2009 (12) TMI 570 - HC - Income Tax

Revision - Limitation - Order of assessment subject of rectification - Notice for revision on issue not affected by rectification and referring to order of assessment - limitation to be reckoned from date of assessment order not date of rectification

Summary

Issues:
Appeal against order of Income-tax Appellate Tribunal regarding assessment year 2000-01 - Interpretation of limitation period under section 263(2) of the Income-tax Act.

Analysis:
The case involved an appeal by the Revenue against the Income-tax Appellate Tribunal's order related to the assessment year 2000-01. The key issue was whether the order of the Commissioner of Income-tax under section 263 was barred by limitation, with a focus on the date from which the period of limitation should be reckoned. The Tribunal had held that the order under section 263 was time-barred, considering the date of the assessment order as the reference point. However, the Revenue contended that the period should be calculated from the date of the rectification order under section 154. The Supreme Court's decision in Hind Wire Industries Ltd. v. CIT was cited in support of this argument.

The facts of the case revealed that the Assessing Officer disallowed a deduction under section 80-IA for a water treatment project, which was later modified through a rectification order. The Commissioner of Income-tax initiated proceedings under section 263, contending that the deduction was contrary to the law. The Tribunal found the revision order to be time-barred based on the date of the assessment order. The Revenue argued that the order under section 154 merged with the original assessment order, affecting the limitation period calculation.

The court examined the provisions of section 263(2) of the Income-tax Act, which sets a two-year limitation period for passing revisional orders. It was emphasized that the revisional order must be issued within two years from the end of the financial year in which the order sought to be revised was passed. The court noted that the Commissioner's show-cause notice focused on revising the assessment order, not the rectification order, which had a different impact on the limitation period calculation.

Citing the Supreme Court's decision in CIT v. Alagendran Finance Ltd., the court highlighted the doctrine of merger and its application in determining the limitation period for revision proceedings. The court rejected the Revenue's argument based on the Hind Wire Industries Ltd. case, emphasizing that the Commissioner's complaint referred to the original assessment order under section 143(3) and not the subsequent amended order under section 154. Ultimately, the court dismissed the appeal, stating that there was no substantial question of law for determination, in line with the principles established in the Alagendran Finance Ltd. case.

In conclusion, the judgment clarified the interpretation of the limitation period under section 263(2) of the Income-tax Act, emphasizing the importance of correctly identifying the order subject to revision and its impact on the calculation of the limitation period. The court's decision was based on a thorough analysis of relevant legal precedents and statutory provisions, ultimately upholding the Tribunal's finding that the revision order was time-barred.