TMI Blog2010 (4) TMI 152X X X X Extracts X X X X X X X X Extracts X X X X ..... me which had come to the notice of the Assessing Officer as having escaped assessment in the course of the proceedings under Section 147 and when he passed the order of reassessment. The Commissioner, when he exercised his jurisdiction under Section 263, in the facts of the present case, was under a bar of limitation since limitation would begin to run from the date on which the original order of assessment was passed. We must however clarify that the bar of limitation in this case arises because the revisional jurisdiction under Section 263 is sought to be exercised in respect of issues which did not form the subject matter of the reassessment proceedings under Section 143(3) read with 147 - 10160 OF 2009 - - - Dated:- 23-4-2010 - DR. D.Y.CHANDRACHUD AND J.P.DEVADHAR, JJ. Mr. Percy J. Pardiwala, Senior Advocate with Kr. Gopal, Jitendra Singh and Satendra Pandey for petitioner. Mr. Vimal Gupta for respondents. JUDGEMENT PER DR. D.Y.CHANDRACHUD, J. Rule, by consent made returnable forthwith. Counsel for the respondents waives service. With the consent of counsel, the petition is taken up for final hearing. 2) The challenge in this proceeding is to a notic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... submitted that if the order dated 27 December 2007 is sought to be revised, ex-facie, the impugned notice dated 30 April, 2009 does not find any error in that order in so far as a reassessment is made of income which had escaped assessment with reference to the provisions of Section 72A. Reliance has been placed on the judgment of the Supreme Court in Commissioner of Income Tax V/s. Alagendran Finance Ltd.{(2007) 293 I.T.R. 1} 5) Now, in the present case, it would be appropriate at the outset to advert to the admitted position as it emerges from the record. The original order of assessment under Section 143(3) dated 27 December 2006 was sought to be reopened on 6 March 2007 solely on the basis that the benefit of Section 72A had been wrongly allowed to the assessee. In the order of reassessment that was passed thereupon under Section 143(3) read with Section 147 on 27 December 2007, the claim made by the assessee with reference to the provisions of Section 72A was disallowed. While seeking to exercise his jurisdiction under Section 263, the Commissioner of Income Tax does not find any error in the order of reassessment dated 27 December 2007 as regards the disallowance claimed b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an order enhancing, modifying or cancelling the assessment and directing a fresh assessment, if he considers that any order passed by the Assessing Officer is erroneous in so far as it is prejudicial to the interest of the Revenue. Sub-section (2) of Section 263 stipulates that no order shall be made under sub-section (1) after the expiry of two years from the end of the financial year in which the order sought to be revised was passed. That period of two years from the end of the financial year in which the original order of assessment dated 27 December 2006 was passed, has expired on 31 March 2009. Hence the exercise of the revisional jurisdiction in respect of the original order of reassessment is barred by limitation. This is sought to be obviated by the Commissioner of Income Tax by seeking to revise, under Section 263, the order dated 27 December 2007. The order dated 27 December, 2007 was passed after the assessment was reopened on the ground of an escapement of income under Section 147 and an order of reassessment was passed by which the claim under Section 72A came to be disallowed. The submission that has been urged on behalf of the assessee is that, since the assessment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt in C.I.T. V/s. Sun Engineering Co. Pvt. Ltd.{ (1992) 198 I.T.R. 297 10} and held that the Tribunal had found that all the subsequent events were in respect of matters other than the lease equalisation fund. In other words, this was not a case where the subject matter of the assessment and the reassessment was the same. The Supreme Court then held as follows:- "We, therefore, are clearly of the opinion that keeping in view the facts and circumstances of this case and, in particular, having regard to the fact that the Commissioner of Income-tax exercising his revisional jurisdiction reopened the order of assessment only in relation to lease equalisation fund which being not the subject of reassessment proceedings, the period of limitation provided for under sub-section (2) of section 263 of the Act would begin to run from the date of the order of assessment and not from the order of reassessment. The revisional jurisdiction having, thus been invoked by the Commissioner of Income-tax beyond the period of limitation, it was wholly without jurisdiction rendering the entire proceeding a nullity. " 8) Where an assessment has been reopened under Section 147 in relation to a particul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ficer, while making an order of reassessment to deal with those issues under Section 143 (3) read with 147 constitutes an error which can be revised in exercise of the jurisdiction under Section 263. The submission cannot be accepted either as a matter of first principle, based on a plain reading of the provisions of Sections 147 and 263, nor is it sustainable in view of the law laid down by the Supreme Court. The Supreme Court has now clearly held in the decision in Alagendran Finance that the doctrine of merger does not apply where the subject matter of reassessment and of the original order of assessment is not one and the same. In other words, where the assessment is sought to be reopened only one one or more specific grounds and the reassessment is confined to one or more of those grounds, the original order of assessment would continue to hold the field, save and except for those grounds on which a reassessment has been made under Section 143(3) read with Section 147. Consequently, an appeal by the assessee on those grounds on which the original order of assessment was passed and which do not form the subject of reassessment would continue to subsist and would not abate. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... atter of the reassessment, after the original assessment was reopened, the commencement of limitation would be with reference to the order of reassessment. The present case does not fall in that category. 11) Counsel appearing on behalf of the Revenue relied upon the judgment of the Supreme Court in Income Tax Officer V/s. K.L. Srihari (UHF){(2001) 118 Taxman 890 (S.C.)} That was a case where an assessment was reopened under Section 147. The Supreme Court, after considering the original order of assessment dated 19 March 1983 and the order of reassessment dated 16 July 1987 passed under Section 147 held that the subsequent order made a fresh assessment of the entire income of the assessee. Once, in the exercise of the power under Section 147, the Assessing Officer had reassessed the entire income of the assessee, the Supreme Court held that the original order would stand effaced by the subsequent order. Srihari was, therefore, a case where the subject matter of the original order of assessment as well as of the order of reassessment was the same. This is distinct from the situation in the subsequent judgment of Alagendran Finance where the Supreme Court noted that the subject ma ..... X X X X Extracts X X X X X X X X Extracts X X X X
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