Case Law Details
Jainsons Agrochem Industries Vs PCIT (Rajasthan High Court)
Rajasthan High Court held that since reassessment order is distinct and different, the period of limitation for exercising powers u/s. 263 of the Income Tax Act would be the date of original assessment order. Thus, entire proceedings barred by limitation.
Facts- The petitioner filed his income tax return declaring a total income of Rs.4,98,43,110/-. The petitioner has also reflected a Dividend income of Rs.21,58,735/- received from investment in Mutual Funds of UTI Ltd. and tax paid on the short term capital gain.
Upon the scrutiny of the petitioner’s income tax return, a notice was issued by the respondents and the assessment u/s. 143(3) of the Income Tax Act, 1961 was done by the concerned authority, while passing a detailed assessment order dated 08.01.2016. A notice was issued to the petitioner u/s. 154 proposing to rectify the said assessment order dated 08.01.2016 pertaining to the earned Dividend income and expenditure u/s. 14A r.w.r 8D of the Income Tax (Fifth Amendment) Rules, 2008.
Thereafter, the petitioner was issued a re-assessment notice u/s. 147 on the ground that there was a short fall of an amount of Rs.2,32,330/- in job charges account. Accordingly, the reassessment order was passed on 25.03.2022.
The present controversy has arisen because the respondents have issued another notice for the hearing dated 09.01.2024 to the petitioner u/s. 263 invoking the revisional jurisdiction relating to the rate of tax on the facts observed in the said notice.
Conclusion- Held 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 under Section 263 of the Act of 1961 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. Thus, the impugned notice issued u/s. 263 of the Act of 1961 alongwith entire proceedings pursuant thereto are quashed and set aside, on count of being barred by limitation.
FULL TEXT OF THE JUDGMENT/ORDER OF RAJASTHAN HIGH COURT
1. This writ petition has been preferred under Article 226 of the Constitution of India claiming the following reliefs:
“It is therefore, most respectfully prayed that the writ petition of the Petitioner may kindly be allowed and by an appropriate writ, order or direction, the Hon’ble Court may further be pleased to:-
A. Declare that the impugned proceedings under Section 263 of the Income Tax Act, 1961 by Respondent has become time barred and therefore continuation of same is non-est and void ab initio and accordingly Issue writ in the nature of Certiorari, or any other appropriate writ, order or direction to quash the Notice dated 09.01.2024 (Annexure-6) issued by Respondent fixing 16.01.2024 as the date of hearing of case on merits including consequential order passed, if any during the pendency of the writ petition.
B. Any other appropriate order or direction, which this Hon’ble Court considers just and proper in the facts and circumstances of this case, may kindly be passed in favour of the Petitioner.
C. Allow the Writ Petition with costs;
D. Any other order/direction, which Hon’ble court deems appropriate.”
2. Brief facts of the case, as placed before this Court by Mr. Sanjay Jhanwar, learned Senior Counsel assisted by Mr. Prakul Khurana appearing for the petitioner-firm, are that the petitioner filed his income tax return on 24.09.2013 declaring a total income of Rs.4,98,43,110/-. In the said income tax return, the petitioner has also reflected a Dividend income of Rs.21,58,735/- received from investment in Mutual Funds of UTI Ltd. and tax paid on the short term capital gain. Upon the scrutiny of the petitioner’s income tax return, a notice was issued by the respondents and the assessment under Section 143(3) of the Income Tax Act, 1961 (hereinafter referred to as the ‘Act of 1961’) was done by the concerned authority, while passing a detailed assessment order dated 08.01.2016. A notice was issued to the petitioner under Section 154 of the Act of 1961 on 18.10.2016 proposing to rectify the said assessment order dated 08.01.2016 pertaining to the earned Dividend income and expenditure under Section 14A of the Act of 1961 read with, Rule 8D of the Income Tax (Fifth Amendment) Rules, 2008. The petitioner duly submitted its reply, upon which the respondents did not rectify the assessment order, while retaining original position thereof.
3. Thereafter, the petitioner was issued a re-assessment notice under Section 147 of the Act of 1961 on the ground that there was a short fall of an amount of Rs.2,32,330/- in job charges account, during the F.Y. 2012-13 and relevant A.Y 2013-14. Accordingly, the reassessment order was passed on 25.03.2022.
