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Nokia India Private Limited Vs. Deputy Commissioner Of Income Tax
September, 25th 2017
$~
*       IN THE HIGH COURT OF DELHI AT NEW DELHI

                                     Reserved on: 7th September, 2017
                                     Date of decision: 21st September, 2017

+                        W.P. (C) No. 1773/2016
        NOKIA INDIA PRIVATE LIMITED                      ...Petitioner
                      Through: Mr. Vikas Srivastava, Mr. Jatinder Pal
                      Singh, Mr. Sumit Mangal and Ms. Kanika Jain,
                      Advocates.

                            versus

        DEPUTY COMMISSIONER OF INCOME TAX              ...Respondent
                      Through: Mr. Sanjay Jain, ASG with Mr. N. P.
                      Sahni and Mr. Rahul Chaudhary, Senior Standing
                      Counsel.
        CORAM:
        JUSTICE S. MURALIDHAR
        JUSTICE PRATHIBA M. SINGH

                         JUDGMENT
%                         21.09.2017
Dr. S. Muralidhar, J.:
1. This writ petition by Nokia India Pvt. Ltd. (`Assessee') seeks the
quashing of the notice dated 14th September 2015 issued by the Deputy
Commissioner of Income Tax, Circle-18 (2), New Delhi (hereafter the
Assessing Officer - `AO') under Section 254 read with Sections 144-C and
143 (3) of the Income Tax Act, 1961 (`Act') for Assessment Year (`AY')
2007-08. The Assessee also challenges the consequential order dated
2nd December 2015 passed by the AO rejecting the plea of the Assessee that
in terms of Section 153 (2A) of the Act, the proceedings under the

W.P. (C) No. 1773/2016                                           Page 1 of 22
aforementioned notice dated 14th September 2015 would be time-barred.

Background facts
2. The Petitioner, which is engaged in manufacture and sale of mobile
handsets, filed its return of income for                the      AY 2007-08 on
1st November 2007 declaring       an income of Rs. 8,10,62,32,096/-. Since,
during the AY in question, the Assessee was involved in international
transactions with its Associated Enterprise (`AE'), a reference was made by
the AO to the Transfer Pricing Officer (`TPO').

3. The Assessee filed objections to the report of the TPO before the Dispute
Resolution Panel (DRP) contesting the transfer pricing (TP) adjustment by
which the returned income of the Assessee stood enhanced. These objections
were disposed of by the DRP. On the basis of the directions issued by the
DRP, the AO completed the assessment by passing an assessment order
under Section 143 (3) read with Section 144C (13) of the Act on
29th September 2011. The total income of the Petitioner was assessed at
Rs. 12,37,03,19,800/-.

4. In the aforementioned final assessment order, the AO made the following
disallowances and additions to the income of the Petitioner:
        S. No.            Nature of Addition made                   Amount of
                                                                  addition (INR)
        1.        Addition on account   of   disallowance   of       87,57,71,395/-
                  Marketing Expenses

        2.        Addition on account of allowance of                 1,03,96,877/-
                  depreciation @ 15% (as against 60%) on
                  computer peripherals.



W.P. (C) No. 1773/2016                                                 Page 2 of 22
        3.        Addition on account of disallowance of amount          62,91,22,970/-
                  claimed as Price Protection Expenses

        4.        Addition on       account   of   transfer   pricing
                  adjustment:

                         a. Advertising, Marketing and Promotion        2,53,48,30,000/-
                            Expenses

                         b. Software Development Services                 21,07,34,539/-
                                                               Total    2,74,55,64,539/-



Order of the ITAT
5. Aggrieved by the above assessment order, the Assessee filed an appeal
being ITA No. 4559/Del/2011 before the Income Tax Appellate Tribunal
(`ITAT'). The decision of the ITAT rendered in the aforementioned appeal
on 18th May 2012 was as under:
a.      As regards disallowance of expenditure incurred on issue of mobile
        handsets on 'free of cost' basis, the ITAT noted that on an identical
        issue for AY 2000-01 and 2001-02, as well as for AY 2006-07, the
        ITAT had set aside the assessment order and remanded the matter to
        the file of the AO. Accordingly, the impugned assessment order was
        set aside "to the file of the AO with the directions to decide the issue
        afresh after affording the assessee a reasonable opportunity of being
        heard."

b.      As regards the applicable rate of depreciation on computer
        peripherals, the ITAT allowed the Assessee's appeal and directed the
        AO to allow depreciation on computer peripherals at the rate of 60%
        instead of 15% as allowed in the original assessment order.

