Madras High Court Clarifies Application of Limitation Period Under Section 153B of Income Tax Act

LI Network

Published on: October 17, 2023 at 14:31 IST

The Madras High Court, in the case of Agni Estates and Foundations Private Limited v. Deputy CIT, has clarified the applicability of the limitation under Section 153B of the Income Tax Act.

The court ruled that this limitation, which is set at 21 months, is relevant solely for taxation and other laws, in accordance with the Relaxation & Amendment of Certain Provisions Act, 2020.

In this case, the assessment orders for the assessment years 2013-14 to 2018-19 were found to have been passed within the prescribed limitation period.

The High Court emphasized that the 21-month limitation, as stipulated in the main provision of Section 153B, should be considered without taking into account any exclusions provided in the Explanation to the section.

The court further explained that the 21-month limitation should be counted from the end of the financial year in which the last of the authorizations for a search under Section 132 was executed. This approach aligns with the provisions of the TOLA (Time Limitation Act), making the benefit under TOLA available to the Revenue.

Justice Dr. Anita Sumanth, a Single Judge Bench, stated that for the purpose of TOLA, it is the statutory time limit as per the main provision of Section 153B that should be considered.

The Explanation provides for exclusions in various situations, and applying these exclusions would extend the time frame. However, the court emphasized that the statutory prescription for the limitation date is determined only by the main provision, which is inflexible.

The Assessee had been subjected to search proceedings under Section 132 and had received notices under Section 153A. The Assessee initially challenged these notices for the assessment years 2013-14 to 2018-19 through writ petitions, which were dismissed, leading to the Revenue completing the assessments for the relevant years. Subsequently, the Assessee filed the present writ petitions, challenging the assessment orders on the grounds of being time-barred.

After a thorough examination of the case, the Bench observed that the extension under TOLA should be considered before factoring in the period of interim protection.

This period of interim protection amounted to a total of 16 months and 24 days, extending the limitation period until April 20, 2023. As a result, the Bench determined that the assessment order passed on January 29, 2022, was well within the statutory time limit and confirmed the same, including the subsequent penalty orders.

In summary, the High Court held that the assessment orders passed for the assessment years 2011-12, 2012-13, and 2019-20 were indeed barred by limitation and subsequently set them aside, along with the associated penalty orders.

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