2018 (11) TMI 432 - AT - Income Tax

Limitation period for rectification starts from original assessment order, not subsequent order

The Income Tax Appellate Tribunal (ITAT) upheld the Commissioner of Income Tax (Appeals) (CIT(A))'s decision that the limitation period for rectification ... Rectification of mistake - proceedings initiated u/s.154 as barred by limitation - rectifying the assessed income after reducing the claim of setting of brought forward unabsorbed depreciation - Held that:- Order which is sought to be amended or rectified has to be an order which would determine the period of limitation. Here, in this case, the order which is sought to be amended cannot be order dated 02.08.2010, because such an order was strictly circumscribed to the direction and giving effect to the ld. CIT(A) order, wherein the issue relating to deferred tax liability and revaluation reserve for the purpose of computation of book profit was neither an issue nor was his direction. If any, such direction or issue would have been there in such an order of the ld. CIT(A) then perhaps limitation could have been reckoned from the order giving effect to such an appellate order dated 02.08.2010. Here, in this case, AO has raked up completely new issue which ostensibly not falling from order dated 02.08.2010. If at all there was any kind of mistake then it could have been in the original assessment order dated 31.10.2003 for which limitation to pass an order has expired on 31.03.2010. Therefore, the impugned order dated 15.10.2010 is clearly barred by limitation and the order of the CIT(A) is not only correct on facts but also in law. - Decided against revenue Issues Involved:1. Whether the proceedings initiated under Section 154 were barred by limitation.2. Whether the Assessing Officer (AO) was correct in considering the limitation period from the order dated 02.08.2010 rather than the original assessment order dated 31.03.2006.Issue-Wise Detailed Analysis:1. Proceedings Initiated Under Section 154 Barred by Limitation:The primary issue contested by the Revenue was whether the proceedings initiated under Section 154 were barred by limitation. The Revenue argued that the limitation period should be reckoned from the order dated 02.08.2010, not the original assessment order dated 31.03.2006. The AO sought to revise the order dated 02.08.2010, which was in respect of giving appeal effect under Section 251/143(3)/154, by adding 'deferred tax' and 'withdrawal from revaluation reserve,' thereby enhancing the book profit under Section 115JB.The assessee contended that the rectification was time-barred as it sought to amend the original assessment order dated 31.03.2006, which was beyond the four-year limitation period provided in Section 154(7). The AO rejected this contention, arguing that the limitation period should apply from the order dated 02.08.2010, supported by the decision of the Hon'ble Apex Court in Hind Wire Industries Ltd. vs. CIT.2. Limitation Period from Order Dated 02.08.2010 vs. Original Assessment Order Dated 31.03.2006:The CIT(A) held that the limitation period should be counted from the date of the original assessment order dated 31.03.2006, not from the order dated 02.08.2010. The CIT(A) observed that the rectification sought by the AO was in respect of the original assessment order and not the order dated 02.08.2010, which was merely an order giving effect to the appellate order and did not address the issues of deferred tax liability and revaluation reserve.The CIT(A) concluded that the limitation period expired on 31.03.2010, making the notice issued on 05.08.2010 and the subsequent order dated 15.10.2010 barred by limitation. The CIT(A) annulled the order passed by the AO under appeal.Analysis by ITAT:The ITAT upheld the CIT(A)'s decision, emphasizing that the order sought to be amended should determine the period of limitation. The ITAT noted that the issue of deferred tax liability and revaluation reserve was not part of the appeal before the CIT(A) or the order dated 02.08.2010. Therefore, the limitation period should be counted from the original assessment order dated 31.03.2006.The ITAT referenced the Hon'ble Supreme Court's decision in Hind Wire Industries Ltd., which clarified that the term 'order sought to be amended' includes both the original and rectified orders. However, the ITAT pointed out that in this case, the AO's rectification did not pertain to any issues addressed in the order dated 02.08.2010 but rather to the original assessment order.The ITAT also cited the Hon'ble Allahabad High Court's decision in Shree Naw Durga Bansal Cold Storage & Ice Factory v. CIT, which supported the view that the limitation period should be determined based on the original order when the rectification sought pertains to issues not addressed in subsequent orders.Conclusion:The ITAT concluded that the order dated 15.10.2010 was barred by limitation, as the rectification sought by the AO pertained to the original assessment order dated 31.03.2006, and the limitation period expired on 31.03.2010. The appeal of the Revenue was dismissed, and the CIT(A)'s order was upheld.