W.P. (C) No. 1773/2016                                                      Page 3 of 22
c.      As regards disallowance of expenditure on account of price protection
        expenses, the ITAT observed that "Since we have admitted additional
        evidence in respect of other distributors to whom trade price
        protection has been allowed, we set aside this issue to the file of the
        AO with the directions to examine the case of the assessee in the light
        of additional evidence filed before this Tribunal and decide the issue
        on merits. Needless to say the AO will provide the assessee a
        reasonable opportunity of being heard."

d.      As regards the TP adjustments in relation to provision of software
        development services to its AEs, the ITAT agreed with the Assessee
        that the DRP had obtained information under Section 133 (6) of the
        Act and had used such information without affording the Assessee an
        opportunity of being heard. Consequently, the ITAT held that "the
        assessment order needs to be aside to the file of the assessing officer
        who will refer the matter to DRP for providing necessary opportunity
        of being heard. We order accordingly."


e.      As regards working capital adjustment for computing the arm's length
        price (`ALP') of the international transaction, the ITAT noted that for
        AY 2006-07, the ITAT had remanded the matter to the file of the
        AO/TPO for re-consideration in light of the fact that the said
        adjustment had been allowed to the Assessee in the earlier AYs.
        Accordingly, the ITAT set aside the matter to the file of the AO with
        the direction to examine the case of the assessee and decide the issue

W.P. (C) No. 1773/2016                                            Page 4 of 22
        afresh in accordance with the provisions of law. The AO was asked to
        provide the Assessee the necessary opportunity of being heard.

f.      As regards the addition on account of Advertising, Marketing and
        Promotion (`AMP') expenses, it was noted by the ITAT that both the
        parties agreed that the issue be set aside in the light of the amended
        provisions of Section 92B of the Act. Accordingly, the ITAT "set
        aside the matter to the file of the AO with the directions to decide the
        issue afresh after affording the assessee a reasonable opportunity of
        being heard."

g.      As regards the power of the TPO to determine ALP in respect of
        international transactions not referred to him by the AO, the ITAT
        held that, in view of the amended provisions of Section 92CA of the
        Act with retrospective effect from 1st April 2002, this ground urged by
        the Assessee had become academic. It was accordingly rejected.

Proceedings on remand
6. On receipt of the ITAT's order, the AO referred the TP issues to the TPO.
While the matter was pending with the TPO, the Assessee filed a letter dated
31st March 2014 before the TPO with a copy to the AO's office. In the said
letter, the Assessee submitted that under Section 153 (2A) of the Act, the
last date for the AO to pass the fresh assessment order was 31st March 2015.
The TPO was requested to take the said provision into consideration.




7. On 21st January 2015, the TPO responded to the aforementioned letter of
the Assessee. According to the TPO, the limitation for passing the order in

W.P. (C) No. 1773/2016                                             Page 5 of 22
the assessment proceedings had to be calculated under Section 153 (3) (ii) of
the Act. According to the TPO, the ITAT had only partly restored the
original order by giving directions to various authorities for considering
certain issues afresh after giving a reasonable opportunity to the Assessee.
Referring to paragraph 29 of the ITAT's order which stated that the appeal
of the Assessee was being partly allowed for statistical purposes, the TPO
stated that the limitation date for completing and passing of the assessment
order had to be calculated in terms of Section 153 (3) (ii) of the Act.
Alternatively, the TPO stated that, even in terms of Section 153 (2A) of the
Act, the proceedings were not time-barred as of 31st January 2015.

8. On 29th January 2015, the Assessee responded to the TPO and a copy
thereof was also sent to the AO. The Assessee reiterated that the limitation
period for passage of a fresh order would be calculated in terms of
Section 153 (2A) of the Act. Thereafter, the AO issued the impugned notice
dated 14th September 2015 calling upon the Assessee to attend the AO's
office on 22nd September 2015 for proceedings under Section 254 read with
Sections 144C and 143 (3) of the Act for AY 2007-08.

