2016 (6) TMI 784 - AT - Income Tax

Revision u/s 263 - period of limitation - allowing credit for MAT as per section 115JAA which according to him was wrongly allowed by the Assessing Officer in the absence of any actual payment made by the assessee towards MAT - period of limitation - Held that - Referring to the decision of the Hon ble Supreme Court in the case of Alegendran Finance Ltd. (2007 (7) TMI 304 - SUPREME Court ) and having regard to the facts of the case we are of the view that the period of limitation for A.Y. 2007-08 has to be reckoned from the date of order passed by the Assessing Officer under section 143(3) read with section 263 i.e. 08.12.2011 and not from the date of order passed by the Assessing Officer under section 143(3) read with sections 263 and 251 i.e. 29.11.2012 as the issue relating to the MAT credit on which the assessment for A.Y. 2007-08 was sought to be revised by the ld. CIT was decided in principle by the Assessing Officer vide his order dated 08.12.2011 passed under section 143(3) read with section 263 and since the impugned order under section 263 passed by the ld. CIT for A.Y. 2007-08 on 30.03.2015 was beyond the period of two years from the end of the financial year in which the order dated 08.12.2011 sought to be revised was passed the same is barred by limitation as provided in section 263(2) of the Act. The said order passed by the ld. CIT under section 263 for A.Y. 2007-08 is accordingly cancelled treating the same as invalid and the appeal of the assessee for A.Y. 2007-08 is allowed. As a result of our decision rendered above cancelling the order passed by the ld. CIT under section 263 for A.Y. 2007-08 and restoring the order of the Assessing Officer for that year whereby he allowed the MAT credit to the assessee the orders passed by the Assessing Officer for the subsequent three years i.e. A.Ys. 2008-09 2009-10 and 2010-11 allowing adjustment for such MAT credit cannot be said to have any error as alleged by the ld. CIT called for revision under section 263 and this consequential position is not disputed even by the ld. D.R - Decided in favour of assessee

1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered in this judgment are:

Whether the order passed by the Commissioner of Income Tax (CIT) under Section 263 of the Income Tax Act, 1961 for the assessment year (A.Y.) 2007-08 is barred by limitation.
Whether the MAT credit allowed for A.Y. 2007-08 and carried forward to subsequent years was erroneous and prejudicial to the interest of the revenue.
Whether the orders for the subsequent assessment years (2008-09, 2009-10, and 2010-11) allowing MAT credit adjustments were valid.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Limitation of CIT's Order under Section 263

Relevant Legal Framework and Precedents: Section 263(2) of the Income Tax Act stipulates a two-year limitation period from the end of the financial year in which the order sought to be revised was passed. The precedents considered include the Supreme Court decision in CIT vs. Alagendran Finance Ltd., which discusses the scope of reassessment proceedings and the doctrine of merger.
Court's Interpretation and Reasoning: The Tribunal noted that the original MAT credit was allowed by the Assessing Officer in the order dated 08.12.2011. The CIT's order under Section 263 was passed on 30.03.2015, beyond the two-year limitation period from the end of the financial year 2011-12.
Key Evidence and Findings: The Tribunal found that the MAT credit issue was decided in principle in the order dated 08.12.2011, and the subsequent order dated 29.11.2012 merely increased the MAT credit by the amount of surcharge and education cess.
Application of Law to Facts: The Tribunal applied the limitation period from the date of the original order (08.12.2011) rather than the order giving effect to the appellate decision (29.11.2012).
Treatment of Competing Arguments: The Tribunal rejected the Department's argument that the limitation should be calculated from the date of the order passed on 29.11.2012.
Conclusions: The Tribunal concluded that the CIT's order under Section 263 for A.Y. 2007-08 was barred by limitation and thus invalid.

Issue 2: Validity of MAT Credit for A.Y. 2007-08

Relevant Legal Framework and Precedents: Section 115JAA of the Income Tax Act governs the allowance and carry-forward of MAT credit. The Tribunal considered whether actual payment of MAT was a prerequisite for credit allowance.
Court's Interpretation and Reasoning: The Tribunal found that the MAT credit was correctly allowed by the Assessing Officer in the original order dated 08.12.2011.
Key Evidence and Findings: The Tribunal noted that the MAT credit was allowed based on the provisions of Section 115JAA, and the CIT's revision was based on the absence of actual payment.
Application of Law to Facts: The Tribunal held that the absence of actual payment did not invalidate the MAT credit allowance.
Treatment of Competing Arguments: The Tribunal considered the Department's argument regarding the necessity of actual payment but found it unpersuasive.
Conclusions: The Tribunal restored the original order of the Assessing Officer, allowing the MAT credit for A.Y. 2007-08.

Issue 3: Validity of Orders for A.Ys. 2008-09, 2009-10, and 2010-11

Relevant Legal Framework and Precedents: The Tribunal considered the impact of the MAT credit allowance on subsequent years' assessments.
Court's Interpretation and Reasoning: The Tribunal found that the orders for subsequent years were not erroneous as the MAT credit was validly carried forward from A.Y. 2007-08.
Key Evidence and Findings: The Tribunal noted that the MAT credit adjustments were consistent with the original allowance.
Application of Law to Facts: The Tribunal applied the principle that the original MAT credit allowance was valid, thereby validating the subsequent years' adjustments.
Treatment of Competing Arguments: The Tribunal found no merit in the Department's argument that the subsequent years' orders were prejudicial to the revenue.
Conclusions: The Tribunal set aside the CIT's orders under Section 263 for A.Ys. 2008-09, 2009-10, and 2010-11, restoring the Assessing Officer's orders.

3. SIGNIFICANT HOLDINGS

Preserve Verbatim Quotes of Crucial Legal Reasoning: "The period of limitation for A.Y. 2007-08 has to be reckoned from the date of order passed by the Assessing Officer under section 143(3) read with section 263, i.e. 08.12.2011."
Core Principles Established: The limitation period for revising an assessment order under Section 263 begins from the date of the original order if the issue was decided in principle in that order.
Final Determinations on Each Issue: The CIT's order for A.Y. 2007-08 was invalid due to being time-barred. The MAT credit for A.Y. 2007-08 was validly allowed and carried forward to subsequent years, rendering the CIT's orders for A.Ys. 2008-09, 2009-10, and 2010-11 invalid.

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