2016 (1) TMI 868 - HC - Income Tax

High Court clarifies time limit for income tax order revision under Section 263

The High Court affirmed the Tribunal's decision in a case concerning the time limitation for the revision of an income tax order under Section 263 of the ... Validity of revision u/s 263 - order barred by time limitation - Held that:- The issue raised by the Appellant is no longer res-integra as an identical issue has been subject matter of consideration before this Court in the case of CIT v/s ICICI Bank Ltd., reported in (2012 (2) TMI 308 - BOMBAY HIGH COURT ) and CIT v/s Lark Chemicals Ltd., reported in (2013 (9) TMI 959 - BOMBAY HIGH COURT) wherein this Court has held that jurisdiction under Section 263 of the Act can be exercised only within the period of two years from the end of the financial year in which the order of the Assessing Officer was passed dealing with the issue which is being subjected to exercise of powers by Revenue under Section 263 of the Act. Thus Tribunal was correct in law in holding that order u/s 263 of the Income Tax Act, 1961 dated 28th March 2011 was barred by time limitation - Decided against revenue Issues:1. Time limitation for revision of income tax order under Section 263 of the Income Tax Act.2. Interpretation of the two-year time limit under Section 263(2) of the Act.3. Consideration of book profits under Section 115JB of the Act in the revision process.Analysis:Issue 1: The primary issue in this case revolves around the time limitation for the revision of an income tax order under Section 263 of the Income Tax Act. The Tribunal had to determine whether the order dated 28th March 2011, passed by the Commissioner of Income Tax, was within the prescribed time limit for revision.Issue 2: The crux of the matter lies in the interpretation of Section 263(2) of the Act, which sets the time limit for revision. The Respondent argued that the order was time-barred as it was passed beyond two years from the end of the financial year in which the original order was issued. The Tribunal had to assess whether the computation of the two-year period was correctly applied in this case.Issue 3: Another significant aspect of the case was the consideration of book profits under Section 115JB of the Act during the revision process. The Respondent contended that the original order dated 16th March 2005 had determined the book profits, which were not altered in subsequent proceedings. Therefore, the Tribunal had to analyze whether the issue of book profits was a subject matter of consideration in the revision process.The Tribunal, relying on the decision of the Karnataka High Court in a similar case, held that the two-year period for revision should be calculated from the date of the original order passed by the Assessing Officer. In this instance, the issue of book profits under Section 115JB was only addressed in the initial order dated 16th March 2005 and was not revisited in subsequent proceedings. Consequently, the Tribunal allowed the Respondent's Appeal, emphasizing the importance of the original order in determining the time limit for revision.The High Court, citing precedents in cases involving ICICI Bank Ltd. and Lark Chemicals Ltd., affirmed the Tribunal's decision. It reiterated that the jurisdiction under Section 263 of the Act must be exercised within two years from the end of the financial year in which the Assessing Officer's order, related to the issue under revision, was passed. As the question raised was settled by previous court decisions, the Appeal was dismissed, concluding that no substantial question of law arose.