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2014 (10) TMI 178 - AT - Income TaxRevision u/s 263 Bar of limitation - Income offered on expenses re-imbursed and deduction on reimbursable expenses Held that - The assessment originally completed under S.143(3) for the year was subsequently reopened by the AO only on the issue of disallowance made u/s 43B on account of service tax payable - Following the decision in Commissioner Of Income-Tax Versus Alagendran Finance Ltd. 2007 (7) TMI 304 - SUPREME Court - the period of limitation as provided u/s 263(2) has to be reckoned from the date of the original assessment passed u/s 143(3) and not from the date of re-assessment passed under S.143(3) read with S.147 of the Act, as the issues on which assessment was sought to be revised were not the subject matter of re-assessment made under S.143(3) read with S.147 - the order passed by the DIT u/s 263 revising the assessment passed under S.143(3) on 31.12.2008 is barred by limitation, having been passed after a period of two years form the end of the financial year in which the order u/s 143(3) sought to be revised was passed thus, upholding the preliminary legal ground raised by the assessee, the order u/s 263 is to be held as invalid Decided in favour of assessee.
Issues Involved:
1. Validity of the order passed under Section 263 of the Income Tax Act, 1961. 2. Limitation period for revising the assessment order under Section 263. 3. Scope of reassessment proceedings under Section 147 and its impact on limitation. Detailed Analysis: 1. Validity of the order passed under Section 263 of the Income Tax Act, 1961: The appeal was filed by the assessee against the order of the Director of Income-tax (International Taxation & Transfer Pricing), Hyderabad, dated 27.3.2014, passed under Section 263 of the Income Tax Act, 1961. The learned DIT found that the Assessing Officer did not verify the agreement on record to ascertain the exact amount of expenditure incurred and the additional expenditure over the budgeted amount, which led to the issuance of a notice under Section 263. The DIT held that the assessment order was erroneous and prejudicial to the interests of the Revenue due to the lack of proper verification and examination by the Assessing Officer. 2. Limitation period for revising the assessment order under Section 263: The assessee challenged the validity of the order passed under Section 263 on the ground that it was barred by limitation. The original assessment order under Section 143(3) was passed on 31.12.2008, and the reassessment under Section 143(3) read with Section 147 was completed on 23.11.2011. The assessee contended that the period of limitation should be reckoned from the date of the original assessment order, not the reassessment order. The Tribunal referred to several judicial pronouncements, including the Supreme Court's decision in CIT v. Alagendran Finance Ltd. and the Bombay High Court's decision in Ashoka Buildcon Ltd. v. ACIT, which supported the assessee's contention that the limitation period should commence from the date of the original assessment order. 3. Scope of reassessment proceedings under Section 147 and its impact on limitation: The Tribunal noted that the reassessment was initiated only on the issue of disallowance under Section 43B on account of service tax payable, and the reassessment order did not consider the issues of 'expenses reimbursed' and 'reimbursable expenses.' The Tribunal held that the period of limitation for revising the assessment under Section 263 should be reckoned from the date of the original assessment order, as the issues on which the assessment was sought to be revised were not the subject matter of the reassessment. The Tribunal also referred to the Bombay High Court's decision in ICICI Bank Ltd., which clarified that Explanation (3) to Section 147 does not alter the limitation period for revising the assessment under Section 263. Conclusion: The Tribunal concluded that the impugned order passed by the DIT under Section 263 was barred by limitation, as it was passed after the expiry of two years from the end of the financial year in which the original assessment order was passed. The Tribunal canceled the order under Section 263, treating it as invalid in the eyes of law, and allowed the appeal of the assessee. Consequently, the Tribunal did not address the other grounds raised by the assessee on merits, as they had become academic in nature due to the decision on the preliminary legal ground. The order was pronounced on 26th September 2014.
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