Laqshya Media Limited Vs Asst./ DCIT (Bombay High Court)
Summary: The Bombay High Court in Laqshya Media Limited Vs Asst./ Dy. Commissioner of Income Tax & Others, Writ Petition No. 477 of 2026, decided on 23 March 2026, held that where the Assessing Officer failed to complete an assessment pursuant to an Income Tax Appellate Tribunal remand within the limitation prescribed under Sections 153(3) and 153(4) of the Income-tax Act, 1961, the return of income furnished by the taxpayer had to be accepted. The dispute concerned Assessment Year 2013-14. The Court rejected the Revenue’s contention that the Tribunal’s final determination of certain transfer pricing issues could independently sustain a tax demand despite the absence of an assessment or appeal-effect order within the statutory period.
The assessee’s original scrutiny assessment was completed on 31 October 2017 under Sections 143(3) and 144C(13). In appellate proceedings, the Tribunal initially restricted the arm’s length corporate guarantee fee to 0.5%, against 1.50% adopted by the Transfer Pricing Officer, and deleted disallowances under Sections 36(1)(iii) and 14A read with Rule 8D. Subsequently, on the Revenue’s miscellaneous application under Section 254(2), the Tribunal rectified its earlier order and remanded the adjustment relating to interest on a loan to an associated enterprise for fresh adjudication by order dated 26 November 2021.
The Revenue did not dispute that the Tribunal’s order was received by the prescribed authority during Financial Year 2021-22. The High Court calculated the ordinary twelve-month limitation under Section 153(3) as expiring on 31 March 2023. Allowing the additional twelve months under Section 153(4) on account of the reference to the Transfer Pricing Officer, the final deadline was 31 March 2024. It was undisputed that the Assessing Officer had not passed the required assessment order by that date. Despite repeated requests from the assessee, no order accepting the returned income had been passed.
Relying upon CIT v. Shelly Products, [2003] 261 ITR 367 (SC), Plasticotes Investments (P.) Ltd. v. CCIT, [2014] 52 taxmann.com 483 (Bombay), and Aircom International India (P.) Ltd. v. DCIT, [2024] 159 taxmann.com 148 (Delhi), the High Court held that an Assessing Officer’s failure to complete assessment proceedings within limitation could not be used to the taxpayer’s detriment. The Court concluded that the failure to pass the assessment or appeal-effect order by 31 March 2024 barred any demand upon the petitioner and required acceptance of the income returned for AY 2013-14. The writ petition was allowed, Rule was made absolute, and no costs were awarded.
List of Cases Discussed
1. CIT v. Shelly Products, [2003] 261 ITR 367 (Supreme Court) — Relied upon for the principle that where an earlier assessment has been set aside or nullified and a fresh assessment cannot lawfully be completed, the return furnished by the assessee must be accepted, subject to the consequences concerning tax already paid and refunds.
2. Plasticotes Investments (P.) Ltd. v. CCIT, [2014] 52 taxmann.com 483 (Bombay High Court) — Relied upon for the proposition that the Revenue cannot take advantage of its own failure to carry out appellate directions and pass a fresh assessment order to deprive an assessee of relief.
3. Aircom International India (P.) Ltd. v. DCIT, [2024] 159 taxmann.com 148 (Delhi High Court) — Relied upon for the direction that returned assessments must be accepted on the relevant issues where the Assessing Officer fails to complete remand assessments within the statutory limitation under Section 153.
FULL TEXT OF THE JUDGMENT/ORDER OF BOMBAY HIGH COURT
1. Rule. With the consent of the parties, Rule made returnable forthwith and heard finally.
2. The present writ petition challenges the inaction of Respondent No. 1 in as much as no order has been passed pursuant to the order of the Income-tax Appellate Tribunal, Mumbai (“Tribunal”) within the prescribed limitation under Section 153 of the Income-tax Act, 1961 (“Act”), for Assessment Year (“AY”) 2013-14.
3. The Petitioner has contended that the proceedings before Respondent No. 1 pursuant to the order of the Tribunal dated 26th November 2021 have become barred by limitation in view of Section 153(3) read with Section 153(4) of the Act. It is on this basis that the Petitioner has sought relief in terms of prayer clause (a) of the Writ Petition which reads as under:
“(a) that this Hon’ble Court may be pleased to issue a writ of mandamus or a writ in the nature of mandamus or any other appropriate writ, order or direction under Article 226 of the Constitution of India, ordering and directing the Respondent No. 1 to accept the income returned by the Petitioner for AY 2013-14.”
4. The return of income filed by the Petitioner for AY 2013-14 was selected for scrutiny assessment and a final assessment order came to be passed on 31st October 2017 under Section 143(3) r.w.s. 144C(13) of the Act, making certain additions / disallowances to the income returned by the Petitioner. Thereafter, the Petitioner filed an appeal before the Tribunal. The Tribunal vide order dated 06th January 2020 held as under:
i. Arm’s length price of Corporate Guarantee fee restricted to 0.5%, as against 1.50% taken by the TPO.
ii. While the Tribunal intended to remand the issue of “adjustment pertaining to interest on loan to AE” back to the lower authorities relying on the Tribunal order of the previous year in the case of the Petitioner, it inadvertently held that no adjustment on this issue to be made.
iii. Deleted the disallowance made by the AO u/s 36(1)(iii).
iv. Deleted the disallowance made by the AO u/s 14A r.w.r. 8D.
