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Facts
The Assessee's original assessment for A.Y. 2014-15 was completed u/s 143(3) on 17.01.2018. Subsequently, the case was reopened u/s 147, and a reassessment order was passed on 30.03.2022. The PCIT initiated revisionary proceedings u/s 263, finding the reassessment order erroneous and prejudicial to revenue, particularly regarding disallowance u/s 14A, but also noting that the reasons for reopening erroneously referred to A.Y. 2013-14. The Assessee contended that the issues raised in the Section 263 notice were distinct from the reassessment proceedings, and thus the PCIT's notice, issued on 25.09.2023, was time-barred as per the limitation period from the original assessment order.
Held
The Tribunal held that when the issues in revisionary proceedings under Section 263 are distinct from the subject matter of reassessment, the period of limitation for Section 263 commences from the date of the original assessment order, not the reassessment order. Since the original assessment order was dated 17.01.2018 and the Section 263 notice was issued on 25.09.2023, the revisionary proceedings were initiated beyond the two-year limitation period prescribed under Section 263(2) of the Act. Consequently, the PCIT's order was without jurisdiction and rendered null, and the Tribunal quashed the impugned order on the point of limitation.
Key Issues
Whether the period of limitation for revisionary proceedings under Section 263 of the Income Tax Act, 1961, starts from the date of the original assessment order or the reassessment order when the issues in revision are distinct and different from the reasons for reopening the assessment.
Sections Cited
143(3), 144C, 115JB, 147, 144B, 154, 14A, 8D, 263, 234B, 151, 143(2)
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Income Tax Appellate Tribunal, MUMBAI BENCH “E”, MUMBAI
Before: SHRI NARENDER KUMAR CHOUDHRY & SHRI GIRISH AGRAWAL
Per : Narender Kumar Choudhry, Judicial Member:
This appeal has been preferred by the Assessee against the order dated 26.03.2024, impugned herein, passed by the Ld. Principal Commissioner of Income Tax (in short Ld. PCIT) under section 263 of the Income Tax Act, 1961 (in short ‘the Act’) for the A.Y. 2014-15.
2. In the instant case, the Assessee had declared its total income at Rs.28,06,90,350/- by filing its return of income on 28.11.2014, which was selected for scrutiny under CASS and ultimately resulted into passing of the assessment order dated 17.01.2018 u/s 143(3) r.w.s. 144C of the Act and assessing the total income at Rs.52,35,41,450/- under normal provision and book profit of Rs.3,66,88,639/- under the provision of section 115JB of the Act.
3. Subsequently, the case of the Assessee was reopened and accordingly order dated 30.03.2022 u/s 147 r.w.s. 144B of the Act was passed, whereby the total income of the Assessee was assessed at Rs.28,06,91,350/-. However, the FAO, subsequently vide order dated 11.03.2024 u/s 154 r.w.s 147 of the Act made the addition of Rs.24,28,51,100/- on account of disallowance made in the original order which was purportedly missed out in the reassessment order, which is not subject matter before us .
4. The Ld. PCIT considering the order dated 30.03.2022 passed by the Faceless Assessing Officer (in short “FAO”) found that FAO has ignored the assessed income of Rs.52,35,41,450/-. Further, an amount of Rs.1,68,03,023/- was disallowed in view of the provision of section 14A of the Act in the original assessment order dated 17.01.2018 u/s 143(3) r.w.s. 144C of the Act. Further, for computing 8D(ii) & (iii), the closing value of the investment was taken after deducting provision for different diminution in value of Rs.7,16,26,80,000/- and therefore the Ld. PCIT opined that it should have been taken the average of opening investment under clause (iii) of rule 8D(ii) of the Income Tax Rules, 1963 (in short “the Rules”). In order to examine the aforementioned issue, the case of the Assessee was reopened u/s 147 of the Act. However, the Assessing Officer (AO) has erroneously recorded the reasons pertaining to the A.Y. 2013-14 and thus the assessment was completed u/s 147 r.w.s. 144B of the Act vide order dated 30.03.2022 assessing the total income at Rs.28,06,91,290/- wherein the FAO has ignored the addition/disallowance of Rs.24,28,51,098/- made in the original assessment order dated 17.01.2018 u/s 143(3) of the Act. 4.1 On the aforesaid reasons, the Ld. PCIT has formed an opinion that FAO has passed the order without making enquiries or verification which should have been made. To that extent the assessment order passed by the AO suffers infirmity and is erroneous in so far as it is prejudicial to the interest of the revenue. The Ld. PCIT consequently issued a notice dated 25.09.2023 u/s 263 of the Act which read as under.
