Limitation under s.263(2) starts from assessment order date; later revision beyond period is void and without jurisdiction

SC held the period of limitation under s.263(2) begins from the date of the assessment order, not from a later reassessment order. The Commissioner's revisional action related to the lease equalisation fund, which was not part of the reassessment, was initiated after the prescribed limitation and therefore was without jurisdiction and void. The revisional proceeding was declared a nullity and the taxpayer's appeal was dismissed.

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Issues Involved:
1. Computation of the period of limitation under section 263(2) of the Income-tax Act, 1961.
2. Application of the doctrine of merger in the context of reassessment and revision proceedings.

Detailed Analysis:

1. Computation of the Period of Limitation:

The primary issue is whether the period of limitation under section 263(2) of the Income-tax Act, 1961, should be computed from the date of the original assessment order or the reassessment order. The respondent company filed returns for the assessment years 1994-95, 1995-96, and 1996-97, which were completed on February 27, 1997, May 12, 1997, and March 30, 1998, respectively. The Assessing Officer initiated reassessment proceedings on March 5, 2004, and passed reassessment orders on March 28, 2002, concerning three items: share issue expenses, bad and doubtful debts, and excess depreciation on gas cylinders and goods containers. The Commissioner of Income-tax invoked section 263 to revise the assessment orders regarding the "Lease Equalisation Fund," which was not part of the reassessment proceedings.

The Tribunal held that the proceedings under section 263 were barred by limitation, as the limitation period should be computed from the original assessment orders dated February 27, 1997, May 12, 1997, and March 30, 1998, respectively. The High Court upheld this view, referencing the case of CWT v. A. K. Thanga Pillai [2001] 252 ITR 260 (Mad).

2. Application of the Doctrine of Merger:

The doctrine of merger was argued by the Revenue, suggesting that the reassessment order should merge with the original assessment order, thus extending the limitation period. The Supreme Court, however, found that the doctrine of merger does not apply in this case because the reassessment proceedings did not address the "Lease Equalisation Fund." The relevant part of section 263 was cited, emphasizing that the doctrine of merger applies only to matters considered and decided in an appeal, not to those that were not.

The Supreme Court referenced CIT v. Sun Engineering Works P. Ltd. [1992] 198 ITR 297, which clarified that reassessment proceedings are limited to the income that escaped assessment and do not reopen the entire original assessment. The court also cited Hind Wire Industries Ltd. [1995] 212 ITR 639 and V. Jaganmohan Rao v. CIT and CEPT [1970] 75 ITR 373, reinforcing that reassessment does not allow revisiting matters not related to the escaped income.

The Supreme Court concluded that the limitation period for invoking section 263 should start from the date of the original assessment orders, not the reassessment orders, as the "Lease Equalisation Fund" was not part of the reassessment. The revisional jurisdiction was invoked beyond the limitation period, rendering the proceedings null and void.

Conclusion:

The Supreme Court upheld the Tribunal and High Court's decisions, dismissing the appeal and confirming that the period of limitation under section 263(2) begins from the date of the original assessment order. The doctrine of merger does not apply when the reassessment and original assessment pertain to different subject matters. The appeal was dismissed with costs assessed at Rs. 25,000.

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