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2011 (4) TMI 1519 - AT - Income TaxValidity of order passed by the Assessing officer u/s 154 r.w.s. 143(1)(a) - time barred mistake - limitation of four years laid down in section 154(7) - HELD THAT -We are of the considered view that the ratio laid down in the case of Hind Wire Industries Ltd v. CIT 1995 (1) TMI 2 - SUPREME COURT remains confined to a case where subject matter of second rectification is the same as the first rectification and it was only in such a situation that the time limit of second rectification proceedings gets extended by the fact of first rectification proceedings. In a situation in which the subject matter of second rectification proceedings is wholly unrelated to the subject matter of first rectification proceedings as is the situation in the present case the time limit for second rectification proceedings remains unaffected by the first rectification proceedings. In view of the these discussion as also bearing in mind entirety of the case we are of the considered view that the impugned rectification order having been passed well after the end of four years from the end of financial year in which intimation u/s 143(1)(a) passed is time barred. In any event by no stretch of logic a rectification of mistake almost after eight years of processing an intimation u/s 143(1)(a) can be said to have been made within a reasonable time limit. We accordingly quash the impugned rectification order.
Issues Involved:
1. Validity and correctness of the rectification order under section 154 of the Income Tax Act, 1961. 2. Applicability of the time limit for rectification under section 154(7) of the Income Tax Act, 1961. Issue-Wise Detailed Analysis: 1. Validity and Correctness of the Rectification Order: The primary issue raised by the assessee was regarding the validity and correctness of the rectification order dated 31st March 2009, passed by the Assessing Officer (AO) under section 154 read with section 143(1)(a) of the Income Tax Act, 1961. The assessee contended that this rectification was time-barred as per the provisions of section 154(7) of the Act. The sequence of events is crucial to understand the issue: - The assessee filed its return of income on 31st October 2001, which was processed and accepted on 8th February 2003. - On 23rd November 2004, a show-cause notice under section 154 was issued to rectify an excess TDS credit, which was accepted by the assessee, and the rectification order was passed on 21st February 2005. - Another show-cause notice was issued on 23rd March 2009, to rectify the loss on the sale of a car claimed as revenue expenditure. The AO relied on the Supreme Court decision in Hind Wire Industries Ltd. v. CIT, which allowed the limitation period for rectification to be reckoned from the date of the latest amended order. Therefore, the AO believed he was within his power to rectify the order up to 31st March 2009. 2. Applicability of Time Limit for Rectification under Section 154(7): The assessee argued that the proposed rectification was time-barred as per section 154(7), which stipulates a four-year period from the end of the financial year in which the original order was passed. The CIT(A) upheld the AO's decision, stating that the rectification was within the permissible time limit. However, the Tribunal analyzed the legal position and relevant case laws: - In CIT vs. Sakseria Cotton Mills Ltd., the Bombay High Court held that the time limit for rectification should be computed with reference to the original order unless the subsequent order dealt with the same issue. - Similarly, in Kothari Industrial Corporation Ltd v. Agricultural Income Tax Officer, the Karnataka High Court concluded that the limitation period for rectification should be calculated from the date of the original order if the subject matter of the subsequent rectification is different. The Tribunal found that the first rectification order dealt with the excess allowance of TDS credit, whereas the second rectification pertained to the loss on the sale of a car, making them unrelated issues. Therefore, the time limit for the second rectification should be calculated from the date of the original order, making the rectification order dated 31st March 2009 time-barred. The Departmental Representative's argument that the limitation under section 154(7) applies only to orders under section 154(1)(a) and not to intimations under section 154(1)(b) was rejected. The Tribunal emphasized that accepting this argument would lead to absurdity, as it would imply that intimations under section 143(1)(a) never receive finality. The Tribunal concluded that the time limit set out in section 154(7) applies to intimation under section 154(1)(b) as well. Even in the absence of a specific time limit in the statute, a reasonable time limit should be applied. The rectification of a mistake almost eight years after processing the intimation under section 143(1)(a) was deemed unreasonable. Conclusion: The Tribunal quashed the impugned rectification order as time-barred, allowing Ground No. 2 raised by the assessee. Consequently, all other grounds of appeal were rendered academic and dismissed. The appeal was allowed in the terms indicated above.
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