leave Petition was dismissed by the Supreme Court (29 October 2020), arguing that this impacted the assessment timeline.
  • The assessment order passed on 13 February 2023 was therefore not barred by limitation.
  • Respondents also contended that the Transfer Pricing Officer’s order was not communicated and thus the limitation was not triggered from the dates claimed by the petitioner. 

COURT ORDER / FINDINGS

  • The limitation period for framing assessment under Section 153(3) is computed from the date when the relevant order (here, the ITAT order) is received by the assessing authority. The order was received on 31 January 2019, thus giving a nine-month window.
  • Even with extensions under Section 153(4) and TOLA, the assessment ought to have been completed by 30 September 2021, and not on 13 February 2023.
  • The respondents’ contention to delay limitation start from the Supreme Court dismissal was untenable as no stay was in operation on the ITAT order.
  • The adjustments made by the respondents of refunds pertaining to AYs 2008-09, 2009-10, and 2010-11 against a demand for AY 2011-12 were also unsustainable since no valid demand existed after the original assessment was set aside.
  • Accordingly, the impugned assessment order dated 13 February 2023 was quashed, and respondents were directed to recompute the refunds with interest under Section 244A within three weeks.

IMPORTANT CLARIFICATION

  • The limitation period under Section 153(3) must be strictly computed from the date the order of the competent authority is received by the assessing officer, and not from later procedural milestones such as dismissal of appeal or SLP.
  • Extensions under Section 153(4) and TOLA have fixed outer limits that cannot be stretched by reinterpretation of timeline events.
  • Adjustments of refunds against demands that legally ceased to exist are invalid even if procedural formalities are followed.  

Link to download the order - https://delhihighcourt.nic.in/app/showFileJudgment/YVA24012024CW173762022_172141.pdf

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