2023 (6) TMI 1047 - SC - Income Tax

Revision u/s 263 - period of limitation for passing order - reckoned from the date of the original assessment order or from the date of the reassessment order? - ITAT and High Court held that proceedings u/s 263 by the Commissioner as barred by limitation - HELD THAT - The issues before the Commissioner while exercising the powers u/s 263 relate back to the original Assessment Order and therefore the limitation would start from the original Assessment Order and not from the Re-assessment Order. We are fortified with our view by the decision of Alagendran Finance Ltd. 2007 (7) TMI 304 - SUPREME COURT as held once an Order of Assessment is re-opened the previous order of assessment will be held to be set aside and the whole proceedings would start afresh but the same would not mean that even when the subject matter of re-assessment is distinct and different the entire proceedings of assessment would be deemed to have been re-opened. Meaning thereby only in a case where the issues before the Commissioner at the time of exercising powers under Section 263 of the Act relate to the subject matter of re-assessment the limitation would start from the date of Re-assessment Order. If the subject matter of the re-assessment is distinct and different in that case the relevant date for the purpose of determination of period of limitation for exercising powers under Section 263 of the Act would be the date of the original Assessment Order. Thus no error has been committed by the ITAT or even the High Court in holding the proceedings under Section 263 of the Act by the Commissioner as barred by limitation.

Summary

Issues:
The judgment deals with the issue of the period of limitation for passing an order under Section 263 of the Income Tax Act, 1961.

The Supreme Court considered whether the limitation for passing an order under Section 263 of the Income Tax Act, 1961 should be calculated from the date of the original assessment order or from the date of the reassessment order. The Court noted that the Commissioner exercised powers under Section 263 with respect to issues not covered in the reassessment proceedings. Therefore, the issues before the Commissioner related back to the original assessment order, and the limitation would start from the original assessment order, not the reassessment order. The Court cited the decision in Commissioner of Income Tax, Chennai v. Alagendran Finance Ltd. (2007) 7 SCC 215 to support this view. The Court emphasized that when an assessment order is reopened, the previous order is set aside, and the proceedings start afresh. However, this does not mean that the entire assessment proceedings are reopened when the subject matter of reassessment is distinct and different. The relevant date for determining the limitation for exercising powers under Section 263 would be the date of the original assessment order if the subject matter of reassessment is distinct and different.

In conclusion, the Supreme Court found that the proceedings under Section 263 of the Income Tax Act by the Commissioner were rightly held as barred by limitation. The Court upheld the decisions of the ITAT and the High Court in dismissing the appeal. Therefore, the Court dismissed the present appeal based on the facts and circumstances of the case and the legal principles discussed.