INCOME TAX ACT, 1961

Section 144(13) Section 144B

Assessment - Validity - Time limit for completion of assessment -

AO issued Notice, dated 25-3-2021 under section 142(1) calling upon assessee to furnish various information. By a Letter, dated 30-3-2021, assessee informed AO that DRP had already passed its directions under sub-section (5) of section 144C. AO again issued another Notice dated 26-9-2021, to assessee asking certain information. Assessee replied by an e-mail. Without considering the Notice dated 26-9-2021 and assessee's reply the assessment Order, dated 30-9-2021 came to be passed by AO under section 143(3) read with section 144C(13) and section 144B. This was followed by the demand notice under section 156 and the penalty notice under section 274 read with section 270A, both dated 30-9-2021. It was assessee's case that under section 144C(13), AO had to complete the assessment within one month from the end of the month in which such direction was received by him from the DRP. Admittedly, DRP's directions were received on 20-3-2021, which means, the date by which AO should have completed the assessment should have been 30-4-2021. Since assessment order had been passed only on 30-9-2021, the entire assessment order was ex facie illegal. AO filed an affidavit in reply in which he relied upon three notifications issued by the Central Board of Direct Taxes (CBDT) being Notification No. 20/2021, dated 31-3-2021, Notification No. 38/2021, dated 27-4-2021 and Notification No. 74/2021, dated 25-6-2021 to submit that the time-limit to complete assessment has been extended upto 30-9-2021 and since the assessment order had been passed on 30-9-2021, there was nothing illegal about it. Held: Sub-section (1) of section 3 of the Relaxation Act extends time-limit with respect to an act for which limitation falls between the period from 20-3-2020 to 31-12-2020. Since directions of DRP were issued and received by AO only on 20-3-2021, assessee's case does not fall under sub-section (1) of section 3 of the Relaxation Act as the time-limit for completion of assessment did not fall within the period from 20-3-2020 to 31-12-2020. Sub-section (1) of section 3 of the Relaxation Act also provides that the Central Government, by notification, can extend the period to such other date after 31-12-2020. Therefore, CBDT issued first Notification No. 20/2021. Clause (A) of this notification, provides that if the time-limit to complete assessment under section 144C(13) was expiring on any date upto 31-3-2021, the said date for completion was extended upto 30-4-2021. Since in the instant case, time-limit for completion of assessment was not expiring as of 31-3-2021, Notification No. 20/2021 was not applicable. Coming to the applicability of Notification No. 38/2021 issued on 27-4-2021 expiry of time-limit for completion of assessment or for passing order in assessee's case under section 144C(13) on 30-4-2021 was not due to an earlier extension of time-limit by an earlier notification but was on account of the fact that directions were issued by DRP on 20-3-2021. As per section 144C(13), AO had one month from the date of the end of the month in which directions were received by him to pass the final order/complete assessment, therefore, time-limit of 30-4-2021 not being on account of extension by earlier notification, Notification No. 38/2021 was also inapplicable to assessee's case. Coming to Notification No. 74/2021 issued on 25-6-2021. There was no extension of time-limit under this notification for completion of assessment or passing of any order under section 144C(13). Therefore, Notification No. 74/2021 was also not applicable to assessee's case. In the circumstances, impugned assessment order dated 30-9-2021 passed under section 143(3) read with section 144C(13) and 144B was quashed as invalid.

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