Limitation for invoking revisional jurisdiction u/s 263 with respect to issues not covered in re-assessment would start from the original Assessment Order – ITAT
In a recent judgment, ITAT has held that limitation for PCIT to invoke revisionary jurisdiction u/s 263 of the Income Tax Act, 1961 (the Act) with respect to the issues which were not covered in the re-assessment would start from the original Assessment Order and not from the Re-assessment Order.
ABCAUS Case Law Citation:
5175 (2026) (07) abacus.in ITAT
In the instant case, the assessee had challenged the order passed by the Pr. Commissioner of Income Tax arising from the assessment order under section 147 read with section 143(3) of the Income Tax Act, 1961 (‘the Act’).
The assessee was an individual and has declared Income from Business and Profession, and income from Other Sources during the year under consideration. The return was processed u/s 143(1).
Thereafter, on the basis of information from investigation wing the assessee has provided accommodation entries amounting from two persons and received cash in return, reassessment proceedings were initiated u/s 147 of the Act and the AO made an addition u/s 68 of the Act vide order u/s 147 r.w. 143(3) of the Act.
Subsequently, the Principal Commissioner of Income-tax (PCIT) invoked revisionary jurisdiction under Section 263 of the Act by issuing a show-cause notice. The PCIT vide order u/s 263 held that the reassessment order passed by the AO was “erroneous in so far as it is prejudicial to the interest of the Revenue as there was lack of enquiry or verification by the AO, as contemplated under Explanation 2 to Section 263, as the AO failed to consider the value of immovable property in light of Section 50C of the Act and the cash deposits made in bank accounts.
Based on the above, the PCIT set aside the assessment order and directed the AO to conduct fresh enquiries on these issues.
Before the Tribunal, the assessee challenged the validity of the proceedings under Section 263 stating that the order of the PCIT u/s 263 of the Act is beyond the period of limitation.
It was contended by the assessee that the reassessment proceedings were on the issue of accommodation entries while the PCIT had invoked the proceedings u/s 263 on the issue of applicability of section 50C as the valuation of property by stamp duty authority was not considered by the assessee while computing the LTCG of sale of property and deposits in Bank. As these issues were not before the AO under reassessment proceedings, the relevant date for the purposes of determination of period of limitation for exercising the powers u/s 263 would relate back to the date of original assessment order u/s 143(1) of the Act.
The Tribunal observed that in the given factual matrix, the ratio of the judgement of the Hon’ble Supreme Court squarely applied to the case. The Hon’ble Supreme Court had held that 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.
The Tribunal observed that in the instant case, PCIT had 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 PCIT while exercising the powers under Section 263 of the Act, related back to the original Assessment Order and accordingly, the limitation would start from the original Assessment Order and not from the Re-assessment Order.
The Tribunal held that since the order u/s 263 was passed more than two years from the end of financial year in which the original order u/s 143(1) was passed, the same was beyond the prescribed time period u/s 263(2) of the Act.
Accordingly, the Tribunal quashed the order u/s 263 and the appeal was allowed.
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