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2023 (7) TMI 1524 - HC - Income TaxRevision u/s 263 - exercise of jurisdiction under the said provision was done for the second time - period of limitation - HELD THAT - Tribunal accepted the plea raised by the assessee as regards the aspect relating to the limitation, it examined the merits of the matter and has recorded a factual finding that the issue on which the PCIT proposed the revision of the order framed u/s 143(3) read with Section 263 dated 23.12.2019, issue which was directed by the PCIT in order u/s 263 dated 23.03.2022 was not the subject matter of revisionary proceedings in the first round. Tribunal came to the conclusion that the period of limitation has to run from the date of assessment as framed under Section 143(3) dated 26.12.2016, that is at the end of the financial year, 31.03.2017. Therefore, it held that the exercise of jurisdiction u/s 263 of the Act is hopelessly barred by limitation. Tribunal also took note of the decision of ARBUDA MILLS 1996 (1) TMI 11 - SUPREME COURT wherein it was held that jurisdiction under Section 263(1) of the Act is sought to be exercised with reference to an issue which is covered by the original order of assessment under Section 143(3) of the Act, which does not form the subject matter of the reassessment. The limitation was necessarily begun to run from the date of order passed under Section 143(3) of the Act. Reference was also made to the decision of ALAGENDRAN FINANCE LIMITED 2007 (7) TMI 304 - SUPREME COURT Thus, we find that the order passed by the learned Tribunal had been passed taking note of the correct legal position and referring to the relevant decision and the said order does not call for any interference. Decided against revenue.
Issues:
1. Jurisdiction under Section 263 of the Income Tax Act, 1961 2. Limitation period for exercising jurisdiction under Section 263 3. Doctrine of merger in reassessment and assessment proceedings Jurisdiction under Section 263: The High Court considered the appeal filed by the revenue challenging the order of the Income Tax Appellate Tribunal. The Tribunal had quashed the order under Section 263 of the Income Tax Act, 1961, passed by the Principal Commissioner of Income Tax. The Tribunal noted that the PCIT had exercised jurisdiction under Section 263 twice, initially for alleged non-verification of broker expenditure and interest-free advances given by the assessee. The Assessing Officer then completed the assessment under Section 143(3) but the PCIT again issued a show-cause notice for further scrutiny. The assessee raised concerns about the PCIT's power to make additional additions after the earlier order. The Tribunal found that the PCIT's exercise of power under Section 263 was barred by limitation and referred to relevant legal precedents to support its decision. Limitation period for exercising jurisdiction under Section 263: The High Court analyzed the issue of limitation in the exercise of jurisdiction under Section 263. The Tribunal considered the date of assessment under Section 143(3) as the starting point for the limitation period, holding that the PCIT's action was time-barred. The Tribunal relied on the decision of the Hon'ble Supreme Court in CIT Vs. ARBUDA MILLS and CIT VS.ALAGENDRAN FINANCE LIMITED to support its conclusion. The Court agreed with the Tribunal's interpretation of the limitation period and dismissed the appeal, emphasizing that the exercise of jurisdiction under Section 263 was indeed barred by limitation. Doctrine of merger in reassessment and assessment proceedings: The High Court addressed the doctrine of merger in the context of reassessment and assessment proceedings. The Tribunal considered whether the subject matter of the reassessment and assessment were the same, invoking the doctrine of merger. The Tribunal concluded that the PCIT's exercise of power under Section 263 for the second time was unjustified, especially since the issues in the subsequent proceedings were not part of the initial revisionary proceedings. By referring to legal principles and relevant decisions, the Tribunal upheld the doctrine of merger and found the PCIT's actions to be legally untenable. The Court upheld the Tribunal's decision and dismissed the appeal, answering the substantial questions of law against the revenue. In conclusion, the High Court upheld the Tribunal's decision, emphasizing the correct legal position regarding the jurisdiction under Section 263, the limitation period for exercising such jurisdiction, and the application of the doctrine of merger in reassessment and assessment proceedings. The Court dismissed the appeal and the connected application, answering the substantial questions of law against the revenue.
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