CIT Vs Alagendran Finance Ltd. (Supreme Court of India)
The Supreme Court examined whether, for the purpose of limitation under Section 263(2) of the Income Tax Act, 1961, the relevant date should be the original assessment order or the reassessment order. The assessee company had filed returns for assessment years 1994-95, 1995-96, and 1996-97, and original assessments were completed between 1997 and 1998. In those assessments, the claim relating to “Lease Equalization Fund” was accepted. Subsequently, reassessment proceedings were initiated only on issues relating to share issue expenses, bad and doubtful debts, and excess depreciation on gas cylinders and goods containers.
Despite the reassessment proceedings not involving the Lease Equalization Fund, the Commissioner invoked revisional powers under Section 263 in 2004 and reopened the assessments on the ground that lease rentals had not been properly taxed. The Income Tax Appellate Tribunal held that the revisional proceedings were barred by limitation because the alleged error related to the original assessment orders and not to the reassessment proceedings. The High Court upheld this view.
Before the Supreme Court, the Revenue argued that the limitation period should be computed from the reassessment orders dated 28.03.2002 and not from the original assessment orders. The assessee contended that the doctrine of merger did not apply because the Lease Equalization Fund was never the subject matter of reassessment.
