Time limit for rectification under Income-tax Act starts from reassessment order, not earlier rectification order.

The High Court held that the time-limit for rectification under section 154 of the Income-tax Act should be calculated from the date of the reassessment order, not from the earlier rectification order. The Court emphasized that the reassessment order supersedes the original assessment, and the limitation period should commence from the reassessment date. The Court referenced established legal principles from Supreme Court decisions on reassessment proceedings, highlighting that reassessment involves a fresh assessment considering the total income or turnover.

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Issues involved:
The issue involves determining the time-limit for rectification u/s 154 of the Income-tax Act, 1961, in a case where there has been an original assessment, an order of rectification, and subsequently a reassessment u/s 147.

Facts:
The assessee, a company, had an assessment for the year 1963-64 completed under section 143(3) on March 23, 1965. A mistake in the calculation of the rebate under section 84 was pointed out by the assessee, leading to an order of rectification u/s 154 on February 25, 1967. Subsequently, the assessment was reopened u/s 147(a), and the reassessment was completed on March 15, 1973. Another order u/s 154 dated June 29, 1974, further reduced the quantum of rebate under section 84.

Appellate Proceedings:
The Appellate Assistant Commissioner held that the order u/s 154 made on June 29, 1974, was time-barred, as subsequent orders after February 25, 1967, could not be considered for limitation. The Revenue appealed to the Tribunal, arguing that the order u/s 154 rectified the assessment order u/s 147 and was within the limitation period. The Tribunal disagreed, stating that the order was barred by time.

Legal Principles:
The High Court referred to established legal principles from Supreme Court decisions regarding reassessment proceedings. It was noted that once an assessment is reopened, the initial order stands cancelled, and the reassessment order replaces the original assessment. The Court cited various cases to support the principle that reassessment involves a fresh assessment, considering the total income or turnover, not just the escaped income.

Decision:
The High Court held that the time-limit for rectification u/s 154 should be computed from the date of the reassessment order, not from the earlier rectification order. The Court emphasized that the reassessment order replaces the original assessment, and the period of limitation should start from the reassessment date. The Court also mentioned that similar views were taken by other High Courts.

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