“In your case, return of income for A.Y. 2014-15 was filed on 28.11.2014 declaring total loss of Rs. 28,06,90,350/- Subsequently, your case was selected for scrutiny under CASS and Assessment Order u/s 143(3) of the IT Act for AY 2014-15 was completed on 17.01.2018 assessing the total income at Rs.52,35,41,450/-. Thereafter, your case was re-opened u/s. 147 of the Act and the assessment u/s. 147 r.w.s 1448 was completed on 30.03.2022 assessing the total income at Rs. 28,06,90,035/-.
2. On perusal of case records, it is seen that the assessed income as per the assessment order u/s. 143(3) of the Act dated 17.01.2018 has been ignored by the Faceless Assessing Officer in the order passed u/s. 147 r.w.s 144B of the Act vide order dated 30.03.2022.
3. Further, it is seen that an amount of Rs. 1,68,03,023/- was disallowed in view of the provisions of Section 14A of the Act in the assessment order u/s. 143(3) of the Act dated 17.01.2018. However, it is noticed that for computing 8D (ii) & (iii), the closing value of investment was taken after deducting provision for diminution in value of Rs. 716,26,80,000/-. It should have been taken the average of opening investment under clause III of Rule 8D (2). Omission to do so resulted in under disallowance to the extent of Rs.3,50, 18,870/-. In order to examine the aforementioned issue, your case was reopened u/s. 147 of the Act. However, the Assessing Officer has erroneously recorded the reasons pertaining to Assessment Year 2013-14 and thus the assessment was completed u/s. 147 r.w.s 1448 vide order dated 30.03.2022 accepting the returned income of Rs. 28,06,90,035/- wherein the Faceless Assessing Officer has ignored the addition/disallowance of Rs.24,28,51,098/- made in the original assessment order u/s. 143(3) dated 17.01.2018.
4. In view of the aforesaid reasons, it is seen that the Assessment Order dated 30.03.2022 passed is erroneous in so far as it is prejudicial to the interest of the revenue. Therefore, I, the Pr. Commissioner of Income-tax-4, Mumbai, in exercise of the powers conferred on me under the provisions of Section 263 of the I.T. Act, 1961, propose to consider this matter and pass such order thereon as the facts and circumstances of t the case may justify.
Before doing so, I hereby give you an STMENT of being heard to explain your stand. If you desire to be heard in person or through an authorised representative, you may please attend before me at my office at the above-mentioned address on 10/10/2023 at 12:00 PM. You are also requested to furnish your submissions in writing so as to reach me on or before the date mentioned above........”
4. The Assessee challenging the Notice u/s 263 of the Act and the proceedings emanated therefrom, raised various issues including that where issues selected for revisionary proceedings are distinct and different from the reasons for reopening the assessment, the period of limitation for the purposes of section 263 shall relate back from the date of the original assessment order, by submitting as under:
2.3.1 In the instant case of the Assessee, the reassessment proceedings were initiated on the basis of complete incorrect/inapplicable/ misplaced facts for AY 2014-15. For ready reference, we reproduce reasons for re-opening of assessment for captioned AY hereunder.
The assessee has filed its return of income for A.Y.2013- 14 on 29.11.2013 declaring total income at Rs. 15,39,26,900/-. Thereafter, assessment u/s. 143(3) of the Income Tax Act, 1961 was completed on 31.01.2017 assessing total income at Rs. 36,97,59,913/-.
On perusal of case records, it is seen that the case was selected under the category of Complete Scrutiny and the assessment of above assessee has been completed w/s.143(3) of the I.T. Act determining income of Rs.36,97,59,973/- under normal provisions after allowing set off of brought forward losses of Rs.5,79,56,973/- (Returned income arrived after set off of loss of Rs.5,79,56,973/- of A.Y. 2012-13). However, the assessment file of AY 2012-13 revealed that the assessment was completed at a positive income of Rs. 27,22,87,896/- after
scrutiny assessment dated 19.05.2016 and Rs.4,19,91,397/-after giving appeal effect dated 5.10.2018. Hence, there was no loss set off available to the assessee for A.Y. 2013-14.
