Assessment Order Comes Into Effect Only Upon Signing, Not Drafting: Bombay HC

Milind Dashrath Pawar Vs National Faceless Assessment Centre (Bombay High Court)

Assessment Order Comes Into Effect Only Upon Signing, Not Drafting; Time-Barred Reassessment Quashed: Bombay HC

The Bombay High Court allowed a writ petition challenging an assessment order passed under Sections 147, 144 and 144B of the Income-tax Act, 1961 for AY 2014-15 on the ground of limitation.

The assessment was reopened through a notice under Section 148 dated 17.07.2019. The petitioner contended that although the assessment order bore the date 13.04.2022, it was digitally signed and served only on 26.05.2022 and was therefore barred by limitation. The petitioner relied on Section 153(2), the extension granted under the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 (TOLA), the reference made to the Valuation Officer under Section 142A, and Explanation 1 to Section 153 to compute the limitation period.

The Revenue submitted that the valuation report dated 16.02.2022 was received by the Assessing Officer on 25.02.2022 and argued that the assessment order was dated 13.04.2022 with a valid DIN, though digitally signed on 26.05.2022.

The High Court held that, based on the admitted date of receipt of the valuation report, the extended limitation period expired on 26.04.2022. It observed that the date mentioned on the assessment order was of no consequence when the order was actually signed on 26.05.2022. The Court held that an assessment order comes into operation only upon its signing and not on the date on which it is prepared.

Accordingly, the Court held that the assessment order was barred by limitation and quashed the assessment order, the demand notice under Section 156, the notice issued under Section 274 read with Section 271(1)(c), the penalty order under Section 271(1)(c), and the consequential demand notice. The writ petition was allowed without any order as to costs.

Time-Barred Section 147 Assessment Order Set Aside Following Digital Signing Delay: Bombay HC

FULL TEXT OF THE JUDGMENT/ORDER OF BOMBAY HIGH COURT

1. With consent of parties, Rule made returnable forthwith and heard finally.

2. By this Writ Petition, the Petitioner challenges the validity of the Assessment Order passed under Section 147, read with Sections 144 and 144B, of the Income-tax Act, 1961 (‘The Act’), dated 13^th April 2022 (digitally signed on 26^th May 2022), passed by Respondent No.1 for Assessment Year 2014-15. The only ground of challenge is that the Assessment Order is barred by limitation.

3. Briefly stated, the facts of the case are that a notice under Section 148 of the Act, dated 17^th July 2019, was issued by Respondent No.2 reopening the Petitioner’s assessment for Assessment Year 2014-15. Several notices under Section 142(1) of the Act were issued in the Petitioner’s case from time to time, followed by Show Cause Notices dated 11^th September 2021 and 31^st March 2022. Eventually, Respondent No.1 passed the impugned order dated 13^th April 2022 but digitally signed by him on 26^th May 2022 and served upon the Petitioner via email dated 26^th May 2022. According to the Petitioner, the said order having been passed on 26^th May 2022, is barred by limitation.

4. In this factual backdrop, the learned Counsel appearing for the Petitioner submits that as per the provisions of Section 153(2) of the Act, an Assessment Order under Section 147 is required to be passed within twelve months from the end of the Financial Year in which notice under Section 148 is served on the Assessee. The learned Counsel submits that in the Petitioner’s case, the said Notice having been issued on 17 July 2019, the last date to pass the Assessment Order was 31^st March 2021. The learned Counsel further submits that in view of Notification No. 10 of 2021 dated 27^th February 2021 issued under Section 3(1) of the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 (“TOLA”), this time limit was extended up to 30^th September 2021. Before this date of expiry, on 24^th September 2021, Respondent No.1 made a reference under Section 142A of the Act to the Assistant Valuation Officer, Thane (‘DVO’) to assess the fair market value of the Petitioner’s land as on 1^st April 2001. The DVO issued the valuation report bearing a date of 16^th February 2022. Therefore, as per clause (v) of Explanation-1 to Section 153, the period commencing from the date on which the Assessing Officer made a reference to the Valuation Officer under Section 142A(1) and ending with the date on which the report of the Valuation Officer is received by the Assessing Officer, would have to be excluded in computing the period of limitation. Accordingly, the period from 24^th September 2021 to 16^th February 2022 shall stand excluded. However, having excluded this period, only 6 days would be left for Respondent No.1 to pass the Assessment Order, and this period being less than 60 days, it would get extended by 60 days from 16^th February 2022 as per the first proviso to Explanation-1 to Section 153. The learned Counsel for the Petitioner, however, clarified that the exact date when the valuation report was received by Respondent No.1 is not ascertainable either from the impugned order or the Affidavits in Reply dated 31^st August 2023 and 25^th September 2023 filed by Respondent No.2. The learned Counsel therefore, submits that the last date to pass an Order under Section 147 was 17^th April 2022, and though the impugned order is dated 13^th April 2022, it having been digitally signed by Respondent No.1 on 26^th May 2022, is clearly beyond the limitation period, and therefore bad in law.

