TMI Blog2023 (7) TMI 1259X X X X Extracts X X X X X X X X Extracts X X X X ..... sion order dated 24.02.2021 of Ld. Pr. Commissioner of Income Tax, Central, (in short Ld. Pr. CIT), Bhopal passed u/s 263 of the Income Tax Act, 1961, for Assessment Year 2008-09. The assessee has raised following grounds of appeal: 1. The ld. Pr. CIT has erred in passing the order u/s 263 without disposing the objection to show cause notice, filed through written submission on 13.02.2021 and request for adjournment of personal hearing filed on 22.02.2021. 2. Based on facts and circumstances the ld. Pr. CIT has erred in passing the order u/s 263 for A.Y. 2008-09 on 22.02.2021 after more than 2 years from date of original order u/s 147 r.w. 143(3) dt. 03.03.2016. 3. Based on facts and circumstances the Ld. PCIT has erred in passing the order u/s 263 for AY 2008-09 for revision of an order dt. 31.07.2017 which itself was an order passed u/s 143(3) r.w.s. 263. The appellant craves leave to amend, alter add to the grounds of appeal and or raise any other ground of appeal. 2. In ground no. 2, the assesse has challenged the validity of the impugned order passed u/s 263 of the Act being barred by limitation as the same has been passed after more than two years from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... od of limitation. Ld. AR has referred to sub-section (2) to section 263 of the Act and submitted that no order shall be made under sub-section (1) of section 263 after expiry of two years from the end of the financial year in which the order sought to be revised was passed. 3. In support of his contention has relied the judgment of Hon ble Supreme Court in the case of CIT vs. M/s. Alagendran Financ Ltd. 293 ITR 1 and submitted that the limitation would begin to run from the date of the original order and not from the order which was passed in pursuant to the first revision order when no such issue was a subject matter of first revision order passed u/s 263 of the Act or the order passed by the Ld. AO in pursuant to the first revision order. He has also relied upon the judgment of Hon ble Madras High Court in case of Indira Industries vs. Pr. CIT 95 taxman 103. Hence the Ld. AR has pleaded that show cause notice dated 09.02.2021 and consequential order dated 24.02.2021 are beyond the period of two years from the end of the financial year when the reassessment order dated 03.03.2016 was passed and therefore the impugned order is unsustainable and liable to be quashed. 4. On ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 16. The issue which was subject matter of first revision order dated 15.02.2017 has been recorded by the Pr. CIT in para 7 as under: 7. In view of the above facts and on examination of the records it is seen that the said assessment order is found to be erroneous and prejudicial to the interest of the revenue on the following ground. Sr.No. A.Y. Grounds/issues 1. 2008-09 During the course of assessment proceedings, the assessee has admitted the fact that the entry of the amount of Rs. 85 Lakhs appearing at page no. 23 of LPS-1 is a valid entry and that this amount of Rs. 85 Lakhs is advanced by the assessee to PATH therefore there is no logic for not accepting the other entries mentioned in the second table in the same page no. 23 of LPS 1 i.e. entry of Rs. 1,15,00,000/- which is alleged to be advanced by the assessee to PATH in cash (not by PATH to the Assessee) and was subsequently repaid along with the interest of Rs. 14,659 by PATH to the Assessee. 7. Thus, the issue on which provisions of section 263 of the Act were invoked by the Pr. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... od of limitation. Ld. DR has contended that after the reassessment order dated 03.03.2016 was set aside by the Ld. CIT the same has merged with the subsequent order dated 31st July 2017. However, the said doctrine of merger would not apply beyond the subject matter of revision order dated 15.03.2017. The Hon ble Supreme Court in case of CIT vs. M/s. Alagendran Finance Ltd. (supra) while considering the identical issue of limitation has held in para 7 to 15 as under: 7. A bare perusal of the order passed by the Commissioner of Income Tax would clearly demonstrate that only that part of order of assessment which related to lease equalization fund was found to be prejudicial to the interest of the Revenue. The proceedings for reassessment have nothing to do with the said head of income. Doctrine of merger, therefore, would not apply in a case of this nature. 8. Furthermore, Explanation (c) appended to Sub-section (1) of Section 263 of the Act is clear and unambiguous as in terms thereof doctrine of merger applies only in respect of such items which were the subject matter of appeal and not which were not. The question came up for consideration before this Court in Comm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has not been charged in the hands of an assessee in the relevant year of assessment. The expression assess refers to a situation where the assessment of the assessee for a particular year is, for the first time, made by resorting to the provisions of Section 147 because the assessment had not been made in the regular manner under the Act. The expression reassess refers to a situation where an assessment has already been made but the Income-tax Officer has, on the basis of information in his possession, reason to believe that there has been under assessment on account of the existence of any of the grounds contemplated by the provisions of Section 147(b) read with the Explanation (I) thereto. 9. We may at this juncture also notice the decision of this Court in Hind Wire Industries Ltd (supra) wherein the decision of this Court in V. Jaganmohan Rao v. CIT and CEPT [75 ITR 373] interpreting the provisions of Section 34 of the Act was reproduced which reads as under: Section 34 in terms states that once the Income- tax officer decides to reopen the assessment, he could do so within the period prescribed by serving on the person liable to pay tax a notice containing all o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that reassessment is not only confined to escaped assessment or under assessment but to the entire assessment for the year and starts the assessment proceeding de novo giving the right to an assessee to reagitate matters which he had lost during the original assessment proceeding, which had acquired finality, is not only erroneous but also against the phraseology of Section 147 of the Act and the object of reassessment proceedings. Such an interpretation would be reading that judgment totally out of context in which the questions arose for decision in that case. It is neither desirable nor permissible to pick out a word or a sentence from the