Asst./ DCIT Vs Laqshya Media Limited (Supreme Court of India)
Summary : The Supreme Court condoned the delay and dismissed the special leave petition in ACIT Vs Laqshya Media Limited, stating that it was not inclined to interfere with the High Court’s judgment and order. The underlying Bombay High Court judgment concerned AY 2014-15, for which the Assessing Officer had failed to complete the assessment following an ITAT remand within the limitation prescribed by Sections 153(3) and 153(4) of the Income-tax Act, 1961. The High Court held that the applicable deadline expired on 31 March 2023 and directed acceptance of the income returned by the assessee. It rejected the Revenue’s contention that the corporate guarantee adjustment already determined by the Tribunal could survive independently despite the absence of an assessment or appeal-effect order within limitation. The Supreme Court’s supplied order contains no separate substantive reasoning; its dismissal leaves the High Court’s direction undisturbed.
Background and Tribunal’s Directions
The assessee’s return for AY 2014-15 was selected for scrutiny, and a final assessment order dated 29 October 2018 was passed under Section 143(3) read with Section 144C(13), making additions and disallowances. On appeal, the Tribunal’s order dated 17 July 2020 restricted the arm’s length corporate guarantee fee to 0.5% till July 2013, against the TPO’s application of 1.50% for the entire financial year. It remanded the adjustment concerning interest on a loan to an associated enterprise for fresh consideration, deleted disallowances under Section 36(1)(iii) and Section 14A read with Rule 8D, and remanded the unreconciled difference between Form 26AS receipts and the assessee’s books for verification.
The TPO subsequently gave effect to the corporate guarantee direction. The Assessing Officer also made a reference under Section 92CA(1) on 17 December 2021 concerning interest on the loan to the associated enterprise. The TPO passed an order dated 28 September 2022 proposing an adjustment, but the Assessing Officer did not thereafter pass an assessment order. Despite subsequent letters seeking acceptance of its return, the assessee received no action and approached the High Court.
Limitation Under Sections 153(3) and 153(4)
The Revenue did not dispute that the Tribunal’s order was received by the prescribed authority during FY 2020-21. Applying Section 153(3), the High Court calculated the initial deadline as 31 March 2022, being twelve months from the end of that financial year. The reference to the TPO attracted the further twelve-month extension under Section 153(4), taking the final deadline to 31 March 2023. The Revenue accepted that no assessment order pursuant to the remand had been passed by that date. The dispute therefore concerned the consequence of the admitted failure to complete the assessment within limitation.
Revenue’s Argument and High Court’s Reasoning
The Revenue argued that the Tribunal had finally determined the corporate guarantee adjustment and that the TPO had already given effect to that determination. According to the Revenue, expiry of limitation should affect only the issues specifically remanded for fresh examination, without nullifying findings that had attained finality.
The High Court rejected this contention. It held that failure to pass an assessment or appeal-effect order by 31 March 2023 barred any demand upon the assessee and required acceptance of the return as furnished. The Assessing Officer’s failure to comply with the Tribunal’s directions within the statutory period could not disturb the returned income.
For this conclusion, the High Court relied on CIT v. Shelly Products, concerning deemed acceptance of the return where a fresh assessment cannot lawfully be made after an earlier assessment is set aside or nullified. It also relied on Plasticotes Investments (P.) Ltd. v. CCIT, which rejected the Revenue’s attempt to take advantage of its own failure to complete a fresh assessment after remand. The Court further referred to Aircom International India (P.) Ltd. v. DCIT, where the Delhi High Court directed acceptance of returned assessments on the relevant issues if remand assessments had not been completed within the stipulated statutory time.
Supreme Court’s Order and Final Outcome
The Bombay High Court allowed the writ petition and directed the Assessing Officer to accept the income returned for AY 2014-15. Rule was made absolute, with no order as to costs. The Supreme Court subsequently condoned the delay, declined interference with the impugned High Court judgment and order, and dismissed the special leave petition. Pending applications, if any, were also disposed of.
Cases Discussed
- Aircom International India (P.) Ltd. v. DCIT [2024] 159 taxmann.com 148 (Delhi High Court) — Relied upon by the High Court for acceptance of returned assessments on the relevant issues where assessment orders following remand were not passed within the statutory limitation.
- Plasticotes Investments (P.) Ltd. v. CCIT [2014] 52 taxmann.com 483 (Bombay High Court) — Relied upon for the principle that the Revenue cannot deprive an assessee of relief by taking advantage of its own failure to pass a fresh assessment order after remand.
- CIT v. Shelly Products [2003] 261 ITR 367 (Supreme Court of India) — Relied upon for deemed acceptance of the return and the bar against further tax demands where a fresh assessment cannot be made in accordance with the Act after the earlier assessment is set aside or nullified.
Read HC Judgment in this case: Laqshya Media Limited Vs Asst./ DCIT (Bombay High Court)
FULL TEXT OF THE SUPREME COURT JUDGMENT/ORDER
1. Delay condoned.
2. We are not inclined to interfere with the impugned judgment and order of the High Court; hence, the special leave petition stands dismissed.
3. Pending application(s), if any, shall stand disposed of.