4. The present controversy has arisen because the respondents have issued another notice for the hearing dated 09.01.2024 to the petitioner under Section 263 of the Act of 1961 invoking the revisional jurisdiction relating to the rate of tax on the facts observed in the said notice.
5. Learned Senior Counsel for the petitioner has drawn the attention of this Court towards the judgment rendered by the Hon’ble Apex Court in the case of Commissioner of Income Tax Vs. Industrial Development Bank of India Ltd., reported in (2023) 152 com 591 (SC) whereby in paragraph No.2, the question of law has been framed, which has been answered in paragraph No.3 of the said judgment. The said paras 2 & 3 read as under:
“2. The following question of law arises for consideration of this Court in the present appeal
“i) whether in the facts and circumstance 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?”
3. 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 Reassessment 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 reopened, the previous 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.”
6. Learned Senior Counsel for the petitioner has also taken this Court to the provisions of Section 263(2) of the Act of 1961, which reads as follows: –
“(2) 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.”
6.1. Learned Senior Counsel further placed reliance on the judgment rendered by a Division Bench of this Hon’ble Court in the case of Chambal Fertilisers and Chemicals Limited Vs. Principal Commissioner of Income Tax & Anr. (D.B. Civil Writ Petition No.5144/2022) decided on 26.02.2024, and submits that once an order of assessment is re-opened, ordinarily, the previous order of assessment would be set aside, and the whole proceedings would start afresh; but in the present case, since the subject matter of reassessment is distinct and different, the entire proceedings of assessment should not be deemed to have been reopened.
6.2. Learned Senior Counsel also submits that the impugned notice dated 09.01.2024 is ex facie illegal because the issues before the Commissioner at the time of exercising powers under Section 263 of the Act of 1961 relates to the subject of the original assessment order, and not the reassessment order. Learned Senior Counsel further submits that since the reassessment order is distinct and different, therefore, the period of limitation for exercising the powers under Section 263 of the Act of 1961 by the Commissioner would relate back to the original assessment order.
7. On the other hand, learned counsel appearing on behalf of the respondents, while opposing the aforesaid submissions made on behalf of the petitioner, submits that on a bare perusal of the reassessment order, it is clear that the said order is a summarized one providing no cogent reasons for justifying the revision proceedings. However, he admits that the only issue that was considered in such adjudication is the acceptability or otherwise of the shortfall of Rs.2,32,330/- in the job charges account, keeping the total assessed income as Rs. 5,03,43,110/-.
7.1. Learned counsel further submits that the order dated 25.03.2022 is cryptic and does not touch the core issue of the escaped assessment and does not contain the legal requirements as to the purpose for which Section 147 of the Act of 1961 has been invoked. He further takes this Court to Sections 147 & 148 of the Act of 1961, which read as follows:-
“147. Income escaping assessment.—If the [Assessing Officer] [has reason to believe] that any income chargeable to tax has escaped assessment for any assessment year, he may, subject to the provisions of sections 148 to 153, assess or reassess such income and also any other income chargeable to tax which has escaped assessment and which comes to his notice subsequently in the course of the proceedings under this section, or recompute the loss or the depreciation allowance or any other allowance, as the case may be, for the assessment year concerned (hereafter in this section and in sections 148 to 153 referred to as the relevant assessment year)
Provided that where an assessment under sub-section (3) of section 143 or this section has been made for the relevant assessment year, no action shall be taken under this section after the expiry of four years from the end of the relevant assessment year, unless any income chargeable to tax has escaped assessment for such assessment year by reason of the failure on the part of the assessee to make a return under section 139 or in response to a notice issued under sub-section (1) of section 142 or section 148 or to disclose fully and truly all material facts necessary for his assessment, for that assessment year:
Provided further that nothing contained in the first proviso shall apply in a case where any income in relation to any asset (including financial interest in any entity) located outside India, chargeable to tax, has escaped assessment for any assessment year
Provided also that the Assessing Officer may assess or reassess such income, other than the income involving matters which are the subject matters of any appeal, reference or revision, which is chargeable to tax and has escaped assessment.