3. Therefore, irregular set off of losses resulted in underassessment of income by Rs.5,79,56,973/- with a consequent short levy of tax of Rs. 1,88,04,139/- excluding interest u/s 234B of the I.T. Act, if any.
4. In view of the above facts and circumstances of the case and material on record, I have reasons to believe that income chargeable to tax amounting to Rs.5,79,56,973/- has escaped assessment for the A.Y. 2013-14 within the meaning of sec 147 of the Income Tax Act owing to failure on part of the assessee to disclose fully and truly all material facts necessary for assessment. So, the case of the assessee for A.Y. 2013-14 is being re-opened /s147 of the I.T. Act to bring to tax the income escaping assessment and also any other income chargeable to tax which has escaped assessment which comes to notice subsequently in the course of proceedings for assessment for A.Y. 2013-14. Accordingly, this is a fit case for re-opening of assessment by issuing notice u/s 148 of the Income Tax Act, 1961.
5 …………………………………………………………………… … ……………………………………………………………………………. ”
It is evident from para 1, 2 and 4 of reasons above that all of them refer to the facts relevant to AY 2013-14 though the approval u/s 151 refers to AY 2014-15.
2.3.2 It is settled legal position that if the issues to be considered in the revisionary proceedings are distinct and different from the reasons for reopening the assessment, the time limit for passing the order u/s 263 of the Act would start from the date of the passing of original assessment order and not the date of reassessment order.
2.3.3 Reliance is placed on the decision of Hon'ble Supreme Court in the case of Alagendran Finance Ltd (293 ITR 1) (Refer pg. no. 37 to 46 of LPB) wherein it was held that for matters which are not the subject of the reassessment proceedings, the period of limitation would begin from the date of order of assessment and not from the order of reassessment. Further, the contention of the department with respect to the applicability of the doctrine of merger was also rejected. The relevant portion of the said order is reproduced hereunder for Your Honours reference:
"12. 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 the matters other than the allowance of 'lease equalization fund. The said finding of fact is binding on us 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 subject-matter of assessment were the same. They were not.
13... We, therefore, are clearly of the opinion that in a case of this nature, the doctrine of merger will have no application....
15. 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 its revisional jurisdiction reopened the order of assessment only in relation to lease equalization 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 the Commissioner of Income-tax beyond the period of limitation, it was wholly without jurisdiction rendering the entire proceeding a nullity. (underlined for Emphasis)
2.3.4 Further, the Hon'ble Supreme Court in the case of Industrial Development Bank of India Ltd. (152 taxmann.com 591) (Refer pg. no. 47 to 49 of LPB) relying on Alagendran Finance Ltd. (supra) held that:
"3.... We are fortified with our view by the decision of this Court in the case of CIT v. Alagendran Finance Ltd. [2007] 162 Taxman 465/293 ITR 1/[2007] 7 SCC 215. As observed and held by this Court in the aforesaid decision, once an Order of Assessment is reopened, the previous order of assessment will be held to be set aside and the whole proceedings would start afresh but the same would not mean that even when the subject matter of reassessment is distinct and different, the entire proceedings of assessment would be deemed to have been re-opened. Meaning thereby, 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 However, if the subject matter of the re- assessment is distinct and different, in that case the relevant date for the purpose of determination of period of limitation for exercising powers under section 263 of the Act would be the date of the original Assessment Order"
2.3.5 Hon'ble Jurisdictional High Court in the case of ICICI Bank Ltd. (343 ITR 74) (Refer pg. no. 50 to 55 of LPB) held that where jurisdiction u/s 263 of the Act is sought to be exercised with reference to an issue which is covered by order of assessment u/s 143(3) of the Act and which does not form subject-matter of reassessment, limitation u/s 263(2) of the Act shall run from order u/s 143(3) of the Act.
2.3.6 Hon'ble Jurisdictional High Court in the cases of Lark Chemicals Ltd. (368 ITR 655) (Refer pg. no. 56 to 59 of LPB) and Ashoka Buildcon Ltd. (325 ITR 574) affirmed on the same principle.