5. Against the said order, the Revenue filed a Miscellaneous Application under Section 254(2) of the Act before the Tribunal, which was allowed vide order dated 24th September 2021. Thereafter, vide order dated 26th November 2021, the Tribunal rectified its order dated 06th January 2020 and restored the issue of “adjustment pertaining to interest on loan to AE” back to the file of the AO for fresh adjudication.
6. In the present writ petition, the Petitioner has contended that Respondent No. 1 was required to pass an assessment order pursuant to the remand by the Tribunal by 31st March 2024, in terms of the limitation prescribed in Sections 153(3) r.w.s. 153(4) of the Act. However, no such assessment order has been passed by 31st March 2024.
7. The Petitioner has further submitted that since Respondent No. 1 did not pass any assessment order until 31st March 2024, it vide letters dated 10th October 2024, 18th November 2024, 01st August 2025 and 02nd January 2026, requested Respondent No. 1 to accept its return of income. However, Respondent No. 1 did not act upon those letters. Hence, the present writ petition.
8. Accordingly, the Petitioner has submitted that in the absence of any assessment order having been passed within the aforementioned limitation period, and upon expiry of time limit to pass the same, the return filed by it for the year under consideration needs to be accepted as such.
9. In these facts, the limited point to be examined is if the Respondent has not passed any assessment order pursuant to the order of the Tribunal within the limitation prescribed under Section 153 of the Act, then whether the return of income filed by the Petitioner becomes final.
10. The Petitioner has drawn our attention to the provisions of Sections 153(3) and 153(4) of the Act, the relevant portion of which is reproduced hereunder:
“(3) Notwithstanding anything contained in sub-sections (1), (1A) and (2), an order of fresh assessment or fresh order under section 92CA, as the case may be, in pursuance of an order under … section 254 …, setting aside or cancelling an assessment, or an order under section 92CA, as the case may be, may be made at any time before the expiry of nine months from the end of the financial year in which the order under … section 254 is received by the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner or, as the case may be…:
Provided that where the order under … section 254 is received by the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner or, as the case may be, … on or after the 1st day of April, 2019, the provisions of this sub-section shall have effect, as if for the words “nine months”, the words “twelve months” had been substituted.
……
(4) Notwithstanding anything contained in sub-sections (1), (1A), (2), (3) and (3A), where a reference under sub-section (1) of section 92CA is made during the course of the proceeding for the assessment or reassessment, the period available for completion of assessment or reassessment, as the case may be, under the said sub-sections (1), (1A), (2), (3) and (3A), shall be extended by twelve months.”
11. Section 153(3) of the Act inter-alia provides that where the Tribunal has set aside the assessment made by the AO or the order of the TPO passed under Section 92CA of the Act, then the AO / TPO is required to pass the fresh assessment order under Section 143(3) of the Act / fresh order u/s 92CA of the Act, within 12 months (as is relevant in the present case) from the end of the financial year in which the order of Tribunal is received by the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner.
12. Further, Section 153(4) of the Act inter-alia provides that where a reference is made to the TPO under Section 92CA(1) of the Act during the course of assessment, then the time limit available to the AO to make a fresh assessment under Section 153(3) is further extended by 12 months.
13. In the present case, Mr. Mishra, appearing on behalf of Respondent No. 1, has not disputed that the order of the Tribunal dated 26th November 2021 was received by the authority prescribed in Section 153(3), during Financial Year 2021-22. Accordingly, the limitation period under Section 153(3), read with Section 153(4), of the Act for completing an assessment pursuant to the remand by the Tribunal, shall be as under:
| Particulars | Date |
|---|---|
| Order passed by the Tribunal, remanding the issue of “adjustment pertaining to interest on loan to AE” back to AO for fresh determination | 26.11.2021 |
| PCCIT / CCIT / PCIT / CIT received Tribunal’s order | FY 2021-22 |
| Limitation as per Section 153(3)
12 months from the end of FY in which PCCIT / CCIT / PCIT / CIT received Tribunal’s order |
31.03.2023 |
| Limitation as per Section 153(4)
Extended by 12 months on account of reference to Transfer Pricing Officer |
31.03.2024 |
14. Mr. Mishra accepts that no assessment order pursuant to the remand by the Tribunal has in fact been passed by Respondent No. 1 by 31st March 2024. However, he contends that the return of income filed by the Petitioner cannot be accepted as such. In this regard, he submitted that the Tribunal had restricted the transfer pricing adjustment on corporate guarantee to 0.50% as against 1.50% made by the TPO. Therefore, there was final determination by the Tribunal on this issue. Hence, the absence of order giving effect to the order of Tribunal would not have the effect of disturbing / nullifying the findings on this issue which have already attained finality, and which was also not the subject matter of remand by the Tribunal. The consequences of limitation would operate only in respect of the issues which were specifically remanded by the Tribunal for fresh examination.
