2021 (8) TMI 677 - HC - Income Tax

Revision u/s 263 - Period of limitation - To be commenced from original assessment order or re-assessment order u/s 147 - Though reopening of assessment u/s 147 initiated but no addition was made by the AO - CIT observed that, claim of business loss was erroneous and prejudicial to the interest of Revenue - HELD THAT - Explanation III to Section 147 of the Act will not alter the position nor improve the case of the Revenue. By virtue of the said Explanation, the Assessing Officer is empowered to assess or re-assess income in respect of any issue, though it has not been specifically mentioned as a reason for reopening under Section 148(2) of the Act. In the case on hand, the jurisdiction under Section 263(1) of the Act was exercised with reference to an issue, which was covered in the original assessment order dated 28.12.2006 and it was not an issue, based on which, the reopening of assessment was made under Section 143 of the Act. For all purposes, the period prescribed under Sub-Section (2) of Section 263 of the Act should commence from 31.3.2007 and the two years' period would come to an end on 31.3.2009. As it is not in dispute that the proceedings u/s 263 of the Act were initiated well beyond the said date, exercise of such power has to be held to be without jurisdiction and barred by limitation. Decided against the Revenue

Summary

Issues:
1. Interpretation of Section 263 of the Income Tax Act, 1961 regarding the limitation period for exercising revisional powers.
2. Relevance of the original assessment order in determining the limitation period for initiating revision proceedings.

Issue 1: Interpretation of Section 263 of the Income Tax Act

The High Court considered whether the initiation of proceedings under Section 263(1) of the Income Tax Act was within the period of limitation. The Court noted that the limitation period for revision under Section 263(2) commences from the end of the financial year in which the order sought to be revised was passed. In this case, the Court determined that the proceedings were initiated beyond the prescribed limitation period, rendering them time-barred. The Court referred to relevant case law, including the decision in CIT Vs. Alagendran Finance Limited, to support its conclusion that revisional proceedings initiated beyond the two-year period from the date of the original assessment were barred by limitation.

Issue 2: Relevance of the Original Assessment Order

The Court examined the reasons for reopening the assessment and found that the issue of business loss was not one of the reasons for reopening. The Court highlighted that the Assessing Officer had raised queries related to the claim of business loss during the original assessment under Section 143(3) of the Act. The Court emphasized that the explanation provided by the assessee regarding the business loss was accepted during the original assessment, and this aspect was not considered by the Commissioner of Income Tax when issuing the notice under Section 263(1) of the Act. The Court cited precedents like Ashoka Buildcon Ltd. vs ACIT to establish that revision proceedings initiated on issues not subject to reassessment should commence from the date of the original assessment and not the reassessment order.

In conclusion, the High Court dismissed the tax case appeal, holding that the revision proceedings were time-barred under Section 263(2) of the Income Tax Act. The Court emphasized the importance of adhering to the limitation period for exercising revisional powers and highlighted the significance of considering issues from the original assessment order when determining the applicability of the limitation period for revision proceedings.