Time Limit for Reassessment in Remand Cases (Section 153)

This ruling for AY 2003-04 serves as a vital check on the “inaction” of tax authorities. It emphasizes that even when the law previously didn’t have a strict deadline, the Revenue cannot take forever to give effect to a Tribunal’s order.

The Legal Issue

Is there a time limit for the Assessing Officer (AO) or Transfer Pricing Officer (TPO) to pass a fresh order when a case is sent back (remanded) by the ITAT? If they delay it for years, is the taxpayer entitled to a refund?

Facts of the Case

The Remand (03.04.2017): The ITAT remitted specific Transfer Pricing issues back to the TPO for fresh consideration.
The TPO’s Order (24.10.2019): More than two years later, the TPO passed an order making adjustments.
The Deadlock: The assessee objected, noting that while the TPO made a demand, there was no formal “Order Giving Effect” (OGE) to the Tribunal’s decision. They sought a refund of taxes already paid.
The Argument: * Pre-2016: Before the Finance Act, 2016, Section 153 did not clearly specify a deadline for orders “giving effect” to a remand.
- Post-2016: The amendment introduced specific timelines: 3 months or 9 months depending on the nature of the order.

The Decision

The High Court ruled in favour of the assessee:

Amended Law Applies: The Court held that since the Tribunal’s order was dated April 2017 (after the June 2016 amendment), the new strict timelines under Section 153(3) and 153(5) applied. The Revenue missed these 3-to-9-month windows entirely.
“Unreasonable Delay” Doctrine: Even if the old law (with no specific limit) applied, an order passed after 2.5 years is “unreasonably delayed.” Machinery provisions must be exercised within a reasonable timeframe; otherwise, they become barred by limitation.
Automatic Refund: Because the time to pass a valid order had expired, the original demand effectively vanished. The Revenue was ordered to refund the taxes with interest.

Key Takeaways

The 12-Month/3-Month Rule: Post-Finance Act 2016, if the ITAT sets aside an assessment:
- For a fresh assessment: The AO has 12 months from the end of the FY in which the order is received.
- To give effect (without fresh assessment): The AO has only 3 months from the end of the month in which the order is received.
Limitation is Jurisdictional: If the AO misses these dates, they lose the power to tax you for that year. Any tax collected must be returned.
Don’t Wait Forever: If you have an ITAT order in your favor (or even a remand) and the AO hasn’t acted within 12 months, you should proactively move a rectification or a Writ Petition for a refund.

HIGH COURT OF KARNATAKA

Deputy/ Assistant Commissioner of Income-tax

Blue Yonder India (P.) Ltd.^*

S.G.PANDIT and K. V. Aravind, JJ.

WRIT APPEAL No. 2117 OF 2025 (T-IT)^†

FEBRUARY 5, 2026

Ravi Raj Y. V., Sr. Standing Counsel for the Appellant. Smt. Tanmayee Rajkumar, Adv. for the Respondent.

JUDGMENT

K. V. Aravind, J.-Heard Y.V. Raviraj, learned Senior Standing Counsel for the appellants-Revenue and Smt. Tanmayee Rajkumar, learned counsel for the respondent-Assessee.

2. This intra-court appeal, filed under Section 4 of the High Court Act, 1961, by the Revenue, calls in question the order dated 11.09.2025 passed in W.P. No.14156/2025.

3. The brief facts, as stated, are that the respondent-assessee filed its return of income for the Assessment Year 2003-04, pursuant to which a scrutiny assessment was concluded involving transfer pricing adjustments. Aggrieved, the assessee preferred an appeal before the Commissioner of Income Tax (Appeals) [for short, “CIT(A)”], which came to be partly allowed by order dated 31.01.2014. Thereafter, both the respondent-assessee and the Revenue preferred appeals before the Income Tax Appellate Tribunal ‘A’ Bench, Bengaluru (for short “the Tribunal”). The Tribunal, by order dated 03.04.2017, disposed of the appeals and remitted certain issues to the Transfer Pricing Officer [TPO] for fresh consideration in terms of the observations made therein.