9. On 21st October 2015, the Assessee responded to the above notice
reiterating that Section 153 (2A) of the Act was applicable and, therefore,
the fresh order of assessment was required to be passed within two years
from the end of the financial year in which the order of the ITAT had been
received by the Commissioner. It was therefore contended that since the
proceedings had become time-barred on 31st March 2015, any notice issued
thereafter would be without jurisdiction.

W.P. (C) No. 1773/2016                                          Page 6 of 22
10. By the impugned order dated 2nd December 2015, the AO disposed of
the above objections by holding that the case was not covered under
Section 153 (2A) of the Act which, according to the AO, was applicable
only when a fresh order of assessment has to be made pursuant to an order in
appeal or revision. Since the assessment had not been totally set aside or
cancelled by the ITAT and, in fact, had been partly upheld on certain issues,
the objection regarding limitation was not valid. It was further pointed out
that the Revenue was also in appeal before the High Court against the relief
allowed by the ITAT as well as to some of the issues restored by the ITAT
to the AO/TPO and even to the DRP.

11. The Assessee states that, despite requesting for a copy of a memorandum
of appeal stated to be filed by the Revenue in this Court, it was not provided
to the Assessee. A letter was issued by the AO on 29 th January 2016 calling
upon the Assessee to furnish information regarding the claim of marketing
expenses on account of issue of mobile handsets on `free of cost' basis as
well as a copy of the additional evidence submitted before the ITAT in
respect of the claim on account of price protection expenses. The Assessee
replied on 8th February 2016 reiterating that the proceedings were time-
barred.

12. The present petition was listed first for hearing on 29th February 2016
and then again on 2nd March 2016. While directing notice to be issued to the
Respondents, it was directed that the further proceedings may go on before
the AO but no final order will be passed till the next date of hearing. That
interim order has continued since.
W.P. (C) No. 1773/2016                                           Page 7 of 22
Submissions of counsel
13. Mr. Vikas Srivastava, learned counsel appearing for the Assessee,
submitted that it was erroneous on the part of the AO to conclude that
Section 153 (2A) of the Act applied only where a fresh order had to be
passed de novo on fresh inquiry and not when the proceedings were
remanded to the AO with directions from the ITAT. According to him, there
was no warrant for such an interpretation on a reading of Section 153 as a
whole as was further explained by Circular No. 56 dated 19th March 1971
issued by the Central Board of Direct Taxes (`CBDT'). Mr. Srivastava relied
on the decision of this Court in Commissioner of Income-tax v. Bhan
Textile (P) Ltd [2008] 300 ITR 176 (Del) and distinguished its decision in
Basu Distributors (P) Ltd. v. Income Tax Officer [2007] 292 ITR 29 (Del).

14. On the other hand, Mr. Sanjay Jain, learned Additional Solicitor General
of India (`ASG'), submitted that Section 153 (2A) of the Act would apply
only where the entire assessment was set aside or cancelled. However, as in
the present case, where the AO was required to follow certain specific
directions issued to him by the ITAT he was `chained' as far as exercise of
discretion was concerned. In such circumstances, Section 153 (2A) of the
Act would not apply. According to the learned ASG, it was only
Section 153 (3) (ii) of the Act which would apply to the present case.

15. Mr. Jain submitted that Section 153 (3) (ii) of the Act would not only
apply where 'appeal effect' had to be given but cases of "assessment and re-
assessment" as well. Reference was also made to the phrases `an assessment
of such income for another assessment year' used in Explanation 2 to
W.P. (C) No. 1773/2016                                           Page 8 of 22
Section 153 and `an assessment of such income on such other person ' used
in Explanation 3 to Section 153 showed that not only cases of re-
computation but also cases of assessment/reassessment on specified aspects
are governed by Section 153 (3) (ii) of the Act. Relying on the decision in
Basu Distributors (supra), Mr. Jain submitted that the distinction was made
by this Court between a situation where the ITAT remands the matter to the
AO by setting aside the order under appeal simpliciter and a situation where
the assessment order is partially set aside with remand only on `select issues
or aspects of assessment'. According to him, the expression `fresh
assessment' used in Section 153 (2A) indicates a situation tantamount to the
cancellation or setting aside of the entire assessment and not where some
part of the assessment order was upheld. According to him, the ratio of the
decision in Bhan Textile (supra) was, in fact, helpful to the Revenue.