Most respectfully, the issues for which Your Honour has issued the captioned notice relate to the Original Order. Hence, following the above-quoted settled legal position, the time limit of two years u/s 263(2) applies to the Original Order which time limit has expired. Therefore, the revision proceedings are time barred.”
(Highlighted by us for clarity)
5. The Ld. PCIT though considered the contentions raised by the Assessee, however, not being convinced by the same, ultimately held the reassessment order dated 30.03.2022 u/s 147 r.w.s. 144B of the Act as erroneous in so far as it is prejudicial to the interest of the revenue in respect of disallowance u/s 14A r.w.s. rule 8D of the Rules and consequently set aside the same and restored it to the file of the AO with a direction to pass a fresh assessment order by granting fresh opportunity of being heard to the Assessee and after making due enquiries and verification in respect of closing value of investment as enumerated in para No.5.5 of the impugned order (reproduced above) and to compute the disallowance u/s 14A of the Act accordingly.
The Assessee, being aggrieved, is in appeal before us. The Assessee mainly challenged the impugned order on the ground that in the reassessment proceedings, the reasons for reopening were recorded in respect of the case for A.Y. 2013-14 but not the case pertaining to A.Y. 2014-15 which is under consideration and therefore the FAO has not made any addition in the order dated 30.03.2022 u/s 147 r.w.s. 144B of the Act and adopted the returned gross total income Rs.28,06,90,350/-, as declared by the Assessee. The Assessee therefore claimed that the issues selected for revisionary proceedings u/s 263 of the Act are distinct from the reasons for re-opening the assessment u/s 147 of the Act. Therefore, limitation period to invoke section 263 shall commence from the date of the original assessment order, as none of the issues stated in the notice u/s 263 of the Act emanates from the reasons for the reopening. Thus, the limitation period for the order u/s 263 would start from 17.01.2018 being the date of the original assessment order u/s 1543(3) of the Act and the therefore time period has expired on 31.03.2021, much before issuing the notice dated 25.09.2023 u/s 263 of the Act and therefore as per the decision of the Hon’ble Apex Court and Hon’ble High Courts referred to above in the submission made before the Ld. PCIT, the impugned notice is liable to be set aside, for the want of limitation.
On the contrary, the Ld. D.R. has submitted that admittedly the FAO has considered the facts of A.Y. 2013-14, while reopening the case u/s 147 of the Act for the A.Y. 2014-15, which is a blatant mistake and therefore the order u/s 263 of the Act was warranted and thus has rightly been passed by the Ld. PCIT. Further the cause of action has arisen from the date of the reassessment order, but not from the original order as claimed by the Assessee and therefore the appeal of the Assessee is liable to be set aside.
We have heard the parties and perused the material available on record. Admittedly the AO in the reassessment proceedings in the reopened case u/s 147 of the Act, has taken into consideration the facts and circumstances and the issues involved in the case pertaining to A.Y. 2013-14 but not relevant to A.Y. 2014-15 and recorded the following reason for reopening of the assessment.
8.1 The Assessee before the FAO has challenged the reasons recorded and reopening of the assessment u/s 147/148 of the Act by submitting as under: “8.1. We submit that you have recorded the reasons for re-opening the assessment u/s 147 of the Act, on factually incorrect and inapplicable basis. The reasons recorded for re- opening the assessment u/s 147 of the Act inter also states that the irregular set off of losses resulted in under-assessment of income by Rs. 5,79,56,973/-with a consequent short levy of tax of Rs. 1,88,04,139/- excluding interest w's 2348 of the Act, if any. Further, you have also made reference to the Return of fecome filed by us for AY 2013-14 on November 29, 2013 declaring totall income at Rs. 15,19,26,900/-and the assessment order passed u/s 143(3) of the Act dated January 31, 2017 assessing total income at Rs. 36,97,59,913/-under normal provisions after allowing set off of brought Forward losses of Rs. 5,79,56,973/- (pertaining to AY 2012-13). Moreover, you have mentioned that the said loss has been incorrectly set off even when there were no losses available for AY 2013-14 (the assessment file of AY 2012-13 revealed that the assessment was completed at a positive income even after giving appeal effect dated 05.10.2018) and inter alia alleged that we have not fully and truly disclosed all material facts necessary for assessment.
