Bombay High Court Rules That Limitation-Barred Remand Assessment Mandates Acceptance of Filed Return of Income
Background and Context
A significant ruling has emerged from the Bombay High Court in Laqshya Media Limited Vs Asst./Dy. Commissioner of Income Tax & Others, Writ Petition No. 477 of 2026, pronounced on 23 March 2026. The Court addressed a critical procedural question: what happens when an Assessing Officer fails to pass a fresh assessment order within the statutory limitation period following a remand by the Income Tax Appellate Tribunal? The answer, as the Court decisively held, is that the return of income filed by the assessee must be accepted as filed — no demand can survive, and no further tax can be recovered.
This decision carries considerable weight for assessees who find themselves in legal limbo after ITAT remand orders, where the Revenue neither complies with the Tribunal's directions nor formally concedes the assessee's position.
Facts of the Case
Original Assessment and Appellate History
The assessee, Laqshya Media Limited, had filed its return of income for Assessment Year 2013-14. The return was subjected to scrutiny, and the final assessment order was passed on 31 October 2017 under Section 143(3) read with Section 144C(13) of the Income-tax Act, 1961. The Assessing Officer made certain additions and disallowances to the income originally returned by the assessee.
Aggrieved by the assessment, the assessee preferred an appeal before the Income Tax Appellate Tribunal, Mumbai. The Tribunal, through its order dated 06 January 2020, adjudicated the matter as follows:
- The arm's length price applicable to Corporate Guarantee fee was restricted to 0.5%, as against 1.50% adopted by the Transfer Pricing Officer.
- The disallowance made by the Assessing Officer under
Section 36(1)(iii)of the Income-tax Act, 1961 was deleted. - The disallowance made under
Section 14Aread with Rule 8D was also deleted. - On the issue of "adjustment pertaining to interest on loan to associated enterprise," the Tribunal inadvertently held that no adjustment was required, whereas its actual intent — consistent with its ruling in an earlier year for the same assessee — was to remand this issue back to the lower authorities for fresh adjudication.
Revenue's Miscellaneous Application and the Remand Order
Recognizing this inadvertent error, the Revenue filed a Miscellaneous Application under Section 254(2) of the Income-tax Act, 1961. The Tribunal allowed this application vide order dated 24 September 2021 and thereafter passed a rectification order dated 26 November 2021, restoring the issue of "adjustment pertaining to interest on loan to AE" to the file of the Assessing Officer for fresh determination.
It was not disputed by the Revenue that the Tribunal's order dated 26 November 2021 was received by the prescribed authority during Financial Year 2021-22.
The Statutory Limitation Framework
Relevant Provisions: Sections 153(3) and 153(4)
The Court examined the limitation provisions governing remand assessments. Section 153(3) of the Income-tax Act, 1961, as applicable, provides:
**"(3) Notwithstanding anything contained in sub-sections (1), (1A) and (2), an order of fresh assessment or fresh order under section 92CA, as the case may be, in pursuance of an order under … section 254 …, setting aside or cancelling an assessment, or an order under section 92CA, as the case may be, may be made at any time before the expiry of nine months from the end of the financial year in which the order under … section 254 is received by the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner or, as the case may be…😗*
Provided that where the order under … section 254 is received by the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner or, as the case may be, … on or after the 1st day of April, 2019, the provisions of this sub-section shall have effect, as if for the words "nine months", the words "twelve months" had been substituted. ……