COMMISSIONER OF INCOME TAX, CENTRAL - I, KOLKATA vs. M/S BHARAT HYDRO POWER CORP. LTD.

Whether on the facts and in the circumstances of the case the learned Tribunal was justified in law in not appreciating the ratio laid down by the Hon’ble Apex Court in the case of Alagendran Finance Limited (2931 ITR 1) ? 2. Whether on the facts and in the circumstances of the case the learned Tribunal was justified in holding that the notice under Section 263 of the Act dated 8.9.2010 is barred by limitation despite the fact that the original assessment order dated 20.3.2006 stand merged with the re-assessment order dated 5.12.2008 in view of the amendment made by inserting explanation 3 to section 147 by Finance Act, 2009 with retrospective effect from 1.4.1989 ? 3. Whether on the facts and in the circumstances of the case the learned Tribunal was justified in holding that the original assessment is modified to the extent and only in respect of those items which have been considered in the re-assessment order and does not make the original assessment order non-existent in respect of concluded items which were not the subject matter of re-assessment proceeding?” 10. The main issue involved in the impugned order the Tribunal is as to whether the proceedings initiated by the Commissioner of Income Tax and the order passed under Section 263 of the Act, 1961 is beyond the limitation provided under sub-Section (2) of Section 263. This question depends upon the question as to whether the limitation would start from the date of passing of the assessment order or from the date of passing of the re-assessment order.

From bare perusal of the scheme of the Act, 1961 and more particularly, the provisions of Sections 143(3), 147/148 and Section 263 of the Act, 1961 we are of the considered view that the limitation would normally start from the date of the assessment order under Section 143(3) of the Act, 1961. But if the grounds on which the order is sought to be revised by the Commissioner of Income Tax under Section 263 of the Act, 1961 was subject-matter of re-assessment order, then the limitation for the purpose of Section 263(2) of the Act, 1961 would start from the date of re-assessment. In the present set of facts, the grounds on which Section 263 was attempted to be involved by the Commissioner of Income Tax, were not subject-matter of re-assessment proceedings or re-assessment order. Under the Circumstances, the date of assessment order (20.03.2006) would be relevant for the purpose of sub-Section (2) of Section 263. Since the notice under Section 263 was issued by the Commissioner of Income Tax on 08.11.2010, therefore, it was clearly barred by time. Hence, the entire proceedings initiated by the Commissioner of Income Tax under Section 263 of the Act, 1961 was without jurisdiction being barred by limitation. 12. The issue as has been raised in the present appeal is also covered by the judgment of the Hon’ble Supreme Court in the case of Commissioner of Income Tax, vs. Alagendran Finance Ltd. (supra) (paragraphs 14, 20 and 25) which is reproduced below:

A bare perusal of the order passed by the Commissioner of Income-tax would clearly demonstrate that only that part of the order of assessment which related to lease equalisation fund was found to be prejudicial to the interests of the Revenue. The proceedings for reassessment have nothing to do with the said head of income. The doctrine of merger, therefore, would not apply in a case of this nature. 20. We may at this juncture also take note of the fact that even the Tribunal found that all the subsequent events were in respect of matters other than the allowance of “lease equalisation fund”. The said finding of fact is binding on us. The doctrine of merger, therefore, in the fact situation obtaining herein cannot be said to have any application whatsoever. It is not a case where the subject- matter of reassessment and the subject-matter of assessment were the same. They were not. 25. We, therefore, are clearly of the opinion that keeping in view the facts and circumstances of this case and, in particular, having regard to the fact that the Commissioner of Income-tax exercising his revisional jurisdiction reopened the order of assessment only in relation to lease equalisation fund which being not the subject of the reassessment proceedings, the period of limitation provided for under sub-section (2) of section 263 of the Act would begin to run from the date of the order of assessment and not from the order of reassessment. The revisional jurisdiction having, thus, been invoked by Commissioner Income-tax beyond period

We have also perused the judgment of Hon'ble Supreme Court in the case of Messrs. Mewalal Dwarka Prasad (supra) heavily relied by learned counsel for the appellant/department. We find that the said judgment has no relevance on facts of the present case inasmuch as it relates to the validity of a reassessment proceeding. In the present set of facts, we are mainly concerned with the running of limitation under sub-section (2) of Section 263 of the Act 1961 and which issue stands concluded directly by the judgment of Hon'ble Supreme Court in the case of Alagendran Finance Limited (supra). 16. Under the circumstances, the Income Tax Appellate Tribunal has not committed any manifest error of law to set aside the order dated 14.01.2011 passed by the Commissioner of Income Tax under Section 263 of the Act 1961. All the three substantial questions of law, as reproduced above, are answered in favour of the assessee against the revenue. The appeal (ITA/14/2012) is dismissed. (SURYA PRAKASH KESARWANI, J.) (RAJARSHI BHARADWAJ, J.) As./S.Kumar