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TMI Blog2014 (10) TMI 178X X X X Extracts X X X X X X X X Extracts X X X X ..... (3) sought to be revised was passed – thus, upholding the preliminary legal ground raised by the assessee, the order u/s 263 is to be held as invalid – Decided in favour of assessee. - ITA No. 1048/Hyd/2014 - - - Dated:- 26-9-2014 - Shri P. M. Jagtap And Smt. P. Madhavi Devi,JJ. For the Appellant : Ms. Kanchan Kaushal and Shri Dhanesh Bafna For the Respondent by : Shri P.Soma Sekhar Reddy ORDER Per P. M. Jagtap, Accountant Member: This appeal filed by the assessee is directed against the order of the learned Director of Income-tax (IT TP), Hyderabad dated 27.3.2014, passed under S.263 of the Income Tax Act, 1961. 2. The relevant facts of the case giving rise to this appeal are as follows : The assessee in the present case is a company which is tax non-resident in India. It is incorporated under the laws of United States of America and runs consultancy services in India in respect of various road projects, other public infrastructure projects by entering into agreements with National Highways Authority of India and Public Works Departments of different State Governments. For the purpose of rendering its services, the assessee company has a Perma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he extent of ₹ 8,677,107 as the same had not been admittedly paid on or before the due date of filing of the return. Accordingly, the assessment under S.143(3) read with S.147 was completed by the Assessing Officer vide order dated 23.11.2011 making an addition of ₹ 8,67,107 to the income of the assessee from the projects started after 1.4.2003 and tax at the rate of 40% was levied thereon as per the provisions of S.44DA of the Act. 5. Subsequently, the assessment records in the case of the assessee for the year under consideration, i.e. assessment year 2006-07 came to be examined by the learned Director of Incometax (International Taxation Transfer Pricing) and on such examination, he found that the assessee company had reported income of ₹ 1,81,88,656 as expenses reimbursed and claimed expenditure of ₹ 5,25,33,190 as reimbursable expenses . According to him, the Assessing Officer, however, did not verify the agreement on record to ascertain the exact amount of expenditure incurred, claim made by the assessee and the additional expenditure incurred over and above the budgeted amount etc. He was also of the opinion that the Assessing Officer even did ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the assessee in accordance with law, rendered the assessment order erroneous and prejudicial to the interests of revenue. and the same was set aside by him to be made afresh by the Assessing Officer as per the following directions- 1. In respect of projects started after 01.04.2003 the assessee debited an amount of ₹ 5,25,33,190/0 to P L Account. The Assessing Officer shall examine the allowability of the same by making proper enquiry on the expenditure so claimed. 2. The Assessing Officer shall verify the reimbursable receipts that should have been offered to tax as per the clauses of the agreement. 7. Aggrieved by the order of the learned DIT passed under S.263, assessee has preferred this appeal before the Tribunal. 8. Learned counsel for the assessee, at the time of hearing before us, raised a preliminary legal issue challenging the validity of the impugned order passed by the DIT under S.263 on the ground that the same is barred by limitation. He submitted that the original assessment order in this case under S.143(3) was passed by the Assessing Officer on 31.12.2008, after taking into consideration all the relevant aspects including the expenses rei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee has not been considered in the cited cases. 10. We have considered the rival submissions and also perused the relevant material on record. It is observed that the learned DIT by the impugned order passed under S.263 of the Act, has sought to revise the assessment made in the case of the assessee for the year under consideration, i.e. assessment year 2006-07, on the issues relating to income offered by the assessee on account of expenses reimbursed and deduction claimed on account of reimbursable expenses which, according to him, were not properly verified and examined by the Assessing Officer at any stage. It is pertinent to note that the assessment originally completed under S.143(3) for the year under consideration was subsequently reopened by the Assessing Officer only on the issue of disallowance made under S.43B on account of service tax payable and a perusal of the order passed by the Assessing Officer under S.143(3) read with S.147 clearly shows that this was the solitary issue, which was considered and decided by the Assessing Officer in the said assessment. The assessment completed originally under S.143(3) thus was neither reopened on the issue of income o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tain specified ground, and subsequent to the passing of the order of reassessment , jurisdiction under S.263 is sought to be exercised with reference to the issue which did not form the subject of re-opening of the assessment or order of re-assessment, the period of limitation provided in sub-section (2) of S.263 would commence form the date of the order of assessment and not from the date on which the order reopening the assessment has been passed. 12. At the time of hearing before us, the Learned Departmental Representative has relied on the amendment made to S.147 by the insertion of Explanation 3 by the Finance Act, 2009 with retrospective effect from 1.4.1989, in order to support the impugned order of the DIT on the issue of limitation. It is observed that a similar stand was taken on behalf of the Revenue in the case of ICICI Bank Ltd. (supra), before the Hon'ble Bombay High Court relying on explanation (3) to S.147, as inserted by the Finance Act, 2009 with retrospective effect from 1.4.1989. It was contended that as a result of insertion of the said explanation, once assessment is reopened, the Assessing Officer is entitled to assess or re-assess the income in respec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er of assessment was passed. We must however clarify that the bar of limitation in this case arises because the revisional jurisdiction under Section 263 is sought to be exercised in respect of issues which did not form the subject matter of the reassessment proceedings under Section 143 (3) read with 147. In respect of those issues, limitation would commence with reference to the original order of assessment. If the exercise of the revisional jurisdiction under Section 263 was to be in respect of issues which formed the subject matter of the reassessment after the original assessment was reopened, the commencement of limitation would be with reference to the order of reassessment. The present case does not fall in that category. 13. Hon'ble Bombay High Court in the case of ICICI Bank Ltd. (supra) accordingly proceeded to hold that the order under S.143(3) passed originally cannot stand merged with the order of re-assessment in respect of those issues which did not form the subject matter of re-assessment and Explanation (3) of S.147 will not alter this position. It was held that Explanation (3) only enables the Assessing Officer, once an assessment is reopened, to assess o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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