2002 (8) TMI 50 - HC - Income Tax

Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that the order under section 263, dated March 19, 1991, was barred by limitation and consequently cancelling the order under section 263? - It is true that the Commissioner of Income-tax has the power to revise the order of the Assessing Officer on the issues which are not taken in appeal before the Commissioner of Income-tax (Appeals), but if the limitation has expired, the Commissioner of Income-tax cannot revise the original order of the Income-tax Officer beyond the period of limitation. The period of limitation in this case is two years from the date of the order sought to be revised, i.e., December 16, 1988, but the order of the Commissioner of Income-tax under section 263, dated February 26, 1992, i.e., beyond two years. - Considering these facts, no interference is called for in the order of the Tribunal.

Summary

Issues:
1. Interpretation of limitation period for revision under section 263 of the Income-tax Act, 1961.
2. Validity of the order under section 263 dated March 19, 1991, in relation to deduction under section 32AB.
3. Application of the decision in CIT v. Shri Arbuda Mills Ltd. [1998] 231 ITR 50 to the present case.

Analysis:

1. Interpretation of Limitation Period:
The Tribunal held that the limitation period for revision under section 263 starts from the date of the original assessment order. In this case, the original assessment was completed on December 16, 1988. The subsequent assessment order on December 27, 1989, only dealt with the issue of depreciation, not the deduction under section 32AB. The Tribunal reasoned that allowing revisions based on errors discovered in later assessments would lead to an indefinite enlargement of the limitation period. Therefore, the Tribunal quashed the order under section 263 on grounds of limitation.

2. Validity of the Order under Section 263:
The Commissioner of Income-tax invoked jurisdiction under section 263, deeming the deduction under section 32AB as improper, rendering the assessment erroneous and prejudicial to the Revenue's interests. The Commissioner issued a show cause notice on December 31, 1991, and made the order under section 263 on February 26, 1992. However, the original assessment order was dated December 16, 1988. The Tribunal's decision highlighted that the Commissioner cannot revise beyond the limitation period of two years from the original order. As the order under section 263 was issued after this period, it was deemed invalid.

3. Application of CIT v. Shri Arbuda Mills Ltd. [1998] 231 ITR 50:
The counsel for the assessee referred to the decision in this case, emphasizing that the Commissioner's powers to revise extend to issues not raised in appeals. However, the Commissioner cannot revise an order beyond the limitation period. The decision underscored that the Commissioner's power to revise does not override the statutory limitation period. The present case aligned with this interpretation, reinforcing the Tribunal's decision to quash the order under section 263.

In conclusion, the High Court upheld the Tribunal's decision, ruling in favor of the assessee and against the Revenue. The Court emphasized the importance of adhering to the statutory limitation period for revisions under section 263, ensuring a balanced application of the law.