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.
