CIT Vs Industrial Development Bank of India Ltd (Supreme Court of India)
The Supreme Court considered the Revenue’s appeal against the Bombay High Court judgment dated 07.05.2009, which had dismissed the Revenue’s appeal and affirmed the ITAT’s order holding that the Commissioner’s order under Section 263 of the Income-tax Act, 1961 was barred by limitation. The question before the Court was whether the limitation period for passing an order under Section 263 should be reckoned from the date of the original assessment order or from the date of the reassessment order.
The Court noted that it was undisputed that the Commissioner exercised powers under Section 263 in respect of issues that were not covered by the reassessment proceedings. Accordingly, the issues considered by the Commissioner related back to the original assessment order. The Court held that, in such circumstances, the limitation period commenced from the date of the original assessment order and not from the date of the reassessment order.
The Supreme Court relied upon its decision in Commissioner of Income Tax, Chennai V. Alagendran Finance Ltd. (2007) 7 SCC 215, which held that although reopening an assessment sets aside the previous assessment and starts fresh proceedings, the entire assessment cannot be treated as reopened where the subject matter of reassessment is distinct and different. The Court observed that only where the issues considered by the Commissioner under Section 263 relate to the subject matter of the reassessment would limitation begin from the reassessment order. Where the reassessment concerns distinct and different issues, the relevant date for computing limitation under Section 263 remains the date of the original assessment order.
Applying this principle, the Court found that no error had been committed by either the ITAT or the High Court in holding that the Commissioner’s proceedings under Section 263 were barred by limitation. Consequently, the Supreme Court dismissed the Revenue’s appeal. The pending application(s) also stood disposed of.
FULL TEXT OF THE SUPREME COURT JUDGMENT/ORDER
Feeling aggrieved and dissatisfied with the impugned judgment and order dated 07-05-2009 passed by the High Court of Judicature at Bombay in ITA (L) No. 2115/2007, by which the High Court has dismissed the said appeal preferred by the Revenue and has confirmed the Order passed by the ITAT holding that the Order passed by the Commissioner under Section 263 of the Income Tax Act, 1961 (for short, `the Act) was barred by limitation, the Revenue has preferred the present appeal.
The following question of law arises for consideration of this Court in the present appeal
“i) Whether in the facts and circumstances of the case and in law, the period of limitation for passing order under Section 263 of the Income Tax Act, 1961 has to be reckoned from the date of the original assessment order or from the date of the reassessment order?”
At the outset, it is required to be noted and it is not in dispute that, as such, the Commissioner exercised powers under Section 263 of the Act with respect to the issues which were not covered in the re-assessment proceedings. Therefore, the issues before the Commissioner while exercising the powers under Section 263 of the Act relate back to the original Assessment Order and, therefore, the limitation would start from the original Assessment Order and not from the Re- assessment Order.We are fortified with our view by the decision of this Court in the case of Commissioner of Income Tax, Chennai V. Alagendran Finance Ltd. (2007) 7 SCC 215. As observed and held by this Court in the aforesaid decision, once an Order of Assessment is re-opened, the previous order of assessment will be held to be set aside and the whole proceedings would start afresh but the same would not mean that even when the subject matter of re-assessment is distinct and different, the entire proceedings of assessment would be deemed to have been re-opened. Meaning thereby, only in a case where the issues before the Commissioner at the time of exercising powers under Section 263 of the Act relate to the subject matter of re-assessment, the limitation would start from the date of Re-assessment Order. However, if the subject matter of the re-assessment is distinct and different, in that case the relevant date for the purpose of determination of period of limitation for exercising powers under Section 263 of the Act would be the date of the original Assessment Order.
In view of the above and for the reasons stated hereinabove and in the facts and circumstance of the case narrated hereinabove, no error has been committed by the ITAT or even the High Court in holding the proceedings under Section 263 of the Act by the Commissioner as barred by limitation. Under the circumstances, the present appeal deserves to be dismissed and is accordingly dismissed.
The appeal is dismissed in terms of the signed order.
Pending application(s) shall stand disposed of.
