Limitation for revision by Commissioner: time runs from the assessment that produced the issue, not a separate reassessment.

The note addresses limitation for commissioner revisions under the income tax revision power, clarifying that the two year limitation period is to be reckoned from the assessment order that gives rise to the subject matter of revision. Where a reassessment was made for distinct issues and the revision challenge concerns matters originating in the original assessment (for example allowance of standard deduction), the limitation period does not run from the reassessment order but from the original assessment order; consequently revision proceedings directed solely at original assessment issues are time barred if beyond that period.

---

---

Issues: (i) Whether the orders passed under Section 263 of the Income-tax Act, 1961 are barred by limitation where the issues for which revision is proposed relate to the original assessment order and not to the subject matter of the re-assessment.

Analysis: The limitation for exercising power under Section 263 is two years from the end of the financial year in which the order sought to be revised was passed. Where the Commissioner seeks to revise issues that do not arise from the re-assessment proceedings but relate to the original assessment order, the period of limitation is to be reckoned from the date of the original assessment order and not from the date of the re-assessment order. The re-assessment in the present matter was made for distinct reasons on which no additions were made; the revision under Section 263 challenged allowance of standard deduction under Section 24(1) which was not the subject matter of the re-assessment. Reliance is placed on the principle that only where the subject matter of revision relates to issues covered by re-assessment will the limitation run from the re-assessment order; otherwise it relates back to the original assessment order.

Conclusion: The orders under Section 263 are time barred and are quashed. The appeals are allowed in favour of the assessee.

---