Revision u/s 263 Limitation where assessment completed u/s 143(1) was reopened u/s 147. Jurisdiction u/s 263 could not be exercised after two years on issues which were not subject matter of consideration while passing the order of reassessment u/s 143(3) / 147 – ITAT
ABCAUS Case Law Citation:
ABCAUS 2037 (2017) (08) ITAT
Assessment Year : 2009-10
Important Case Laws Cited/relied upon by the parties:
Malabar Industrial Co. Ltd (243ITR83)
Alagendra Finance Ltd. (293 ITR 1)
Lark Chemicals Ltd. (368 ITR 655)
Ambuja Cement Ltd.
Brief Facts of the Case:
The Assessee-HUF had filed its return of income declaring total income of Rs. 8,99,029/-. The return was processed u/s 143(1) of the Income Tax Act, 1961 (the Act) on 04/05/2010. Later on, the Assessing Officer (AO) issued a notice u/s 148 for reopening of the assessment and subsequently the AO completed the assessment u/s 143 (3) r.w.s. 147 of the Act, on 09/02/2015, determining its income at Rs.20,00, 830/-.
On going through the assessment records, the Principal Commissioner of Income Tax (PCIT) noticed that the assessee had taken unsecured loans from company in which it was having substantial shareholding. Referring to the provisions of section 2 (22) (e) of the Act, PCIT stated that same had to be treated as income of the assessee under the head deemed dividend. He held that the AO had not examined the issue during the assessment proceedings, that the order passed by him was erroneous and prejudicial to the interest of revenue in view of clause (a) to explanation 2 below subsection (1) of section 263 of the Act. Accordingly, he issued a notice to the assessee to initiate revisionary proceedings.
Not convinced with the submissions of the assessee, PCIT directed the AO to examine the issue of deemed dividend, as he had failed to examine the issue in the order passed u/s. 143(3) read with section 147 of the Act.
Contention of the Appellant Assessee:
It was stated that order passed by the AO was neither erroneous not prejudicial to the interest of revenue, that the order passed by the CIT was barred by limitation. On merits, it was further argued that transaction entered in to by the assessee and the company was not loan or deposit but the account was of mutual and current account category, that between the assessee and the company.
Contentions of the Respondent Revenue:
On the other hand, the Departmental Representative (DR) stated that intimation issued u/s 143(1) could not be treated as assessment order and the revisionary order was passed within the time limit prescribed by the provisions of the Act.
Observations made by the Tribunal:
It was noted that as per the provisions of section 263(2) no order can be passed 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.
The ITAT noted the different dates when the various orders were passed as under:
|1. Return was processed and intimation u/s 143(1) was issued||04/05/2010|
|2. Reassessment proceedings were completed||09/02/2015|
|3. CIT passed the revisionary order u/s 263||22/03/ 2017|
The ITAT referred to a judgment of Bombay High Court which was delivered on identical set of facts. In the said case the CIT had sought to revise issues decided not only in the order of reassessment completed u/s 143(3) r.w.s. 147 but also other issues which were in fact accepted and assessed by the intimation u/s. 143(1) of the Act. The Tribunal held that they were not issues adjudicated upon in the assessment order passed u/s. 143 (3)r.w.s.147 and that the CIT would have no jurisdiction to initiate proceeding u/s. 263 on those issues on account of jurisdiction u/s 263 being barred by time.
The Bombay High Court had upheld the order of the Tribunal and held as under:
“…..there was no dispute that except the issue of non-genuine purchases all other issues dealt with by the Commissioner were not the subject matter of the reassessment order. All the other issues on which the Commissioner sought to exercise the jurisdiction u/s. 263 were concluded by virtue of an intimation u/s. 143(1) which admittedly was done beyond a period of two years prior to the notice issued u/s. 263.Section 263(2) provides that no order would be made in exercise of the jurisdiction u/s. 263(1) after the expiry of two years from the end of the financial year in which the order sought to be revised was passed. Admittedly, the Commissioner had not exercised the revisional jurisdiction in respect of the intimation passed section 143(1) within two years of its being passed.Therefore, the exercise of the jurisdiction on those issues u/s. 263 was time barred. Moreover, the jurisdiction u/s. 263 could not be exercised on issues which were not subject matter of consideration while passing the order of reassessment u/s. 143(3) / 147 but a part of an assessment done earlier under the Act.…..that the contention that in the case of bogus bills and non-genuine purchases, i.e., where the State is being defrauded the limitation as provided u/s. 263 be ignored could not be accepted for the reason that neither the Tribunal nor in the appellate jurisdiction, could ignore the mandate of limitation provided under the Act.This was an issue which would fall within the domain of Parliament so as to make suitable amendment to the law after considering the various competing interests.”
The Tribunal in the instant case also noted that the Hon’ble Apex Court has also taken a similar view.
It was held that the revisionary order of the CIT was not passed within the time limit prescribed by the provisions of section 263 of the Act.