Whether when power to make assessment lapses completely on expiry of period of limitation, it becomes a statutory fetter which cannot be relaxed or waived even by assessee – YES: ITAT

THE issue is – Whether when the power to make assessment lapses completely on expiry of the period of limitation, it becomes a statutory fetter which cannot be relaxed or waived even by the assessee. YES is the answer.

Facts of the case
The assessee company is engaged in the business of operation of ships and filed its return of income for the relevant assessment year 2004-05 on 29.10.2004. Original assessment u/s. 143(3) of the Act was completed by the AO on 15.12.2006 rejecting the claim of the assessee u/s. 33AC on the ground that the assessee has not specified the amount transferred to reserve in the P&L Account for the relevant year. The assessee carried this matter before CIT(A) and he allowed the claim of the assessee vide his order dated 29.08.2007. But the revenue contested the order of CIT(A) before ITAT and ITAT set aside this issue and restored back the same to the file of the AO for deciding afresh by following ITAT’s order in assessee’s own case for AY 2001-02 wherein it had decided that from the perusal of share capital and reserve, it appears that reserve and surplus are more than twenty times of paid up share capital of assessee company, whereas section 33AC clearly debars the assessee from claiming any deduction in case the amount carried to such reserve account exceeds twice the aggregate of the amounts of the paid up share capital and since both the assessee and Revenue has not produced the relevant details regarding the aggregate amount transferred to reserve account for deduction u/s 33AC till the AY under consideration, we keeping in view the facts and circumstances involved in this case and for the sake of transparency restore the matter back to the file of AO to decide the same afresh. We hereby clarify that it will be the onus of the assessee to produce relevant evidence and documents before the AO in support of its claim that the amount transferred till the financial year under consideration for the purpose of section 33AC does not exceed twice the aggregate of paid up share capital. We hold and direct accordingly and accept the ground raised by the revenue for statistical purposes. AO while giving appeal effect, framed assessment u/s. 254/143(3) & also u/s. 263/143(3) and disallowed the deduction u/s. 33AC again. On appeal, CIT(A) confirmed the issue of limitation.
Having heard the matter, the Tribunal held that,
++ Tribunal vide order dated 25.07.2008 has set aside the appeal and restored the matter back to the file of the AO to decide the same afresh. Counsel for the assessee drew our attention to the order giving effect to the order of the Tribunal. Counsel for the assessee before us stated that notice u/s. 142(1) on the assessee to give effect to the order of the Tribunal was issued on 19.08.2011 and in term of section 153(2A) i.e. the time limitation for completion of assessment and reassessment has prescribed the time limit for framing assessment was only nine months in view of second proviso and in any case not more than one year in term of sub-section 2A. We are of the view that no assessment is possible after the expiry of period of limitation, the provisions of section 153(2A) are absolute and they impose a fetter on income tax authorities to make a set-aside assessment after the expiry of periods mentioned in this sub-section. This is a statutory fetter which is not for the assessee to relax or waive or vice versa. The power to make assessment lapses completely upon the expiry of the periods mentioned in the section;
++ the argument of DR that the assessee’s case falls u/s. 153(3), which, inter alia, lays down that the provisions of sub-section 1 and 2 of section 153 shall not apply to assessments made on the assessee in order to give effect to any direction contained in an order u/s. 254. But in the present case, the Tribunal has completely set aside the assessment on the abovementioned issue and directed the AO to reframe the assessment afresh. This provision of section 153(3), in the given facts of the case, is subject to the provisions of section 153(2A). In other words, if a matter falls u/s. 153(2A) i.e. if the Tribunal has set aside or cancelled the assessment, then the fresh order by the AO of assessment shall be passed within the period as prescribed u/s. 153(2A). Here, in the present case, assessee’s case clearly falls under the 2nd proviso to section 153(2A). Therefore, in the present case, framing of order of assessment by the AO, of set aside assessment after expiry of limitation in terms of section 153(2A) is invalid. This ground of assessee’s appeal on limitation is allowed. Since we have adjudicated the issue on limitation and allowed in favour of assessee being assessment order barred by limitation, we need not to adjudicate issues on merit and the same have become infructuous. In the result, the appeal of assessee is allowed.