Delay in Passing Assessment Order Bars Tax Demand; Mandates Acceptance of ITR: Bombay High Court

The Bombay High Court has held that failure of the Income Tax Department to pass a fresh assessment order within the prescribed limitation period renders the proceedings time-barred, thereby requiring acceptance of the taxpayer’s return of income as filed. The bench of Justice B. P. Colabawalla and Justice Firdosh P. Pooniwalla has observed that the non-passing of an order giving effect to the order of the Tribunal / assessment order 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 the department 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. The decision came in a writ petition filed by Laqshya Media Limited, challenging the inaction of the Assessing Officer (AO) in passing an order pursuant to directions issued by the Income Tax Appellate Tribunal. The dispute relates to Assessment Year (AY) 2013–14. The petitioner’s return was originally scrutinized, and an assessment order was passed in October 2017 making various additions. Aggrieved, the company approached the ITAT, which granted partial relief and remanded one issue—pertaining to transfer pricing adjustment on interest on loans to associated enterprises—back to the AO for fresh adjudication. Subsequently, the Tribunal rectified its earlier order in November 2021, explicitly restoring the issue to the AO. The core question before the Court was whether the return of income must be accepted if the Assessing Officer fails to pass an order within the limitation period prescribed under Section 153 of the Income-tax Act, 1961? Under Section 153(3) read with Section 153(4), the AO was required to pass a fresh assessment order within: 12 months from the end of the financial year in which the Tribunal’s order was received; and an additional 12 months due to transfer pricing reference This effectively set the deadline as 31 March 2024. However, the Court noted that no assessment order was passed within this timeframe. Despite repeated representations by the petitioner seeking closure of proceedings and acceptance of its return, the department failed to act. The department contended that certain aspects of the Tribunal’s order—such as restriction of corporate guarantee fee—had attained finality and should not be disturbed merely due to delay in passing the consequential order. The Court rejected this argument, holding that the failure to pass an order within the statutory time limit bars the Revenue from making any further assessment or raising demand. Such inaction cannot be used to selectively preserve findings favorable to the department while ignoring the limitation bar. The Bench emphasized that statutory timelines under tax law are mandatory and not procedural formalities. It observed that once the time limit expires the authority loses jurisdiction to complete the assessment. The return filed by the assessee must be deemed accepted. No further demand can be raised, even if tax liability might have been higher. The Court relied on the landmark ruling of the Supreme Court of India in CIT v. Shelly Products, which held that failure to complete assessment after it is set aside results in deemed acceptance of the return. The Court issued a writ of mandamus directing the Assessing Officer to accept the return of income filed by the petitioner for AY 2013–14; and refrain from raising any further tax demand. Case Details Case Title: Laqshya Media Limited Versus DCIT Citation: JURISHOUR-681-HC-2026(BOM) Case No.: Writ Petition No.477 Of 2026 Date: 23/03/2026 Counsel For Petitioner: Adv. Ravi Sawana Counsel For Respondent: Abhishek R. Mishra Click Here To Read Order Read More: Customs Duty | Gold Confiscation Order Quashed Citing Denial Of Cross-Examination of Witnesses: Kerala HC

Delay in Passing Assessment Order Bars Tax Demand; Mandates Acceptance of ITR: Bombay High Court

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