REVISION BY THE COMMISSIONER

SECTION 263 – REVISION OF ORDERS PREJUDICIAL TO REVENUE

1263. Orders under sub-section (2), inserted by Taxation Laws (Amendment) Act, 1984, are to be passed within two years of the date of orders sought to be revised in cases where order sought to be revised was passed before October 1, 1984

As a consequence of the amendment of section 263, by section 47 of the Taxation Laws (Amendment) Act, 1984, the limitation for passing an order under section 263 will, in view of general principles of interpretation of statutes, stand extended in cases where the period of limitation originally laid down in that section had not expired before October 1, 1984. However, with a view to avoiding controversy and litigation in the matter. It is desirable that orders under section 263 are passed, as far as possible, within two years of the date of the order sought to be revised in cases where the order sought to be revised was passed before October 1, 1984.

Circular : No. 402 [F. No. 279/146/84-ITJ], dated 1-12-1984.

JUDICIAL ANALYSIS

EXPLAINED IN -The above circular was referred to in B. Vijayakumar v. IAC [1987] 20 ITD 254, with the following observations :

“7. . . . In our opinion the assessees’ contention that the revision orders passed by the Commissioner were barred by time is not correct in view of the clear provisions of law contained in the amendment to section 25(3) and which has been clearly eluci­dated by the Board in the first part of Circular No. 402, dated 1-12-1984. . .

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8. In these cases the assessment orders were passed by the WTO on 5-11-1983 and 25-10-1983 and, therefore, the old law of limita­tion, prior to amendment would expire on 4-11-1985 and 24-10-1985. Before these dates, the amendment had come into force with effect from 1-10-1984 and thereby the time limit for revision had been extended and, therefore, the revisionary orders passed by the Commissioner on 16-12-1985, 30-12-1985 and 7-1-1986 as the case may be, are clearly within the extended time limit provided by the amended law. Accordingly, they are valid and in accord­ance with law.” (p. 258)

EXPLAINED IN -The above circular was referred to and applied in Miss Shikha Gupta v. ITO [1987] 23 ITD 546 (Delhi). The Court observed :

“9. It is not in dispute that limitation in the case of Miss Shikha Gupta had struck proceedings on 30th April, 1984 for the assessment year 1981-82. Similarly, in the case of Miss Savita Bansal for the assessment years 1979-80 to 1981-82 action under section 263 had become barred by 30th April, 1984. In the case of Miss Sahil Bansal for the assessment years 1979-80 to 1981-82 action under section 263(2) had become barred on 2-5-1984. Simi­larly, for the assessment year 1982-83 in the case of Sahil Bansal and Savita Bansal the action under section 263 was barred on 29-9-1984. All these dates fall prior to 1-10-1984 when the substituted present sub-section (2) which provides that no order shall be made under sub-section (1) after the expiry of two years from the end of the financial year in which the order sought to be revised was passed, was brought on the statute book by the Taxation Laws (Amendment) Act, 1984 w.e.f. 1-10-1984 for the following :—

“(2) No order shall be made under sub-section (2) :—

( a)   to revise an order or assessment made under section 147, or

( b)   after the expiry of two years from the date of order sought to be revised.”

Thus, it is very clear that the CIT on the dates, he issued notice under section 263 to the assessee to show cause why an order under section 263 need not be passed was acting without lawful authority. The show cause notice issued and the subsequent proceedings culminating into an order under section 263 dated 27-3-1985 in each case was therefore without jurisdiction and ab initio void. It was non est in law. We hold it so.

10. The CBDT in the circular to which our attention has been invited has made this position abundantly clear. So much so, that the Board has even cautioned the officers, “with a view to avoid­ing controversy and litigation in the matter, it is desirable that order under section 263 are passed, as far as possible, within two years of the date of the order sought to be revised in cases where the order sought to be revised was passed before October 1, 1984.” Thus, there cannot be any manner of doubt that the impugned orders passed by the ld. CIT(A) are without juris­diction. We have held them to be non est in law. However, even an order made in this manner unless challenged and removed from record can have its implications. We, therefore, cancel orders under section 263 made in each case. . . .” (pp. 550 – 551)

EXPLAINED IN -The above circular was referred to in Anand Sales Corpora­tion v. ITO [1989] Taxation 94(4) – 46. The Tribunal observed :

“On the legality of the jurisdiction, we feel that there is considerable merit in the argument advanced by the assessee. Though the words used are for removal of doubts in the Explana­tion to section 263, but the same being made effective only from 1-10-1984, it would be a difficult proposition to hold that it would enlarge the scope of section 263 to a period prior to 1-10-1984. The Courts have always held that all beneficial additions or explanations, intended to clarify the intentions of the sec­tion only could be held to be operative retrospectively, while any such explanation intended to enlarge the scope of authority of the administrator should always be operative prospectively. Perhaps the conclusion so arrived at was due to the fact of what could not have been done earlier due to absence of any enactment, could not be said to be permissible by a subsequent explanation even stating therein that it was only for clarification. The Board had issued a Circular No. 402, dated 1-11-1984, wherein also it was opined by them that “However, with a view to avoiding controversy and litigation in the matter, it is desirable that orders under section 263 of the Income-tax Act, 1961, are passed, as far as possible, within two years of the date of the order sought to be revised in cases where the order sought to be re­vised was passed before 1st October, 1984.” This also goes to indicate that even the Board seems doubtful as the retrospective application of the Explanation. . . .” (p. 49)

EXPLAINED IN – The above circular was explained in Gujarat Forging (P.) Ltd. v. ITO [1996] 56 ITD 208 (Ahd. – Trib.), with the following observa­tions :

“8.1 The learned counsel placed reliance on Circular No. 402, dated 1-11-1984, and the judgment of the Hon’ble High Court in CIT v. International Computers Indian Mfr. Ltd. [1991] 187 ITR 580 (Bom.) (supra) in sup­port of his contention that the limitation of time prescribed in the unamended provision should be applied. The said Circular clarifies that as a consequence of the amendment of section 263 with effect from 1-10-1984, the limitation for passing an order under section 263 will, in view of the general principles of interpretation of statute, stand extended in cases where the period of limitation originally laid down in that section had not expired before 1-10-1984. However, with a view to avoid contro­versy and litigation in the matter, they advised the CITs that as far as possible orders under section 263 should be made within two years of the date of the order sought to be revised in cases where the order sought to be revised was passed before 1-10-1984. The later part of the Circular is merely an advice given by the Board to the Officers as a measure of abundant caution and the same cannot be interpreted to mean that the Board gave a clarifi­cation of the aforesaid amendment in favour of the assessee.”

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Category : Income Tax (25158)
Type : Circulars (7511) Notifications/Circulars (30303)

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