5. Summarizing the above submissions, the learned Counsel for the Petitioner submitted a list of dates and events as under:

6. In this case, the most crucial fact to determine the period of limitation is the actual date on which Respondent No.1 received the valuation report of the DVO. On a query raised by us, Mr. Akhileshwar Sharma, the learned Counsel appearing for the Revenue, submitted that, as per the written instructions received by him from the Income Tax Officer 2(2) Kalyan, who is Respondent No. 2, the DVO’s report dated 16^th February 2022 was received on 25^th February 2022 in the worklist. Mr. Sharma, however, submits that the impugned Assessment Order is dated 13^th April 2022 and bears the DIN also, which is within the limitation period, though it is digitally signed on 26 May 2022.

7. We have heard the learned Counsel for the parties and also perused the papers and proceedings in the above Writ Petition. The short issue for our consideration is as to when the limitation period in this case expired. It is the Petitioner’s case that the same expired on 17^th April 2022, as explained in the Table set out in paragraph (5) above, which is based on the date of the valuation report. But having regard to the fact admitted by Mr. Sharma, appearing on behalf for the Respondents, that Respondent No.1 received the valuation report on 25^th February 2022, the sixty days limitation period available for passing the Assessment Order would expire on 26^th April 2022, which is much before the date on which the Assessment Order was digitally signed on 26^th May 2022. In our view, the fact that the impugned order is dated 13^th April 2022 is of no consequence, when it was actually signed on 26^th May 2022. The Assessment Order would come into operation only upon its signing and not the date on which it was prepared. We are, therefore, of the considered view that the impugned order is clearly barred by limitation, and thus, bad in law, and is required to be quashed and set aside.

8. We, therefore, quash and set aside the impugned order dated 13^th April 2022 (digitally signed on 26^th May 2022) passed by Respondent No.1 and all consequential orders/proceedings emanating therefrom, and allow this Writ Petition in terms of Prayer Clause (a), which reads as thus:

“(a) that this Hon’ble Court may be pleased to issue a Writ of Certiorari or a Writ in the nature of Certiorari or any other appropriate Writ, Order or direction, calling for the records of the Petitioner’s case and after going into the legality and propriety thereof, to quash and set aside the impugned Assessment Order passed on 26.05.2022 under section 147 read with section 144 read with section 144B of the Act (Exhibit “M”), the notice of demand issued on 26.05.2022 under section 156 of the Act (Exhibit “N”), the notice issued on 26.05.2022 under section 274 read with section 271(1)(c) of the Act (Exhibit “O”), penalty order passed on 23.02.2023 u/s. 271(1)(c) of the Act (Exhibit “P”) and the notice of demand issued on 23.02.2023 under section 156 of the Act (Exhibit “Q”).”

9. Rule is made absolute in the aforesaid terms and the Writ Petition also stands disposed of in terms thereof. However, there shall be no order as to costs.

10. This order will be digitally signed by the Private Secretary/ Personal Assistant of this Court. All concerned will act on production by fax or email of a digitally signed copy of this order.