2022 (6) TMI 1358 - HC - Income Tax

Revision u/s 263 - CIT setting aside the 2nd assessment orders - question of limitation - whether principle of merger of original assessment with the reassessment order does not apply when the issues settled in the original assessment order remain untouched in the reassessment order? - HELD THAT - Limitation to invoke jurisdiction under Section 263 of the Act in respect of the issues that stood resolved in the original assessment ought to be reckoned from the date of original assessment. Tribunal correctly allowed the appeals holding that the assessments are barred by limitation. We find that the order of the Tribunal holding that the exercise of power under Section 263 of the Act by the Commissioner of Income Tax is barred by limitation in terms of the judgment of Alagendran Finance Ltd. 2007 (7) TMI 304 - SUPREME COURT does not warrant any interference. The substantial question of law relating to limitation is answered against the Revenue. Accordingly the appeals stand dismissed. Substantial question of law pertaining to deduction of 10% of cumulative advances under section 36(1)(viia) raised herein is left open for adjudication in appropriate cases.

Summary

Issues: Limitation for invoking jurisdiction under Section 263 of the Income Tax Act.

Analysis:

1. Background: The case involved the question of limitation for invoking jurisdiction under Section 263 of the Income Tax Act, 1961. The assessee, a banking company, filed its Return of Income for certain assessment years, which were subsequently selected for scrutiny and assessments were completed. The Assessing Officer later reopened the assessments for those years.

2. Reassessment and Show Cause Notices: The Assessing Officer reopened the assessments for the relevant years and passed orders under Section 143(3) read with Section 147 of the Act. Subsequently, the Commissioner of Income Tax issued show cause notices under Section 263 of the Act and set aside the 2nd assessment orders for those years.

3. Tribunal's Decision: The assessee challenged the orders passed under Section 263 before the Income Tax Appellate Tribunal. The Tribunal considered the question of limitation and held that the principle of merger of original assessment with the reassessment order does not apply when the issues settled in the original assessment remain untouched in the reassessment order. It ruled that the limitation to invoke jurisdiction under Section 263 in such cases should be reckoned from the date of the original assessment.

4. Supreme Court Precedent: The Tribunal's decision was based on the judgment of the Hon'ble Supreme Court in the case of CIT v. Alagendran Finance Ltd., where it was held that the period of limitation for invoking jurisdiction under Section 263 begins from the date of the original assessment when issues settled in the original assessment order remain untouched in the reassessment order.

5. High Court's Decision: The High Court upheld the Tribunal's decision, stating that the exercise of power under Section 263 by the Commissioner of Income Tax was barred by limitation as per the Supreme Court precedent. The Court found no reason to interfere with the Tribunal's order and dismissed the appeals filed by the Revenue.

6. Conclusion: The High Court answered the substantial question of law relating to limitation against the Revenue and dismissed the appeals. However, it left open for adjudication the substantial question of law pertaining to the deduction of 10% of cumulative advances under section 36(1)(viia) in appropriate cases, with no costs awarded.

This detailed analysis of the judgment provides a comprehensive overview of the issues involved and the reasoning behind the High Court's decision.