judgment of this Court, divorced from the context of the question under consideration and treat it to be the complete 'law' declared by this Court. The judgment must be read as a whole and the observations from the judgment have to be considered in the light of the questions which were before this Court. A decision of this Court takes its colour from the questions involved in the case in which it is rendered and while applying the decision to a later case, the courts must carefully try to ascertain the true principle laid down by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... matters as had not been considered and decided in an appeal. Accordingly, even in respect of the aforesaid three items, the powers of the Commissioner under section 263 shall extend and shall be deemed always to have extended to them because the same had not been considered and decided in the appeal filed by the assessee. This is sufficient to answer the question which has been referred. We, therefore, are clearly of the opinion that in a case of this nature, the doctrine of merger will have no application. 14. The Madras High Court in A.K. Thanga Pillai (supra), in our opinion, has rightly considered the matter albeit under Section 17 of the Wealth Tax Act, 1957 which is in pari materia with the provisions of the Act. Relying on Sun Engineering Works P. Ltd (supra), it was held: Under section 17 of the Wealth-tax Act, 1957, even as it is under section 147 of the Income-tax Act, proceedings for reassessment can be initiated when what is assessable to tax has escaped assessment for any assessment year. The power to deal with underassessment and the scope of reassessment proceedings as explained by the Supreme Court in the case of Sun Engineering [1992] 198 ITR 297, i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the original order passed by the Ld. AO dated 03.03.2016 could be held as erroneous so far as allowing this claim of interest on income tax while passing 1st revision order dated 15.03.2017. Therefore, the limitation for passing revision order as prescribed under sub-section(2) of section 263 would reckon from the end of the financial year in which the original order u/s 143(3) r.w.s. 147 dated 03.03.2016 was passed and the same expired on 31.03.2018. The Hon ble Madras High Court in the case of Indira Industries vs Pr. CIT (supra) has held in para 3 4 as under: 3. DISCUSSION: 3(i) By consent of both the counsel, the main writ appeal itself was heard out and again by consent of both counsel, we are disposing of the main writ appeal itself by the instant judgment. 3(ii) Assessee assailed the impugned notice before the learned single Judge on two main grounds. The two main grounds, in simple terms, can be crystallized and set out as follows: a) As the original re-assessment was done on the basis of Assessee accepting the position, the same issue cannot be reopened under Section 263 of the IT Act as it tantamounts to 'Change of Opinion'; and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e to the tune of Rs. 3.23 crores. 3(viii) Some other issues have also been raised in the impugned notice under Section 263. 3(ix)The Principle of law is, it can be construed to be 'Change of Opinion' only when the same issue dealt with in reassessment is raised again in proceedings under Section 263. This is clearly articulated in Sat Pal Aggarwal's case itself. On facts, it would be seen that in Sat Pal Aggarwal's case, reassessment proceedings and thereafter invocation of jurisdiction by Commissioner under Section 263 of the IT Act were on the same set of grounds. 3(x) Therefore, while we agree with the conclusion of the learned single Judge that this is not a case of change of opinion qua Section 263 of the IT Act, we do not agree with ultimate conclusion for reasons which are elaborated in this judgment. 3(xi)This takes us to the next point urged by the Assessee. As would be evident from the narration of facts and discussion supra, the second point raised by the Assessee is that the impugned notice is barred by limitation, to be precise, it is barred by Section 263(2) of the IT Act is the plea of the Assessee. In support of the second poi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... original issue (in the reassessment proceedings) was with regard to disallowance of interest paid by the Assessee, as the loan amount has been diverted to the partners, the issue now raised in the impugned notice under Section 263 is not restricted to the disallowance of interest on loan alone. It deals with other aspects such as claims of the assessee regarding administrative, selling and distribution expenses made by the Assessee to the tune of Rs. 3.23 crores and claim of bad debts written off to the tune of Rs. 33.06 lakhs etc., 3(xvii) Therefore, as the impugned notice deals with several issues other than the one raised earlier, the limitation period in the instant case has to necessarily run from 31.3.2015 being the end of the financial year as 25.02.2015 is the date on which the scrutiny assessment was admittedly made for the Assessee under Section 143 (3) of the IT Act. 3(xviii) We therefore have no hesitation in holding that the reckoning date qua the impugned notice for the purpose of Section 263(2) of IT Act is not the date of re-assessment being 30.12.2016, but the date of scrutinizing the assessment i.e, 25.02.2015. 3(xix) As would be evident from the narr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... P.No. 22978 of 2017 dated 28.08.2017 is set aside and consequently, the impugned notice issued by the respondent Revenue being notice dated 16.08.2017 bearing Reference C.No.852(5)/PCIT- 8/2017-18 is quashed. No costs. Consequently, connected miscellaneous petition is closed. 10. Hence, when the claim of interest on income tax was not a subject matter of subsequent order passed by the Ld. AO u/s 143(3) r.w.s. 263 of the Act then the limitation period of two years as prescribed under subsection (2) of section 263 of the Act would reckon from the date of the first assessment and not from the second assessment. 11. The decision relied upon by the Ld. DR is regarding the scope of section 263 of the Act and does not deal with the issue of limitation. Therefore, the said decision will not help the case of the revenue. Accordingly, in the facts and circumstances of the case as well as binding precedent as cited above, we are of the considered view that the impugned revision order passed by the ld. Pr. CIT dated 24.02.2021 is beyond the period of limitation of two years provided under sub-section (2) of section 263 of the Act and consequently, the impugned order is not sustainable ..... X X X X Extracts X X X X X X X X Extracts X X X X
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