Assessment – Limitation – Computation of period of limitation – Exclusion of time taken to comply with direction of Court – Meaning of ‘direction’ in section 153(3) – Court remitting matter to A.O. asking him to give assessee opportunity to be heard – Not a direction within meaning of section 153(3) – No exclusion of any time in computing limitation

Assessment – Limitation – Computation of period of limitation – Exclusion of time taken to comply with direction of Court – Meaning of ‘direction’ in section 153(3) – Court remitting matter to A.O. asking him to give assessee opportunity to be heard – Not a direction within meaning of section 153(3) – No exclusion of any time in computing limitation

For the A.Y. 2008-09, the case of the assessee was referred to the Transfer Pricing Officer (TPO) for computation of the arm’s length price u/s 92C. The Court by an order restrained the TPO from proceeding to pass a draft assessment order for a period up to 7th March, 2012, i.e., approximately three months. The writ petition was disposed of by the Court by order dated 7th March, 2012 remitting the matter to the A.O. and directing the assessee to appear before the A.O. on 21st March, 2012. The TPO, by an order dated 13th June, 2012 after affording an opportunity to the assessee, passed a draft order of assessment on 5th July, 2012 and forwarded it to the assessee on 11th July, 2012. The assessee filed objections before the Dispute Resolution Panel which passed an order on 22nd April, 2013. The A.O. passed a final order on 31st May, 2013.

The Tribunal held that the draft assessment was completed by the A.O. on 5th July, 2012, beyond the period of limitation.

On appeal by the Revenue, the Karnataka High Court upheld the decision of the Tribunal and held as under:

‘i) Section 153 lays down the period of limitation for assessment. Section 153(3) states that in computing the period of limitation, the time taken to comply with a direction of the court is to be excluded. Section 153(3)(ii) applies to cases where any direction is issued either by the appellate authority, revisional authority or any other authority to decide an issue. The Supreme Court in Rajinder Nath vs. CIT and ITO vs. Murlidhar Bhagwan Das has held that a finding given in an appeal, revision or reference arising out of an assessment must be a finding necessary for disposal of a particular case. Similarly, a direction must be an expressed direction necessary for disposal of the case before the authority or court and must also be a direction which the authority or court is empowered to give while deciding a case before it. A direction issued to remit the matter and asking the assessee to appear before the A.O. on a particular date does not amount to either issuing a direction or finding within the meaning of section 153(3)(ii).

ii) It was evident that the order dated 7th March, 2012 passed by the Court neither contained any finding nor any direction. The Tribunal was right in holding that the draft assessment was completed by the A.O. on 5th July, 2012, which was beyond the period of limitation.’