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2018 (7) TMI 1556 - AT - Income TaxRevision u/s 263 - period of limitation - exemption claimed u/s 10B / 10A as disallowed and also interest expenditure for the reason that there was diversion of funds not for the purpose of business - Held that - When Commissioner invokes his revisionary jurisdiction u/s 263 on issues which are not considered in the reassessment order, the time limit for invoking the revisionary jurisdiction will run from the date of the original assessment order and not from the reassessment order. See M/S. INDIRA INDUSTRIES VERSUS PRINCIPAL COMMISSIONER OF INCOME TAX, CHENNAI 2018 (6) TMI 840 - MADRAS HIGH COURT In the instant case, since the subject matter of revisionary proceedings u/s 263 of the I.T.Act are not covered under the reassessment order dated 17.03.2015, the reassessment order cannot be considered for the time limit purpose u/s 263. Therefore, if the assessment order u/s 143(3) of the I.T.Act dated 26.04.2013 is reckoned, the Commissioner s order dated 27.03.2017 passed u/s 263 was time barred and same cannot be sustained. - Decided in favour of assessee.
Issues Involved:
1. Whether the order passed under section 263 of the Income-tax Act, 1961, was barred by limitation? Detailed Analysis: Issue 1: Limitation of Order under Section 263 The primary issue in this appeal was whether the order passed under section 263 of the Income-tax Act, 1961 ("the Act"), was barred by limitation. Facts of the Case: The assessee, a company engaged in software development services, filed its return of income for the assessment year 2009-2010 on 30.09.2009, declaring a total income of ?77,95,261 and claimed a deduction under section 10B of the Act. The initial intimation under section 143(1) was received on 28.09.2010. A draft assessment order was issued under section 144C, disallowing the deduction under section 10B and interest expenses. The final assessment order was passed on 26.04.2013, which the assessee claimed not to have received. Subsequently, a reassessment notice was issued, and an order under section 143(3) read with section 147 was passed on 27.03.2015, disallowing deductions under sections 10A and 10B. On 09.10.2016, the Commissioner of Income-tax (CIT) initiated proceedings under section 263 to revise the reassessment order dated 27.03.2015. The assessee objected, arguing that the revisionary proceedings were barred by limitation. However, the CIT rejected the objections and passed an order under section 263 on 27.03.2017. Grounds of Appeal: The assessee raised several grounds, primarily arguing that the revision proceedings were barred by limitation. They cited the Supreme Court ruling in Alagendran Finance Ltd and the Bombay High Court ruling in the case of CIT v. ICICI Bank Limited, which held that the period of limitation for section 263 should commence with reference to the original assessment order if the issues did not form the subject matter of the reassessment proceedings. Arguments and Legal Precedents: The assessee's representative submitted that the order under section 263 was barred by limitation, supported by the Supreme Court and Bombay High Court judgments. The Departmental Representative supported the CIT's order. Tribunal's Findings: The Tribunal noted that section 263(2) stipulates that no order under section 263(1) can be made after two years from the end of the financial year in which the order sought to be revised was passed. The assessment order under section 143(3) was passed on 26.04.2013, and the reassessment order under section 143 read with section 147 was passed on 17.03.2015. If the original assessment order dated 26.04.2013 was considered, the period of limitation expired on 31.03.2016. However, if the reassessment order dated 17.03.2015 was considered, the CIT had until 31.03.2017 to pass the order under section 263. The Tribunal examined the facts and legal precedents, including the Supreme Court's decision in Alagendran Finance Ltd. and the Bombay High Court's decision in ICICI Bank Ltd., which held that the limitation period for section 263 should commence from the date of the original assessment order if the issues were not covered in the reassessment proceedings. In this case, the subject matter of the revision under section 263 was not connected to the issues in the reassessment order. Therefore, the period of limitation should commence from the date of the original assessment order, i.e., 26.04.2013, making the CIT's order dated 27.03.2017 time-barred. Conclusion: The Tribunal concluded that since the subject matter of the revisionary proceedings under section 263 was not covered under the reassessment order dated 17.03.2015, the reassessment order could not be considered for the time limit purpose under section 263. Therefore, the CIT's order dated 27.03.2017 was barred by limitation and could not be sustained. The appeal filed by the assessee was allowed. Order: The appeal filed by the assessee is allowed, and the order pronounced on 23rd July 2018.
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