8.2. Further, we submit that on perusal of the Annexure forming part of the copy of the approval obtained u/s 151 of the Act from the Principal Commissioner of Income tax -4, Mumbai, the Hon'ble Principal Commissioner of Income tax -4, Mumbai has also based on the factually incorrect/inapplicable bases granted the approval u/s 151 of the Act on March 30, 2021.
8.3. We, therefore, submit that since the reasons has been recorded and granted approval based on incorrect facts, the same cannot become a valid basis for carrying a belief that income has escaped assessment so as to re-open the assessment for the captioned AY.”
8.2 The FAO considering the contentions raised by the Assessee, vide order dated 30.03.2022 u/s 147 r.w.s. 144 of the Act, admittedly accepted the returned income of the Assessee and eventually made no addition by holding as under:
“1. The assessee filed return of income for A.Y 2014-15. The assessee's case was reopened by issuing a notice u/s 148 on 31.03.2021 and Assessee filed return against notice u/s 148. Accordingly, statutory notice u/s 143(2) of the Act dated 24.01.2022 was issued and duly served upon the assessee.
2. In compliance to the notices, assessee filed his submissions on various dates which were examined.
3. Assessee's reply is duly considered and the assessment u/s 147 of the Act is hereby concluded by determining the total income of the assessee as enclosed in the computation sheet.”
8.3 However, the Ld. PCIT set aside the re-assessment order dated 30.03.2022 u/s 147 r.w.s. 144 of the Act by holding the same as erroneous in so far as it is prejudicial to the interest of the revenue qua disallowance u/s 14A r.w.r 8D of the Rules. No doubt the FAO in the reassessment proceedings, has done the mistake and pass the erroneous order prejudicial to the interest of the revenue. However, question emerge:
“When the issues involved in the revisionary proceedings are distinct and different from the reasons for reopening the assessment then what would be the starting point of time for passing the order u/s 263 of the Act, whether it would be from the date of the passing of the original assessment order or the date of the reassessment order?”
8.4 We observe that Hon’ble Apex Court in the case of Commissioner of Income Tax, Chennai vs. Alagendran Finance Ltd. 293 ITR 1 (SC) has also dealt with the identical issue, wherein the subject matter of the reassessment proceedings and proceedings invoked u/s 263 of the Act was different. The Hon’ble Apex Court ultimately by considering various judgments of the various courts, ultimately held that where the subject matter of the reassessment proceedings is not involved in the revisionary proceedings u/s 263 of the Act, then the period of limitation provided for u/s 263(2) of the Act would begin to run from the date of the order of the assessment and not from the order of the re-assessment and thus the revisionary jurisdiction beyond the period of limitation, would be without jurisdiction rendering the entire proceedings nullity. For ready reference and clarity, the relevant paras of the judgments are reproduced herein below:
“10. There may not be any doubt or dispute that once an order of assessment is reopened, the previous underassessment will be held to be set aside and the whole proceedings would start afresh but the same would not mean that even when the subject matter of reassessment is distinct and different, the entire proceeding of assessment would be deemed to have been reopened.
