2012 (2) TMI 308 - HC - Income Tax

Limitation for Tax Revision Orders Clarified: Original Assessment Date Key

The Commissioner of Income Tax3 Versus ICICI Bank Ltd.

The High Court held that the invocation of revisional jurisdiction under Section 263 of the Income Tax Act was barred by limitation. The Court emphasized ... Period of Limitation to revise an order by CIT – CIT's order dated 28.03.2003 passed u/s 263 setting aside the Assessment Order dated 26.03.2002 passed u/s 143 r.w.s. 147 - disallowance u/s 36(1)(vii), (viia) and in respect of foreign exchange rate difference - Held that:- Original A.O. allowing such expenses was passed on 10.03.1999 u/s 143(3). However aforesaid issues were not raised & decided either in the first reassessment dated 22.02.2000 or in the second reassessment dated 26.03.2002. Where the jurisdiction u/s 263(1) is sought to be exercised with reference to an issue which is covered by the original order of assessment u/s 143(3) and which does not form the subject matter of the reassessment, as in the present case, limitation must necessarily begin to run from the order u/s 143(3). See Ashoka Buildcon Ltd. Vs. ACIT (2010 - TMI - 76630 - Bombay High Court).Therefore invocation of the jurisdiction u/s 263 held to be barred by limitation by Tribunal u/s 263(2) is upheld. See CIT vs Alagendran Finance Ltd (2007 - TMI - 40388 - Supreme Court) – Decided against the Revenue. Issues involved:1. Invocation of revisional jurisdiction under Section 263 of the Income Tax Act, 1961 by the Commissioner.2. Barred by limitation under Section 263(2) of the Income Tax Act.3. Interpretation of Section 36(1)(vii) amendment and Explanation 3 to Section 147.4. Commencement of the period of limitation for an order under Section 263.Issue 1: Invocation of revisional jurisdiction under Section 263:The Tribunal held that the Commissioner's order under Section 263 for disallowance was barred by limitation. The appeal raised the question of whether the Tribunal was correct in holding the order of the CIT setting aside the Assessment Order was time-barred under Section 263(2).Issue 2: Barred by limitation under Section 263(2):Subsection (2) of Section 263 states that no order shall be made after two years from the end of the financial year in which the order sought to be revised was passed. The key argument was that the order under Section 263 was sought to revise issues decided in the original assessment, and thus, the limitation period should commence from the date of the original assessment.Issue 3: Interpretation of Section 36(1)(vii) amendment and Explanation 3 to Section 147:The submission by the Revenue was based on the amendment to Section 36(1)(vii) and the insertion of Explanation 3 to Section 147. It was argued that the Assessing Officer failed to apply the amended law when reopening the assessment, leading to the Commissioner's order under Section 263.Issue 4: Commencement of the period of limitation for an order under Section 263:The Supreme Court's decision in Commissioner of Income Tax Vs. Alagendran Finance Ltd. clarified that the limitation period for an order under Section 263 starts from the date of the original assessment, not the reassessment. The Division Bench judgment in Ashoka Buildcon Ltd. further emphasized that the original assessment continues to hold for issues not part of the reassessment, affecting the commencement of the limitation period for revisional jurisdiction.In conclusion, the High Court ruled that the invocation of the jurisdiction under Section 263 was indeed barred by limitation. The judgment analyzed the timeline of assessments, the application of amended provisions, and the interpretation of relevant sections to determine the limitation period for revisional jurisdiction. The decision highlighted the importance of the original assessment in cases where issues were not part of reassessments, impacting the commencement of the limitation period for revisional orders.