2015 (9) TMI 1720 - AT - Income Tax

Income Tax Tribunal Invalidates Time-Barred Order, Rules in Favor of Appellant

Crystal Pharmaceuticals Versus CIT Panchkula

Crystal Pharmaceuticals Versus CIT Panchkula - TMI Issues involved:1. Jurisdiction under section 263 of the Income Tax Act.2. Limitation period for passing order under section 263.3. Application of Gross Profit rate in assessment.Issue 1: Jurisdiction under section 263 of the Income Tax Act:The appeal was filed against the order of the Ld. CIT, Panchkula under section 263 of the Income Tax Act 1961. The CIT initiated proceedings against the order passed under section 147/143(3) on the grounds that the assessee maintained two sets of account books with different turnovers. The AO rejected the books under Section 145(3) and applied a higher GP rate on the lower turnover, resulting in under-assessment of income. The CIT held the assessment as erroneous and prejudicial to the interest of revenue, canceling the assessment and directing the AO to consider the higher turnover for computation.Issue 2: Limitation period for passing order under section 263:The appellant argued that the order under section 263 was barred by limitation, as it was passed beyond the prescribed period from the date of the original assessment order under section 143(3). The appellant contended that the error in applying the GP rate on the turnover was in the order dated 26/12/2008, not in the subsequent order under section 147. The appellant relied on the doctrine of merger and the Supreme Court ruling in CIT vs. Alagendran Finance Ltd. The Tribunal held that the order under section 263 was indeed barred by limitation as it was passed well beyond the prescribed period from the original assessment order.Issue 3: Application of Gross Profit rate in assessment:The Tribunal concluded that the error related to the application of the GP rate in the order passed under section 143(3) on 26/12/2008. The subsequent order under section 147 did not address this issue. The Tribunal referred to the Supreme Court ruling in CIT Vs. Alagendran Finance Ltd., emphasizing that the limitation for passing an order under section 263 should be calculated from the date of the original assessment order. As the order under section 263 was passed beyond the limitation period, it was deemed barred by limitation. Consequently, the Tribunal vacated the order under section 263, and the appeal of the assessee was allowed.This detailed analysis of the judgment provides insights into the issues of jurisdiction under section 263, the limitation period for passing orders, and the application of the Gross Profit rate in the assessment process.