2024 (5) TMI 1022 - HC - Income Tax

Reassessment with distinct subject matter doesn't extend Section 263 revision limitation period from original assessment

The Rajasthan HC set aside revision proceedings u/s 263 due to limitation issues. The court held that where reassessment covers distinct subject matter ... Validity of Revision proceedings u/s 263 - period of limitation - period of limitation for passing order u/s 263 reckoned from the date of the original assessment order or from the date of the reassessment order - HELD THAT:- This Court, on a careful perusal of the judgment rendered in the case of Industrial Development Bank of India Ltd. [2023 (6) TMI 1047 - SUPREME COURT] followed by case of Chambal Fertilisers and Chemicals Limited [2024 (2) TMI 1381 - RAJASTHAN HIGH COURT] finds that the reassessment order in its original form the consequential order passed on 25.03.2022 are strictly within the ambit of the escaped assessment of job charges. It is not the case of the petitioner that the original assessment order could not have been within the ambit of Section 263 under the revisionary jurisdiction but the petitioner’s contention is limited to the extent that once the reassessment of the escaped assessment in limited jurisdiction has happened on 25.03.2022, the revision would also have the same limited ambit for the purpose of limitation prescribed in Section 263(2) of the Act of 1961, which is of two years only, for the purpose of job work charges, which would encompass the controversy as regards the impugned notice. This Court is conscious of the fact that the petitioner may have had a case to challenge the original assessment order, but at the same time, has lost the battle in terms of the Law of Limitation as the Hon’ble Apex Court in Commissioner of Income Tax Vs. Industrial Development Bank of India Ltd. [2023 (6) TMI 1047 - SUPREME COURT] in which it has been clearly laid down that if the subject matter of the reassessment is distinct and different, in that case the relevant date for the purpose of determination of the period of limitation for exercising powers u/s 263 would be the date of original assessment order, which makes the revision proceedings to be ex facie illegal on the face of it on count of limitation. Revision proceedings set aside - Decided in favour of assessee. Issues Involved:1. Validity of proceedings under Section 263 of the Income Tax Act, 1961.2. Period of limitation for passing an order under Section 263.3. Distinction between original assessment and reassessment orders.4. Legality of the notice dated 09.01.2024 issued under Section 263.Issue-wise Detailed Analysis:1. Validity of proceedings under Section 263 of the Income Tax Act, 1961:The petitioner challenged the proceedings initiated under Section 263 of the Act, claiming they were time-barred. The petitioner argued that the issues addressed in the notice under Section 263 pertained to the original assessment order and not to the reassessment order. The court noted that the Commissioner's powers under Section 263 are revisional and must be exercised within the prescribed period of limitation.2. Period of limitation for passing an order under Section 263:The petitioner relied on the Supreme Court judgment in Commissioner of Income Tax Vs. Industrial Development Bank of India Ltd., which clarified that the period of limitation for passing an order under Section 263 should be reckoned from the date of the original assessment order if the issues are not covered in the reassessment proceedings. The court observed that the limitation period for exercising powers under Section 263 is two years from the end of the financial year in which the original assessment order was passed, as per Section 263(2) of the Act.3. Distinction between original assessment and reassessment orders:The court emphasized that the subject matter of the reassessment was distinct and different from the original assessment. The reassessment order dated 25.03.2022 only addressed the shortfall in the job charges account amounting to Rs. 2,32,330/-. The court referred to the Supreme Court's ruling, which stated that if the subject matter of reassessment is distinct, the limitation period for Section 263 should relate back to the original assessment order.4. Legality of the notice dated 09.01.2024 issued under Section 263:The court found that the notice dated 09.01.2024 was issued beyond the period of limitation, as it pertained to issues in the original assessment order and not the reassessment order. The court held that the revisional jurisdiction under Section 263 could not be invoked as the limitation period had expired. Consequently, the notice and the entire proceedings pursuant to it were quashed and set aside.Conclusion:The court allowed the writ petition, quashing the notice dated 09.01.2024 and the proceedings under Section 263 of the Income Tax Act, 1961, on the grounds of being barred by limitation. The court emphasized the importance of adhering to the prescribed limitation period when exercising revisional jurisdiction under Section 263.