148. Issue of notice where income has escaped assessment.—[(1)] Before making the assessment, reassessment or recomputation under section 147, the Assessing Officer shall serve on the assessee a notice requiring him to furnish within such period, *** as may be specified in the notice, a return of his income or the income of any other person in respect of which he is assessable under this Act during the previous year corresponding to the relevant assessment year, in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed; and the provisions of this Act shall, so far as may be, apply accordingly as if such return were a return required to be furnished under section 139:
Provided that in a case—
(a) where a return has been furnished during the period commencing on the 1st day of October, 1991 and ending on the 30th day of September, 2005 in response to a notice served under this section, and
(b) subsequently a notice has been served under sub-section (2) of section 143 after the expiry of twelve months specified in the proviso to sub-section (2) of section 143, as it stood immediately before the amendment of said sub-section by the Finance Act, 2002 (20 of 2002) but before the expiry of the time limit for making the assessment, re-assessment or recomputation as specified in sub-section (2) of section 153, every such notice referred to in this clause shall be deemed to be a valid notice:
Provided further that in a case—
(a) where a return has been furnished during the period commencing on the 1st day of October, 1991 and ending on the 30th day of September, 2005, in response to a notice served under this section, and
(b) subsequently a notice has been served under clause (ii) of sub-section (2) of section 143 after the expiry of twelve months specified in the proviso to clause (ii) of sub-section (2) of section 143, but before the expiry of the time limit for making the assessment, reassessment or recomputation as specified in sub-section (2) of section 153, every such notice referred to in this clause shall be deemed to be a valid notice.”
7.2. Learned counsel thus placed reliance on that prescription of Section 147 of the Act of 1961, which provides that for the purpose of assessment and reassessment or re-computation of the escaped assessment, any issue(s) which come to the notice subsequently in the course of proceedings, ought to have been taken into consideration by the authority, while initiating the proceedings under Section 147 of the Act of 1961, and since such proceedings have been illegally drawn without taking into due consideration the complete spectrum of reassessment and re-computation, therefore, the order dated 25.03.2022 is ex facie illegal, unlawful and cannot withstand the scrutiny of law, and thus, amenable to revisional jurisdiction under Section 263 of the Act of 1961 by the Commissioner.
7.3. Learned counsel further submits that the powers of the Commissioner under Section 263 of the Act of 1961 are wide and relate back to the reassessment order, as the reassessment order has been illegally passed, thus reopening of the same would mean that the whole proceedings requires to be adjudicated afresh meaning thereby, the entire proceedings of assessment would be deemed to have been reopened.
8. In the rejoinder arguments, learned Senior Counsel for the petitioner submits that the assessment order in itself contains the limited ambit of the job work charges. He further demonstrates the ambit upon which the notice was given, which precedes the order of assessment passed on 25.03.2022 (Annexure -5) and reasons recorded in communication dated 10.01.2022, paragraph No.6 of which deals with the basis of forming reason to believe and details of escapement of income, and categorically, the notice was issued stating the reasons due to which the reassessment authority believed that an income to the tune of Rs.2,32,330/- has escaped the due assessment, within the meaning of Section 147 of the Act of 1961.
9. Heard learned counsel for the parties as well as perused the record of the case along with the judgments cited at Bar.
10. This Court, on a careful perusal of the judgment rendered by the Hon’ble Apex Court in the case of Commissioner of Income Tax Vs. Industrial Development Bank of India Ltd. (supra) followed by the Hon’ble Division Bench of this Court in the case of Chambal Fertilisers and Chemicals Limited (supra) 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 to the tune of Rs.2,32,330/-. It is not the case of the petitioner that the original assessment order could not have been within the ambit of Section 263 of the Act of 1961 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.
11. 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. (supra) 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 under Section 263 of the Act of 1961 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.
12. Thus, in light of the aforesaid observations, the impugned notice dated 09.01.2024 issued under Section 263 of the Act of 1961 alongwith entire proceedings pursuant thereto are quashed and set aside, on count of being barred by limitation.
13. The instant writ petition stands allowed in the above terms. All pending applications stand disposed of.
Author Bio
