CIT-3 Vs Industrial Development Bank of India Ltd (Supreme Court of India)
The Supreme Court dismissed the Revenue’s appeal challenging the Bombay High Court judgment which had upheld the ITAT’s finding that proceedings initiated by the Commissioner under Section 263 of the Income Tax Act, 1961 were barred by limitation. The central issue before the Court was whether the limitation period for passing an order under Section 263 should be calculated from the date of the original assessment order or from the date of the reassessment order.
The Court noted that the Commissioner had exercised powers under Section 263 in relation to issues that were not part of the reassessment proceedings. Relying on the decision in Commissioner of Income Tax, Chennai v. Alagendran Finance Ltd. (2007) 7 SCC 215, the Court held that although reopening an assessment ordinarily restarts assessment proceedings, such reopening is limited only to the matters covered in reassessment. Where the issues examined by the Commissioner are distinct and unrelated to the reassessment proceedings, the limitation period under Section 263 must be reckoned from the date of the original assessment order and not from the reassessment order.
Applying this principle, the Court concluded that the Commissioner’s exercise of revisional powers under Section 263 was time-barred because the issues raised did not relate to the reassessment proceedings. The Supreme Court therefore held that no error had been committed by the ITAT or the High Court in treating the Section 263 proceedings as barred by limitation and dismissed the Revenue’s appeal.