16. Mr. Jain painstakingly took the Court through each of the directions
issued by the ITAT to emphasize that the setting aside and remanding of the
matter to the AO was only in respect of some of the issues and that too with
directions and therefore it is Section 153 (3) (ii) of the Act which would
apply. He also referred to the decision of Bombay High Court in Rikhabdas
Jhaverchand v. CIT [2001] 249 ITR 774 (Bom) and the Supreme Court in
Rajinder Nath v. CIT [I979] 120 ITR 14 (SC) to distinguish the expression
'finding' from the expression 'direction'.

Legislative History
17. Prior to its amendment by the Taxation Laws (Amendment) Act, 1970,
Section 153 of the Act read as under:

W.P. (C) No. 1773/2016                                           Page 9 of 22
        "Time limit for completion of assessments and reassessments .

        153. (1) No order of assessment shall be made under Section
        143 or Section 144 at any time after--
        (a) the expiry of--
               (i) four years from the end of the assessment year in
               which the income was first assessable, where such
               assessment year is an assessment year commencing on or
               before the 1st day of April, 1967;

                (ii) three years from the end of the assessment year in
                which the income was first assessable, where such
                assessment year is the assessment year commencing on
                the 1st day of April, 1968;

                (iii) two years from the end of the assessment year in
                which the income was first assessable, where such
                assessment year is an assessment year commencing on or
                after the 1st day of April, 1969; or

        (b) the expiry of eight years from the end of the assessment year
        in which the income was first assessable, in a case falling within
        clause (c) of sub-section (1) of section 271; or

        (c) the expiry of one year from the date of the filing of a return
        or a revised return under sub-section (4) or sub-section (5) of
        Section 139;

        whichever is latest.

        (2) No order of assessment reassessment or recomputation shall
        be made under Section 147--

        (a) where the assessment, reassessment or recomputation is to
        be made under clause (a) of that section, after the expiry of four
        years from the end of the assessment year in which the notice
        under Section 148 was served ;


W.P. (C) No. 1773/2016                                              Page 10 of 22
        (b) where the assessment, reassessment or recomputation is to
        be made under clause (b) of that section, after--
              (i) the expiry of four years from the end of the assessment
              year in which the income was first assessable, or

                (ii) the expiry of one year from the date of service of the
                notice under Section 148, whichever is later.

        (3) The provisions of sub-sections (1) and (2) shall not apply to
        the following classes of assessments, reassessments and
        recomputations which may be completed at any time--
              (i) where a fresh assessment is made under Section 146 ;

                (ii) where the assessment, reassessment or recomputation
                is made on the assessee or any person in consequence of
                or to give effect to any finding or direction contained in
                an order under Section 250, 254, 260, 262, 263 or 264 or
                in an order of any court in a proceeding otherwise than by
                way of appeal or reference under this Act;

                (iii) where the case of a firm, an assessment is made on a
                partner of the firm in consequence of an assessment made
                on the firm under section 147.

        Explanation....."

18. The Taxation Laws (Amendment) Act, 1970 inserted sub-section (2A) in
the Act with effect from 1st April, 1988 and it reads as under:
        "(2A) Notwithstanding anything contained in sub-sections (1)
        and (2), in relation to the assessment year commencing on the
        1st day of April, 1971, and any subsequent assessment year, an
        order of fresh assessment under section 146 or in pursuance of
        ah order, under section 250; section 254, section 263 or section
        264, setting aside or cancelling an assessment, may be made at
        any time before the expiry of two years from the end of the
        financial year in which the order under section 146 cancelling
        the assessment is passed by the Assessing Officer or the order
W.P. (C) No. 1773/2016                                               Page 11 of 22
        under section 250 or section 254 is received by the Chief
        Commissioner or Commissioner or, as the case may be, the
        order under section 263 or section 264 is passed by the Chief
        Commissioner or Commissioner."

19. Simultaneously, in the Taxation Laws (Amendment) Act, 1970, certain
highlighted words to that effect were inserted in Section 153(3) as under:

        "(3) The provisions of sub-sections (1), (lA), (IB) and (2) shall
        not apply to the following classes of assessments, reassessments
        and re-computations which may, subject to the provisions of
        sub-section (2A), be completed at any time."

20. By an amendment brought about by the Finance Act, 2001, the general
time limit under Section 153 (2A) was reduced to one year. With effect from
1st July 2012, the time limit was increased to two years in certain TP cases.
Finally, by the amendment in 2016, the time limit under Section 153 (2A)
has been reduced to 9 months.