In Sun Engineering Works P. Ltd (supra) also, V. Jaganmohan Rao (supra) was noticed stating: "The principle laid down by this Court in Jaganmohan Rao's case, therefore, is only to the extent that once an assessment is validly reopened by issuance of a notice under Section 22(2) of the 1922 Act (corresponding to Section 148 of the Act) the previous under assessment is set aside and the ITO has the jurisdiction and duty to levy tax on the entire income that had escaped assessment during the previous yearThe judgment in Jaganmohan Rao's case, therefore, cannot be read to imply as laying down that in the reassessment proceedings validly initiated, the assessee can seek reopening of the whole assessment and claim credit in respect of items finally concluded in the original assessment. The assessee cannot claim recomputation of the income or redoing of an assessment and be allowed a claim which he either failed to make or which was otherwise rejected at the time of original assessment which has since acquired finality. Of course, in the reassessment proceedings it is open to an assessee to show that the income alleged to have escaped assessment has in truth and in fact not escaped assessment but that the same had been shown under some inappropriate head in the original return, but to read the judgment in Jaganmohan Rao's case, as if laying down that reassessment wipes out the original assessment and that reassessment is not only confined to "escaped assessment" or "under assessment" but to the entire assessment for the year and starts the assessment proceeding de novo giving the right to an assessee to reagitate matters which he had lost during the original assessment proceeding, which had acquired finality, is not only erroneous but also against the phraseology of Section 147 of the Act and the object of reassessment proceedings. Such an interpretation would be reading that judgment totally out of context in which the questions arose for decision in that case. It is neither desirable nor permissible to pick out a word or a sentence from the judgment of this Court, divorced from the context of the question under consideration and treat it to be the complete 'law' declared by this Court. The judgment must be read as a whole and the observations from the judgment have to be considered in the light of the questions which were before this Court. A decision of this Court takes its colour from the questions involved in the case in which it is rendered and while applying the decision to a later case, the courts must carefully try to ascertain the true principle laid down by the decision of this Court and not to pick out words or sentences from the judgment, divorced from the context of the questions under consideration by this Court, to support their reasonings….”(p.319) It was furthermore held: "As a result of the aforesaid discussion, we find that in proceedings under Section 147 of the Act, the Income Tax Officer may bring to charge items of income which had escaped assessment other than or in addition to that item or items which have led to the issuance of notice under Section 148 and where reassessment is made under Section 147 in respect of income which has escaped tax, the Income Tax Officer's jurisdiction is confined to only such income which has escaped tax or has been under-assessed and does not extend to revising, reopening or reconsidering the whole assessment or permitting the assessee to reagitate questions which had been decided in the original assessment proceedings. It is only the under- assessment which is set aside and not the entire assessment when reassessment proceedings are initiated. The Income Tax Officer cannot make an order of reassessment inconsistent with the original order of assessment in respect of matters which are not the subject-matter of proceedings under Section 147"
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 the matters other than the allowance of 'lease equalization fund'. The said finding of fact is binding on us. 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 subject matter of assessment were the same. They were not.
It may be of some interest to notice that a similar contention raised at the instance of an assessee was rejected by a 3-Judge Bench of this Court in Commissioner of Income-Tax v. Shri Arbuda Mills Ltd. [231 ITR 50]. This Court took note of the amendment made in Section 263 of the Act by the Finance Act, 1989 with retrospective effect from June 1, 1988, inserting Explanation (c) to Sub-section (1) of Section 263 of the Act stating: "The consequence of the said amendment made with retrospective effect is that the powers under section 263 of the Commissioner shall extend and shall be deemed always to have extended to such matters as had not been considered and decided in an appeal. Accordingly, even in respect of the aforesaid three items, the powers of the Commissioner under section 263 shall extend and shall be deemed always to have extended to them because the same had not been considered and decided in the appeal filed by the assessee. This is sufficient to answer the question which has been referred." We, therefore, are clearly of the opinion that in a case of this nature, the doctrine of merger will have no application.
The Madras High Court in A.K. Thanga Pillai (supra), in our opinion, has rightly considered the matter albeit under Section 17 of the Wealth Tax Act, 1957 which is in pari materia with the provisions of the Act. Relying on Sun Engineering Works P. Ltd (supra), it was held: "Under section 17 of the Wealth-tax Act, 1957, even as it is under section 147 of the Income-tax Act, proceedings for reassessment can be initiated when what is assessable to tax has escaped assessment for any assessment year. The power to deal with underassessment and the scope of reassessment proceedings as explained by the Supreme Court in the case of Sun Engineering [1992] 198 ITR 297, is in relation to that which has escaped assessment, and does not extend to reopening the entire assessment for the purpose of redoing the same de novo. An assessee cannot agitate in any such reassessment proceedings matters forming part of the original assessment which are not required to be dealt with for the purpose of levying tax on that which had escaped tax earlier. Cases of underassessment are also treated as instances of escaped assessment. The order of reassessment is one which deals with the assessment already made in respect of items which are not required to be reopened, as also matters which are required to be dealt with in order to bring what had escaped in the earlier order of assessment, to assessment. An assessee who has failed to file an appeal against the original order of assessment cannot utilise the reassessment proceedings as an occasion for seeking revision or review of what had been assessed earlier. He may only question the extent of the reassessment in so far as the escaped assessment is concerned. The Revenue is similarly bound" The same principle was reiterated by a Division Bench of the Calcutta High Court in Commissioner of Income-Tax v. Kanubhai Engineers (P.) Ltd. [241 ITR 665].