3.1 After a lapse of nearly two years, the TPO passed an order dated 24.10.2019, making transfer pricing adjustments to the extent of Rs. 5,82,35,865/-. Consequently, a demand was reflected against the respondent-assessee on the income-tax portal. The assessee filed objections to the demand so reflected and, in the absence of an order giving effect to the Tribunal’s decision, sought refund of the taxes paid. Alleging inaction on the part of the authorities, the respondent-assessee approached this Court by filing a writ petition seeking a direction to refund an amount of Rs.19,89,19,122/-.

3.2 The learned Single Judge, upon consideration of the provisions of Section 153 of the Income Tax Act, 1961 (for short, “the Act”) and the Division Bench judgment of this Court in the case of Dy. CIT v. BIESSE India Pvt. Ltd. [WA No. 1619 of 2024, dated 5-8-2025] disposed of on 05.08.2025, held that further proceedings were not permissible. Accordingly, while allowing the writ petition, the learned Single Judge directed the Revenue to consider the refund of the amount with applicable interest within a period of three months.

4. Sri Y.V. Raviraj, learned Senior Standing Counsel appearing for the appellants-Revenue, submits that the assessment year involved is 2003-04. It is contended that the Tribunal passed the order remanding certain issues to the Transfer Pricing Officer on 03.04.2017. Learned counsel submits that Section 153 of the Act has undergone amendment with effect from 01.06.2016.

4.1 It is further submitted that, in view of Section 153(9), the provisions of Section 153 of the Act as they stood immediately prior to the commencement of the Finance Act, 2016 shall apply to, and in relation to, any order of assessment, reassessment or re-computation made before 01.06.2016. It is contended that since the original assessment was passed prior to the said amendment, even pursuant to the order of remand, the provisions as they existed at the relevant point of time would govern the case.

4.2 On the aforesaid premise, learned counsel submits that prior to the amendment, Section 153 of the Act did not prescribe any period of limitation and, therefore, the order giving effect to the order of the Tribunal could be passed at any time.

5. Per contra, Smt. Tanmayee Rajkumar, learned counsel appearing for the respondent-assessee on caveat, submits that this Court, while considering similar contentions urged by the Revenue and taking note of sub-section (7) of Section 153 of the Act in Dy. CIT v. SCICOM Contact Centre Service [W.A. No. 2102 of 2025, dated 22-1-2026] and W.A. No. 1619/2024, DD 05.08.2025, has held that such proceedings are barred by limitation. Learned counsel further submits that, even as on date, no order giving effect to the order of the Tribunal has been passed.

6. Having considered the submissions of learned counsel for the parties, it is not in dispute that the assessment year involved is 2003-04. The order of the Tribunal is dated 03.04.2017, whereby the Transfer Pricing Officer was directed to determine the issues afresh. Section 153 of the Act has undergone substantial amendment by the Finance Act, 2016 with effect from 01.06.2016.

7. Prior to the said amendment, no period of limitation was prescribed for passing an order giving effect to an order of remand made by the Tribunal. However, by virtue of the amendment introduced by the Finance Act, 2016, specific time limits have been prescribed. In one contingency, the limitation is three months from the end of the month in which the order of the Tribunal is received, and in another, it is nine months. If the amended provisions are held applicable, the time prescribed for giving effect to the order of the Tribunal dated 03.04.2017 is no longer available as on date.

8. It is submitted at the Bar that, as on date, no order giving effect to the order of the Tribunal has been passed. Even assuming the contention of the Revenue that, prior to the amendment, no period of limitation was prescribed, a lapse of more than eight years cannot, by any standard, be construed as a reasonable period for passing an order giving effect to the order of the Tribunal. Consequently, any order now sought to be passed pursuant to the directions of the Tribunal dated 03.04.2017 would be barred by limitation.

9. In these circumstances, the direction issued by the learned Single Judge to refund the amount with applicable interest cannot be said to suffer from any infirmity warranting interference by this Court. The order of the learned Single Judge is founded on the decisions of the Division Bench of this Court taking a similar view. Accordingly, the writ appeal stands dismissed.

Pending I.A., if any, stands disposed of.