21. The reason behind the introduction of sub-section (2A) to Section 153 of
the Act can be gleaned from para 22 of the Circular No. 56 dated
19th March 1971 issued by the CBDT which reads as under:
        "Time limit for completion of assessments set aside in appeal or
        reopened under section 146

        22. Section 153, relating to time limits for completion of
        assessments and reassessments has been amended so as to
        provide a time limit for completion of fresh assessments, to be
        made in cases where : (i) the original assessment made under
        section 144 has been cancelled by the Income Tax Officer on an
        application by the assessee under Section 146; or (ii) the
        original assessment is set aside or cancelled in appeal by the
        Appellate Assistant Commissioner or the Appellate Tribunal or

W.P. (C) No. 1773/2016                                             Page 12 of 22
        in revision by the Commissioner. For this sub-section (2A) has
        been inserted in section 153. Under this sub-section the fresh
        assessment in the cases mentioned at (i) may be made at any
        time before the expiry of two years from the end of the financial
        year in which the original assessment was cancelled by the
        Income-tax Officer under section 146. In the cases mentioned at
        (ii) the fresh assessment may be made at any time before the
        expiry of two years from the end of the financial year in which
        the order of the Appellate Assistant Commissioner or the
        Appellate Tribunal is received by the Commissioner or, as the
        case may be, the order in revision is passed by the
        Commissioner. Such fresh assessments may be completed
        within the above-mentioned time limit even if the time limit
        specified in sub-section (1) or sub-section (2) of section 153 for
        the completion of assessment or reassessment has expired.
        Under the existing provisions of section 153(3), such fresh
        assessments are not subject to any time limit. The time limit
        laid down under new sub-section (2A) of section 153 will be
        operative only in relation to assessments for the assessment
        year 1971-72 or any subsequent years." (emphasis supplied)

Analysis and reasons
22. Having perused the impugned order of the ITAT carefully and the
operative portions qua which the assessment order was set aside and the
matter remanded to the AO, the Court is unable to agree with the contention
of learned ASG that the aforementioned order of the ITAT did not constitute
a complete setting aside of the assessment with directions to the AO to pass
a fresh order. The Court does not agree with the submission of the learned
ASG that the AO was `chained' by the ITAT's directions and could not have
passed a fresh assessment order de novo pursuant to such remand.

23. The Court is also unable to agree with the contention that unless the
entire assessment order is wholly set aside, the time limit for passing the

W.P. (C) No. 1773/2016                                             Page 13 of 22
fresh order under Section 153 (2A) would not be attracted. There is no
warrant for such an interpretation. The object behind introduction of
sub-section (2A) was to prescribe a time limit for completing the assessment
proceedings upon the original assessment being set aside or being cancelled
in appeal. Clearly, the intention was not to restrict the applicability of
sub-section (2A) only to such cases where the `entire' original assessment
order is set aside. It was noted that, "Under the existing provisions of
section 153 (3), such fresh assessments are not subject to any time limit."
Indeed, Section 153, as it stood at that time, did not prescribe any time
limits. Section 153 (3) (ii), in particular, did not require the order passed
thereunder to be issued within any particular time limit. Further there is a
distinction between an 'assessment' that is set aside and an 'assessment order'
being set aside. When the assessment on an issue is set aside and the matter
remanded, with a direction that the issue has to be determined afresh,
Section 153 (2A) of the Act would get attracted.

24. What is important to note is that, along with the insertion of
sub-section (2A), sub-section (3) underwent a simultaneous change. It was
expressly made "subject to the provisions of sub-section (2A)." This meant
that Section 153 (3) would thereafter apply only to such cases where
Section 153 (2A) did not apply. In other words, in all instances of an AO
having     to    pass    a   fresh   assessment   order   upon   remand    where
Section 153 (2A) would apply, the AO would be bound to follow the time-
limit imposed by sub-section (2A). Where the AO was only giving effect to
an appellate order, then Section 153 (3) (ii) of the Act would apply.



W.P. (C) No. 1773/2016                                              Page 14 of 22
25. In the present case, of the seven issues, the assessment in respect of five
was set aside and the issues remanded for a fresh determination. Whether the
remand was to the TPO or the DRP would not make a difference as long as
what results from the remand is a fresh assessment of the issue. Clearly,
therefore, the time limit for completing that exercise was governed by
Section 153 (2A) of the Act.

