M/S JAINSONS AGROCHEM INDUSTRIES vs. PRINCIPAL COMMISSIONER OF INCOME TAX

Facts

The petitioner, M/s Jainsons Agrochem Industries, filed an income tax return for AY 2013-14 on 24.09.2013, declaring a total income of Rs. 4,98,43,110/-. An assessment order under Section 143(3) was passed on 08.01.2016. A rectification notice under Section 154 was issued on 18.10.2016 regarding dividend income and expenditure under Section 14A, which was not pursued. Subsequently, a reassessment notice under Section 147 was issued for AY 2013-14 on the ground of a shortfall in job charges amounting to Rs. 2,32,330/-. A reassessment order was passed on 25.03.2022. The present writ petition challenges a notice dated 09.01.2024 issued by the Principal Commissioner of Income Tax (PCIT) under Section 263 of the Income Tax Act, 1961, invoking revisional jurisdiction concerning the rate of tax, arguing it is time-barred.

Held

The Tribunal held that the impugned notice dated 09.01.2024 issued under Section 263 of the Income Tax Act, 1961, along with all consequential proceedings, is quashed and set aside on the grounds of being barred by limitation. The Tribunal relied on the Supreme Court's decision in CIT vs. Industrial Development Bank of India Ltd. and a Division Bench ruling of the same court in Chambal Fertilisers and Chemicals Limited. It was observed that the reassessment order dated 25.03.2022, concerning the job charges shortfall of Rs. 2,32,330/-, was strictly within a limited ambit and distinct from the original assessment order. Following the precedent, when the subject matter of reassessment is distinct and different, the period of limitation for exercising powers under Section 263 of the Act would be reckoned from the date of the original assessment order. Since the notice under Section 263 was issued on 09.01.2024, which is beyond two years from the original assessment order dated 08.01.2016, it is held to be ex facie illegal on the count of limitation. The writ petition is allowed in these terms.

Key Issues

1. Whether the period of limitation for passing an order under Section 263 of the Income Tax Act, 1961, is to be reckoned from the date of the original assessment order or the reassessment order, when the subject matter of reassessment is distinct and different from the issues sought to be revised under Section 263. Assessee's Contention: The petitioner argues that the impugned notice dated 09.01.2024 under Section 263 is time-barred. They contend that the reassessment order dated 25.03.2022 dealt with a distinct issue (job charges) from the original assessment order. Therefore, as per the judgment in CIT vs. Industrial Development Bank of India Ltd. (2023) and the Division Bench ruling in Chambal Fertilisers and Chemicals Limited, the limitation for Section 263 proceedings should be reckoned from the date of the original assessment order (08.01.2016), making the notice issued on 09.01.2024 beyond the two-year period prescribed under Section 263(2). Revenue's Contention: The revenue submits that the reassessment order dated 25.03.2022 was cryptic and did not address the core issue of escaped assessment adequately. They argue that the powers of the Commissioner under Section 263 are wide and relate back to the reassessment order, especially if the reassessment order was illegally passed, thus reopening the entire proceedings. They also refer to Section 147, suggesting that any subsequent issues should have been considered during reassessment.