Case Note & Summary
The appeal by the Revenue arose from an order of the Income Tax Appellate Tribunal (ITAT) dated 24 September 2008 for Assessment Year 1996-97. The Tribunal had held that the invocation of revisional jurisdiction under Section 263 of the Income Tax Act, 1961 by the Commissioner on 28 March 2003 was barred by limitation. The facts were that on 24 November 1997, an intimation was issued under Section 143(1)(a). An order under Section 154 was passed on 30 March 1998 to give credit for advance tax. An order of assessment was passed on 10 March 1999 under Section 143(3), allowing deductions claimed under clauses (vii) and (viia) of Section 36(1) and foreign exchange rate difference. A notice under Section 148 was issued on 21 October 1999, and the first reassessment was carried out on 22 February 2000 for reworking a deduction under Section 80M. An appeal against the order under Section 143(3) was decided by the Commissioner (Appeals) on 28 March 2001. A second notice under Section 148 was issued on 28 March 2001, and a second reassessment order was passed on 26 March 2002 for reworking the deduction under Section 36(1)(viii). This order was set aside by the Tribunal on 27 August 2010, and an appeal was pending. On 28 March 2003, the Commissioner passed an order under Section 263 for disallowance under Section 36(1)(vii), (viia), and in respect of foreign exchange rate difference. The legal issue was whether the Commissioner's order under Section 263 was within the limitation period prescribed under Section 263(2). The Revenue argued that the limitation should be computed from the date of the reassessment order (26 March 2002), while the assessee contended that the relevant order was the original assessment order dated 10 March 1999. The court analyzed the provisions of Section 263(2), which provides that no order under Section 263 shall be made after the expiry of two years from the end of the financial year in which the order sought to be revised was passed. The court noted that the order sought to be revised was the original assessment order under Section 143(3) dated 10 March 1999, and the Commissioner's order was passed on 28 March 2003, which was beyond the two-year period from the end of the financial year 1998-99 (i.e., beyond 31 March 2001). The court held that the subsequent reassessment orders did not extend the limitation period for revising the original order. Therefore, the Tribunal was correct in holding that the Commissioner's order was barred by limitation. The appeal was dismissed.
Headnote
A) Income Tax - Revision - Limitation - Section 263(2) Income Tax Act, 1961 - The Commissioner's revisional power under Section 263 must be exercised within two years from the end of the financial year in which the order sought to be revised was passed. In this case, the original assessment order under Section 143(3) was passed on 10 March 1999, and the Commissioner's order under Section 263 was passed on 28 March 2003, which is beyond the limitation period. The subsequent reassessment orders did not extend the limitation period for revising the original order. Held that the Tribunal correctly held the revision order as barred by limitation (Paras 1-3).
Issue of Consideration
Whether the Tribunal was right in holding that the order of the Commissioner dated 28.03.2003 passed under Section 263 of the Income Tax Act, 1961 setting aside the Assessment Order dated 26.03.2002 passed under Section 143 read with Section 147 of the Income Tax Act is barred by limitation under Section 263(2) of the Income Tax Act?
Final Decision
The appeal is dismissed. The Tribunal's order holding that the Commissioner's order under Section 263 was barred by limitation is upheld.
Law Points
- Limitation for revision under Section 263 of Income Tax Act
- 1961
- commences from the end of the financial year in which the order sought to be revised was passed
- not from the date of any subsequent reassessment order