The decision in Basu Distributors
26.1 Turning now to the judicial precedents, the Court proposes to first
discuss the decision in Basu Distributors (supra) since considerable reliance
was placed on said decision by the learned ASG. There, the ITAT had
allowed the Assessee's appeal and directed that "It is imperative in the
interest of justice and fair play to set aside and restore the matter to the AO
for re-consideration after giving sufficient reasonable opportunity to the
Assessee to furnish necessary details, explanations and evidences in support
of the above and to pass fresh order as per law, rule and CBDT circulars."




26.2 The fact situation in the context of which the above directions were
issued was that the AO had made additions to the returned income of the
Assessee pertaining to cash payments made to Ritz Theatres (P) Ltd. (`Ritz')
and to Honey Enterprises (`HE') which, according to the AO, were in
violation of Section 40A (3) of the Act. The grievance of the Assessee was
that sufficient opportunity had not been given to it to place the complete
facts and therefore, offer the necessary explanation and evidence regarding
such cash payment. The ITAT agreed with this contention of the Assessee
and therefore passed a remand order after setting aside the order of the AO

W.P. (C) No. 1773/2016                                            Page 15 of 22
and the CIT(A). Although the remand order was dated 23rd June 2000, no
action was taken by the AO for over four years till 2nd September 2004 and
the final assessment order was passed only on 20th February 2005.

26.3 In the above context, the Court in Basu Distributors (supra) was called
upon to address the question whether the re-assessment proceedings were
time barred under Section 153 (2A) of the Act. The Court observed as
under:
         "20. Having had the advantage of perusing the plethora of
         precedents on the aspect of law which has engaged our
         attention, we are of the view that Section 153(2A) is not
         attracted in the facts of the present case; no period of limitation
         is prescribed as per the provisions of Section153(3)(ii). It is trite
         that Parliament is continuously concerned with the evils or
         undesirability of the proverbial sword hanging over the head of
         an Assessee. Parliament has therefore set-down the parameters
         within which an assessment must be completed and over the
         years has shortened the span of time in this regard. It has,
         however, carved out an exception to the rule where a specific,
         limited or restricted direction is passed by an Appellate
         Authority which is of the opinion that it would not be possible
         to decide the appeal before it without a clarification on this
         point. The Appellate Authority has also the power to set aside
         the Assessment Order and direct a de novo enquiry, in which
         case every aspect, computation and dimension is open for
         consideration. This partakes of the nature of an assessment
         which is akin to the original assessment and, therefore, the
         period of limitation applicable to the original assessment must
         apply to the fresh assessment. Where the Appellate Authority
         remands the case for a determination on a selected issue or
         aspect of the assessment, the uncertainty or discomfort of the
         sword of uncertainty provides no peril to the assessee. All the
         parties are fully aware of the parameters within which the fresh
         enquiry is circumscribed and limited. It is obviously for this
         reason that the rigours of limitation are totally removed. If the
W.P. (C) No. 1773/2016                                                 Page 16 of 22
        AO is unduly slow in completing the assessment, it may be
        open to the assessee to approach the High Court under Articles
        226 and 227 of the Constitution seeking a direction for an
        expeditious end and closure to the restricted enquiry.

        21. Reverting to the facts of the case at hand it is manifestly
        clear that in substance the entire assessment had not been set
        aside. The Assessee's contention was that Section 40A(3) had
        not been violated in its spirit since no expenditure exceeding
        Rupees Twenty Thousand had been incurred in cash; these were
        incurred by effecting entries in the Books of Accounts and
        hence were as undisputable as payments made by Account
        Payee Cheques or Account Payee Bank Draft. It was only on
        this restricted aspect of the assessment that the Tribunal had
        remanded the case to the AO. The entire assessment exercise,
        therefore, had not been undertaken de novo, thereby, rendering
        Section 153 (2A) of the Act inapplicable to the case.

