QUEST GLOBAL ENGINEERING SERVICES PVT.LTD. vs. THE PRINCIPAL COMMISSIONER OF INCOME TAX HUBLI

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WP/101642/2023HC KarnatakaKAHC02004483202329 March 2023Bench: M.I.ARUN4 pages
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What did the High Court hold?

The High Court held that the notice issued by the respondent under Section 263 of the Income Tax Act, 1961, was barred by limitation. The court referred to Section 263(2) of the Act, which stipulates that no order under sub-section (1) shall be made after the expiry of two years from the end of the financial year in which the order sought to be revised was passed. In this case, the order sought to be revised was dated March 31, 2017. The impugned notice was issued on February 1, 2023. The court found that the notice was issued beyond the two-year period prescribed, making the proceedings contemplated by the notice liable to be set aside on the ground of limitation. The court quashed the impugned notice and disposed of the writ petition accordingly.

What were the facts?

The petitioner, Quest Global Engineering Services Pvt. Ltd., is an assessee for income tax. The jurisdictional Transfer Pricing Officer passed an order on March 31, 2017, concerning Assessment Year 2002-03, which was perceived as beneficial to the assessee and adverse to the revenue. Consequently, the Principal Commissioner of Income Tax, Hubli, issued a notice dated February 1, 2023, under Section 263 of the Income Tax Act, 1961, proposing to revise the earlier order. The petitioner filed a writ petition before the High Court of Karnataka, Dharwad Bench, challenging this notice on grounds of limitation.

What were the issues?

1. Whether the notice issued by the respondent under Section 263 of the Income Tax Act, 1961, for revision of an order passed on March 31, 2017, is barred by limitation, considering the two-year period prescribed under Section 263(2) of the Act? Assessee's Contention: The assessee argued that any order under Section 263 of the Act must be passed within two years from the end of the financial year in which the order sought to be revised was passed. The order to be revised was passed on March 31, 2017, and the impugned notice was issued on February 1, 2023. Therefore, the notice is beyond the statutory time limit. Revenue's Contention: The judgment does not record any specific contentions from the revenue regarding the limitation period.

Which sections of the Income-tax Act were involved?

Section 263

AI-generated summary — verify with the full judgment below

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WP No. 101642 of 2023

IN THE HIGH COURT OF KARNATAKA, DHARWAD BENCH

DATED THIS THE 29TH DAY OF MARCH, 2023

BEFORE

THE HON'BLE MR JUSTICE M.I.ARUN

WRIT PETITION NO. 101642 OF 2023 (T-IT)

BETWEEN:

QUEST GLOBAL ENGINEERING SERVICES PVT.LTD. AEQUS SPECIAL ECONOMIC ZONE, NO. 437A, PLOT NO.2, THANA HATTARGU S.O. HUKKERI, BELGAUM-591243, REPRESENTED BY HEREIN BY ITS GENERAL MANAGER … PETITIONER (BY SRI. T. SURYYANARAYANA; SEINIOR ADVOCATE FOR NANDISH PATIL, TANMAYEE RAJKUMAR & MANASA ANANTAN, ADVOCATES)

AND:

THE PRINCIPAL COMMISSIONER OF INCOME TAX, HUBLI C.R. BUILDING, NAVANAGAR, HUBBALLI-580025. … RESPONDENT (BY SRI. Y.V. RAVIRAJ, ADVOCATE)

THIS WRIT PETITION IS FILED UNDER ARTICLES 226 AND 227 OF THE CONSTITUTION OF INDIA, PRAYING TO,. QUASHING THE NOTICE DATED 01.02.2023 BEARING DIN NO.ITBA/REV/F/ REVI/2022-23/ 1049303607(1) (ANNEXURE- E) ISSUED BY THE RESPONDENT UNDER SECTION 263 OF THE ACT FOR THE ASSESSMENT YEAR 2002-03.

VISHAL NINGAPPA PATTIHAL Digitally signed by VISHAL NINGAPPA PATTIHAL Location: Dharwad Date: 2023.03.30 10:25:10 +0530

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WP No. 101642 of 2023

THIS PETITION, COMING ON FOR PRELIMINARY HEARING IN ‘B’ GROUP, THIS DAY, THE COURT MADE THE FOLLOWING:

ORDER

1.

Petitioner is a Private Limited Company and is assessed for income tax. In respect of the assessment year 2002-03, the jurisdictional Transfer Pricing Officer passed an order dated 31.03.2017, determining the Arms Length Price. The said order is perceived as beneficial to the assessee and adverse to the interest of revenue by the respondent. Hence, he has issued the impugned notice bearing No.ITBA/REV/F/REV1/2022-23/1049303607(1) dated 01.02.2023 vide annexure-E to the writ petition seeking to revise the proceedings by invoking his powers under Section 263 of the Income Tax Act (for short ‘the Act’). Aggrieved by the same, the present writ petition is filed. 2. The case of the petitioner is that any order under Section 263 of the Act, has to be passed within two years from the end of the financial year regarding which the order sought to be revised was passed and in the

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WP No. 101642 of 2023

instant case the order sought to be revised was passed on 31.03.2017 and the same is sought to be revised by issuing a notice on 01.02.2023 by the respondent. 3. Section 263 of the Act deals with Revision of orders prejudicial to the revenue. Section 263 (2) reads as under: “263. (1) XXXXXX

(2) No order shall be made 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.”

Thus, any order under Section 263 of the Act can be passed only within two years from the date of the order sought to be revised. 4. In the instant case admittedly the order sought to be revised is dated 31.03.2017 and the impugned notice is issued on 01.02.2023 and the proceedings contemplated as per the notice is liable to be set aside on the ground of limitation. Hence the following:

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WP No. 101642 of 2023

ORDER i) The impugned notice bearing No.ITBA/ REV/ F/ REV1/ 2022-23/ 1049303607(1), dated 01.02.2023

issued by the respondent vide Annexure-E to the writ petition is hereby set aside. ii) The writ petition is disposed off accordingly.

Sd/- JUDGE

RHR/- List No.: 1 Sl No.: 52

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