15. It is thus an undisputed fact that Respondent No. 1 has not passed any assessment order pursuant to the order of the Tribunal by 31st March 2024, being the limitation prescribed in Sections 153(3) r.w.s. 153(4) of the Act.
16. We do not agree with the submissions made by Mr. Mishra that the return of income cannot be accepted as such, even in the absence of an order giving effect to the order of the Tribunal. We are of the view that the non-passing of an order giving effect to the order of the Tribunal / assessment order by Respondent No. 1 by 31st March 2024 has barred any demand to be raised upon the Petitioner and therefore, return of income filed by the Petitioner needs to be accepted as such. Where Respondent No. 1 was obliged to comply with the directions of the Tribunal and complete the assessment upon remand, the inaction on his part to pass any assessment order within the limitation, cannot disturb the income returned by the Petitioner.
17. We find support from the decision relied upon the Petitioner, in the case of CIT v. Shelly Products [2003] 261 ITR 367 (SC). Therein, the Hon’ble Supreme Court observed as under:
“30. What then is the effect of the failure to make an order of assessment after the earlier assessment made is set aside or nullified in appropriate proceedings? If the assessing authority cannot make a fresh assessment in accordance with the provisions of the Act it amounts to deemed acceptance of the return of income furnished by the assessee. In such a case the assessing authority is denuded of its authority to verify the correctness and completeness of the return, which authority it has while framing a regular assessment. It must accept the return as furnished and shall not in any event raise a demand for payment of further taxes. Accepting the income as disclosed in the return of income furnished by the assessee, it must refund to the assessee any tax paid in excess of the liability incurred by him on the basis of income disclosed. Even if the tax paid is found to be less than that payable, no further demand can be made for recovery of the balance amount since a fresh assessment is barred. In other words, the tax paid by the assessee must be accepted as it is, and in the event of the tax paid being in excess of the tax liability duly computed on the basis of return furnished and the rates applicable, the excess shall be refunded to the assessee, since its retention may offend Article 265 of the Constitution.”
(emphasis supplied)
18. An identical controversy also arose before this Court in Plasticotes Investments (P.) Ltd. v. CCIT [2014] 52 taxmann.com 483 (Bombay). In this case, the CIT(A) had restored the assessment to the file of the AO for denovo adjudication. However, the AO did not comply with the directions for fresh assessment and, in due course, the time to pass the assessment order had expired. In view of the failure of the AO to pass any assessment order, the assessee demanded refund of tax and interest paid by it. In light of these facts, this Court held as under:
“7. The stand of the Assessing Officer that no refund could be granted as no assessment order on remand could be passed because copy of the order dated 14 January 1999 of the CIT(A) was not served upon him is not acceptable for the reason that the Assessing Officer could have himself called for a copy of the same from the office of the CIT(A). In any case a copy of the order dated 14 January 1999 was served upon the Assessing Officer with a copy of this petition some time in 2005 and since then no order of assessment has yet been passed by the Assessing Officer. Once CIT(A) has remanded the proceedings to the Assessing Officer for passing a fresh assessment order it is not open to the Assessing Officer not to carry out the directions of the CIT (A) to the detriment of the assessee. If the revenue’s submission that no refund can be granted to an assessee consequent to an order passed in an appeal unless the Assessing Officer passes a fresh assessment order is accepted then in that event Revenue would be able to deprive all assessees of their property without the authority of law by merely stating that it are helpless on account of its failure to pass an assessment order consequent to an order of appeal. The Revenue’s submission is an attempt to justify its conduct by taking advantage of its own wrong to deprive the citizen of its money.”
19. Similarly, in Aircom International India (P.) Ltd. v. DCIT [2024] 159 taxmann.com 148 (Delhi), the Delhi High Court held as under:
“6. Accordingly, the present batch of matters is disposed of with a direction to the AO to pass appeal effect orders in accordance with law within eight weeks. In the event, the AO has not passed the assessment orders in accordance with the orders of remand passed by the ITAT within the time stipulated under Section 153(3) read with Section 153(4) and Section 153(5) of the Act, the returned assessments are directed to be accepted on the said issues….”
20. We are therefore, of the view that the return of income filed by the Petitioner for the year under consideration (AY 2013-14) has to be accepted as such.
21. In view thereof, we allow the present writ petition in terms of prayer clause (a), which is reproduced hereunder:
“(a) that this Hon’ble Court may be pleased to issue a writ of mandamus or a writ in the nature of mandamus or any other appropriate writ, order or direction under Article 226 of the Constitution of India, ordering and directing the Respondent No. 1 to accept the income returned by the Petitioner for AY 2013-14.”
22. Rule is made absolute in the above terms and the Writ Petition is also disposed of in terms thereof. No order as to costs.
23. 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.