        22. We conclude by holding that a writ petition under Articles
        226 and 227 of the Constitution is always maintainable if the
        High Courts find that any authority is acting contrary to the
        powers bestowed upon it. Writ petitions, therefore, cannot be
        dismissed per se. The objection on this score cannot be
        appreciated; the Revenue would be justified in contending that
        in the facts of the case invoking the extraordinary Jurisdiction
        of this Court was not called for. Considerable time of this Court
        has been needlessly spent on adjudicating on this preliminary
        objection. However; we dismiss the writ petitions as meritless
        since, in the facts and circumstances of the case, it cannot be
        argued that Section 153(2A) is attracted and constitutes an
        absolute power on assessment proceedings. This is obviously
        the manner in which all the authorised representatives of the
        Petitioners understood the law since they chose to address the
        AO on the merits of the case. The Petitioners have chosen to
        file the present petitions after considerable delay in the vain
        attempt to avoid payment of Income Tax on technicalities
        which do not exist in their favour. We would have dismissed the
        writ petitions with heavy costs but decline from doing so

W.P. (C) No. 1773/2016                                             Page 17 of 22
        because the Revenue has unreasonably raised preliminary
        objection pertaining to the maintainability of the writ petitions."

27. From para 20 of the aforementioned judgment, it is plain that the ITAT
had in fact set aside the entire assessment order and directed a de novo
enquiry. The Court noted that where the remand is on a "selected issue or
aspect of the assessment, the uncertainty or discomfort of the sword of
uncertainty provides no peril to the assessee." The enquiry to be undertaken
by the AO upon evidence being furnished by the Assessee was indeed a
fresh enquiry and if no time limit was prescribed for that exercise, the
Assessee would undoubtedly have the sword of uncertainty hanging.
Considering the additions made, there was, in fact, no other substantive
issue that had to be examined afresh by the AO. Therefore, the Court, in
terms of its own analysis of Section 153 (2A) in the aforementioned
decision, required a fresh assessment order to be made by undertaking a de
novo enquiry. For such an exercise the limitation in Section 153 (2A) had to
apply. On the facts of Basu Distributors (supra), it is not understood how
Section 153 (2A) would not apply.

28. Be that as it may, as far as the present case is concerned, the
aforementioned decision in Basu Distributors (supra) would, not in fact,
come to the aid of the Revenue. The facts in the present case fully answer
the description of the case which in para 20 of the decision in Basu
Distributors (supra) was held to be subject to the limitation under Section
153 (2A) viz., where the order of the appellate authority results in the
assessment order being set aside and the AO is asked to undertake "a de
novo enquiry, in which case every aspect, computation and dimension is

W.P. (C) No. 1773/2016                                              Page 18 of 22
open for consideration."

Other decisions
29. Turning now to the other decision of this Court, i.e. Bhan Textile
(supra), it requires to be noticed at the outset that although for some reason,
the Court in Bhan Textile (supra) did not refer to the earlier decision in
Basu Distributors (supra), its interpretation of Section 153 (2A) did not
contradict the interpretation in Basu Distributors (supra). In Bhan Textile
(supra), the Court observed that the setting aside of the assessment order
became necessary as the AO did not give an opportunity to the Assessee to
place its evidence on record. The CIT (A) had in effect cancelled the
assessment order although those specific words were not used. This Court
held that, in such a situation, "Section 153 (2A) is clearly applicable." This
decision, therefore, fully supports the case of the Assessee.

30. A similar view has been taken by the Gujarat High Court in Instruments
and Control Co. v. Chief Commissioner of Income-tax [2012] 349 ITR 571
(Guj). There, the Gujarat High Court discussed the entire scheme of
Section 153 and also followed the decision of this Court in Bhan Textile
(supra). It was observed by the Gujarat High Court as under:
        "22. Under the circumstances, the class of cases of fresh assessment
        to be made pursuant to order under section 250 etc. would fall under
        section (2A) of section 153 of the Act, and the period of limitation
        prescribed therein would operate. In those cases where there is no
        need for a fresh assessment and are not covered under section (2A) of
        section 153 of the Act, but are covered under clauses (i), (ii) and (iii)
        of section 153, the limitation prescribed under sub-section (2A) of
        section 153 would not apply and the expression "assessment,
        reassessment and re-computation be completed at any time" may

W.P. (C) No. 1773/2016                                              Page 19 of 22
        enable the revenue to continue the proceedings of assessment even
        beyond the period prescribed under sub-sections (1) and (2) of section
        153 of the Act and would also ;not be hindered by the prescription of
        limitation under section (2A) of section 153 of the Act."

