2011 (6) TMI 772 - AT - Income Tax

Summary

Issues Involved:
1. Validity of the order passed u/s 263 of the Act.
2. Limitation period for issuing notice u/s 263 of the Act.
3. Doctrine of merger in the context of reassessment proceedings.

Summary:

Validity of the order passed u/s 263 of the Act:
The appeal arises from an order passed u/s 263 of the Act by the Commissioner of Income Tax (Central-1), Kolkata, which set aside the order passed u/s 147/143 of the Act dated 05.12.2008. The Commissioner found the order to be erroneous and prejudicial to the interest of revenue, directing the Assessing Officer to complete it as per law after affording proper opportunity of being heard to the assessee.

Limitation period for issuing notice u/s 263 of the Act:
The assessee argued that the notice issued u/s 263 was barred by limitation as per section 263(2) of the Act. The original assessment was made u/s 143(3) on 20.03.2006, and the reassessment order was passed u/s 148/143(3) on 05.12.2008. The assessee contended that the issues raised in the notice u/s 263 were not part of the reassessment proceedings and thus, the limitation period should be considered from the date of the original assessment order.

Doctrine of merger in the context of reassessment proceedings:
The Tribunal observed that the reassessment order dated 05.12.2008 did not pertain to the issues mentioned in the notice issued u/s 263. The doctrine of merger does not apply when the subject matter of reassessment is distinct and different from the original assessment. The Tribunal relied on the decision of the Hon'ble Apex Court in the case of CIT vs. Alagendran Finance Ltd. [293 ITR 1], which held that the period of limitation commenced from the dates of the original assessments and not from the reassessments since the latter had not anything to do with the distinct issues.

Conclusion:
The Tribunal concluded that the original assessment order dated 20.03.2006 did not merge with the reassessment order dated 05.12.2008 for the issues mentioned in the notice u/s 263. Therefore, the notice issued u/s 263 dated 08.09.2010 was barred by limitation. Consequently, the impugned order of the Commissioner was quashed, and the appeal of the assessee was allowed.

ORDER PRONOUNCED IN THE OPEN COURT ON 24.06.2011.