2007 (4) TMI 397 - AT - Income Tax

Commissioner's Time-Barred Jurisdiction under Income-tax Act

The Tribunal held that the Commissioner's exercise of jurisdiction under section 263 of the Income-tax Act was time-barred as the reassessment order did ... Revision - Of orders prejudicial to interest of revenue Issues Involved:1. Jurisdiction u/s 263 of the Income-tax Act.2. Time-barred proceedings u/s 263.3. Examination of gross profit ratios during assessment proceedings.Summary:1. Jurisdiction u/s 263 of the Income-tax Act:The Commissioner of Income-tax assumed jurisdiction u/s 263 of the Income-tax Act, 1961, to set aside the assessment order dated 28th August 2002, passed by the Assessing Officer. The Commissioner believed the order was erroneous and prejudicial to the interest of the revenue due to the following reasons:- Appropriate addition was not made in respect of additional stock declared by the assessee during the survey.- The gross profit ratios were not adequately examined.- The salary to partners was claimed without provision in the original partnership deed.2. Time-barred proceedings u/s 263:The assessee contended that the proceedings u/s 263 were time-barred as the issue of gross profit was addressed in the original assessment order dated 14th February 2000. The reassessment proceedings were confined to the issues of non-disclosure of income on account of unaccounted stock and the deductibility of salaries paid to partners. The reassessment order dated 28th August 2002 retained the original assessment figure, and the assessee argued that the limitation period for revision should run from the date of the original assessment order, making the Commissioner's order time-barred.3. Examination of gross profit ratios during assessment proceedings:The Commissioner was not satisfied with the assessee's explanations regarding the gross profit ratios and concluded that the sales were not duly examined with reference to sale bills/invoices and ledger accounts. The Commissioner directed the Assessing Officer to re-examine the gross profit issue in accordance with the law.Judgment:The Tribunal upheld the objections raised by the assessee, stating that the reassessment order was a nullity and could not be taken into account for computing the limitation period for the exercise of revisionary powers by the Commissioner. The Tribunal emphasized that the reassessment order was only in form and not in substance, as it retained the originally assessed income. The Tribunal concluded that the time-limit for the Commissioner's powers u/s 263 must be computed with reference to the original assessment order dated 14th February 2000. Consequently, the impugned order passed by the Commissioner was set aside as time-barred.