1993 (9) TMI 155 - AT - Income Tax

Summary

Issues:
Jurisdiction of the Commissioner of Income-tax under section 263 based on wealth-tax records
Limitation period for invoking section 263 for assessment years 1983-84 and 1984-85

Jurisdiction Issue:
The case involved appeals by the assessee against the Commissioner of Income-tax's order under section 263 for the assessment years 1983-84 and 1984-85. The Commissioner revised the orders of the Assessing Officer due to a lack of nexus between borrowings and investments, and the failure to determine the appropriate section for deduction. The Commissioner relied on wealth-tax records to reach this decision. The learned Chartered Accountant argued that the Commissioner lacked jurisdiction as wealth-tax records are not under the Income-tax Act. The Tribunal agreed, citing the Explanation to section 263(1) and the limited scope of the Commissioner's authority under section 263 to records related to income-tax proceedings. Therefore, the Tribunal held that the Commissioner lacked jurisdiction based on wealth-tax records, leading to the failure of the orders under section 263.

Limitation Issue:
Regarding the limitation period for invoking section 263, the original assessments for the years 1983-84 and 1984-85 were completed on 31-1-1986 and 23-7-1986, respectively. The reassessments did not include the deduction of interest allowed in the original assessments. The Tribunal considered the argument that the power to revise the assessment should be exercised within two years from the end of the financial year in which the original assessment was made. Citing the decision in CIT v. Sun Engg. Works (P.) Ltd., the Tribunal held that matters settled in the original assessment and not revisited in reassessment are final. Therefore, the order under section 263 for the assessment year 1983-84, passed on 20-2-1989, was deemed barred by limitation as the original assessment was completed by 31-1-1986. However, the order for the assessment year 1984-85 was within the time allowed under section 263(2) of the IT Act. Consequently, the Tribunal upheld the contention of the assessee for the first year but rejected it for the second year on the issue of limitation.

In conclusion, the appeals were allowed based on the lack of jurisdiction of the Commissioner of Income-tax to invoke section 263 using wealth-tax records and the limitation period for the assessment year 1983-84.