31. The facts and conclusion of that case are set out by the Gujarat High
Court in paras 24 and 25 of the above decision as under:

        "24. With this background in mind, we may revert back to the
        facts of the case. The Tribunal on an appeal filed by the
        assessee, upheld the assessee's contention that the commission
        was disallowed in case of two agencies, placing reliance on
        statements recorded behind the back of the assessee without
        affording the cross-examination of such witnesses. It was on
        this count that the Tribunal remitted the matter to the file of
        Assessing Officer with direction to summon those two parties
        again and allow the assessee an opportunity to cross-examine
        them so that true facts may emerge in relation to the payment of
        commission by the assessee company to these two agencies.
        While doing so, (be Tribunal also granted liberty to the
        Assessing Officer to probe into the matter further by way of an
        inquiry and investigation into the alleged payment of
        commission to such parties.

        25. To our mind, the case on band would fall under sub-section
        (2A) of section 153 of the Act. The Tribunal may not have used
        the words of "setting aside the assessment", nevertheless, when
        it remitted the matter back to the Assessing Officer for
        summoning two witnesses again for cross-examination by the
        assessee and permitted further probe to the Assessing Officer,
        necessarily it must be understood to have set aside the
        assessment under challenge. The Tribunal, otherwise in law,
        could not have remitted the proceedings to the Assessing
        Officer for fresh consideration after summoning two witnesses
        and carrying out such probe as may be necessary. We may
        record that such commissions paid to the two agencies was the
        sole dispute between the assessee and the Department. In the

W.P. (C) No. 1773/2016                                            Page 20 of 22
        original assessment, the Assessing Officer discussed only this
        issue and made corresponding disallowance. In essence, thus,
        the Assessing Officer was required to pass a fresh order of
        assessment which was necessary on account of an order passed
        by the Tribunal under section 254 of the Act cancelling the
        assessment framed by the Assessing Officer. The period of
        limitation prescribed in section 153(2A), therefore, would
        apply. While such an order was served on the Commissioner on
        3.8.1994, within a period of two years of the end of such
        financial year, a fresh order of assessment had to be passed by
        the Assessing Officer. The same not having been done, in our
        view, such proceedings have become time-barred. The
        assessment placed before the Assessing Officer by the
        Tribunal's order, therefore, must be treated as having abated. In
        that view of the matter, the declaration prayed for by the
        petitioner must be granted."

32. In the considered view of the Court, the aforesaid decision of the Gujarat
High Court fully supports the case of the Assessee here. The decisions of the
Madhya Pradesh High Court in Gulabchand Motilal v. Commissioner of
Income-tax [1988] 174 ITR 117 (MP), the High Court of Punjab and
Haryana in Bharti Engineering Corporation v. Union of India [2008] 298
ITR 400 (P&H) and Deep Chand Jain v. ITO [1984] 145 ITR 676 (P&H),
and the Karnataka High Court in CIT v. Paul Noel Rodrigues [2015] 231
Taxman 811 (Kar), all hold likewise. The Kerala High Court in Patel R.P.
v. ACIT 2015 (5) KHC 370 held that Section 153 (2A) of the Act would
apply even where more than one issue is involved i.e. even where one of the
issues has been remanded to the AO for a fresh determination.

33. The analysis of the terms `finding' and `directions' by the Supreme
Court in Rajinder Nath (supra) was in the context of Section 153 (3) (ii) of
the Act at a time when Section 153 (2A) of the Act had not been introduced
W.P. (C) No. 1773/2016                                             Page 21 of 22
since the relevant AY in that case was 1956-57. The said decision is,
therefore, not of help to the Revenue.

Conclusion
34. For all the aforementioned reasons, the Court holds that, in the present
case, the assessment proceedings had to necessarily be completed by the AO
within the time limit specified in Section 153 (2A) of the Act. Inasmuch as
the AO failed to do so, the impugned notice dated 14th September 2015
issued by the AO and all proceedings consequential thereto including the
order dated 2nd December 2015 passed by the AO are hereby set aside.

35. The writ petition is allowed in the above terms but, in the circumstances,
with no orders as to costs.



                                                      S. MURALIDHAR, J.



                                                 PRATHIBA M. SINGH, J.
SEPTEMBER 21, 2017
rd




W.P. (C) No. 1773/2016                                           Page 22 of 22

 
 
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