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 its revisional jurisdiction reopened the order of assessment only in relation to lease equalization 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 the Commissioner of Income Tax beyond the period of limitation, it was wholly without jurisdiction rendering the entire proceeding a nullity.”
{highlighted by us for clarity} 8.5 We further observe that Hon’ble Apex Court in the case of CIT vs. Industrial Development Bank of India Ltd. (2023) 454 ITR 811 (SC) while dealing with the identical issue as involved in the instant case and by considering the judgment of the Hon’ble Apex Court in the case of CIT vs. Alagendran Finance Ltd. (supra) reiterated “that where the issues before the Commissioner at the time of exercising the powers u/s 263 of the Act relate to the subject matter of reassessment, the limitation would start from the date of reassessment order. However, if the subject matter of the reassessment is distinct and different, in that case, the relevant date for the purpose of determination of the period of limitation for exercising the powers u/s 263 of the Act would be the date of the original assessment order”, by observing and holding as under:
“2. The following question of law arises for consideration of this Court in the present appeal
"(1) Whether in the facts and circumstances of the case and in law, the period of limitation for passing order under section 263 of the Income Tax Act, 1961 has to be reckoned from the date of the original assessment order or from the date of the reassessment order?"
At the outset, it is required to be noted and it is not in dispute that, as such, the commissioner exercised powers under section 263 of the Act with respect to the issues which were not covered in the re-assessment proceedings. Therefore, the issue before the Commissioner while excercising the powers under Section 263 of the Act relate back to the original Assessment Order and, therefore, the limitation would start from the original Assessment Order and not from the Re-assessment Order. We are fortified with our view by the decision of this Court in the case of CIT v. Alagendran Finance Ltd. [2007] 162 Taxman 465/293
ITR 1/[2007] 7 SCC 215. As observed and held by this Court in the aforesaid decision, once an Order of Assessment is re- opened, the previous order of assessment will be held to be set aside and the whole proceedings would start afresh but the same would not mean that even when the subject matter of re- assessment is distinct and different, the entire proceedings of assessment would be deemed to have been re- opened. Meaning thereby, 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. However, if the subject matter of the re-assessment is distinct and different, in that case the relevant date for the purpose of determination of period of limitation for exercising powers under section 263 of the Act would be the date of the original Assessment Order.
In view of the above and for the reasons stated hereinabove and, in the facts, and circumstance of the case narrated hereinabove, no error has been committed by the ITAT or even the High Court in holding the proceedings under section 263 of the Act by the Commissioner as barred by limitation. Under the circumstances, the present appeal deserves to be dismissed and is accordingly dismissed.”
8.6 We further observe that Hon’ble Jurisdictional High Court in the case of Commissioner of Income Tax-3, Mumbai vs. ICIC Bank Ltd. (2012) 19 taxmann.com 142 (Bom.) has also dealt with the identical issue and by following the judgment of the Hon’ble Apex Court in the case of Alagendran Finance Ltd. (supra) ultimately held that subject matter/the issues involved against which the revisionary jurisdiction was exercised, not the subject matter of the reassessment proceedings and therefore the period of limitation provided u/s 263(2) of the Act would begin to run from the date of the order of the assessment and not from the order of the re-assessment.
8.7 On the aforesaid analyzations and respectfully following the judgments referred to above, the question posed by us is answered as under:
“When the issue involved in the revisionary proceedings u/s 263 of the Act, is distinct and different from the reasons for reopening the assessment then the period of limitation as provided u/s 263(2) of the Act, would begin to run from the date of assessment and not from the date of re-assessment and the revisional jurisdiction if having, been invoked by the Ld. PCIT, beyond such period of limitation, would be without jurisdiction and render the entire proceeding a nullity.”
8.8 Coming to the instant case, the reassessment proceedings were initiated while recording the reasons for reopening by considering the peculiar facts and circumstances of the case and the issues involved in the A.Y. 2013-14 but not the relevant A.Y. 2014-15 which is under consideration and in the reassessment order dated 30.03.2022, the AO by accepting its mistake eventually made no addition, but the Ld. PCIT still held the reassessment order dated 30.03.2022 as erroneous in so far as prejudicial to the interest of the Revenue qua disallowance u/s 14A r.w.r 8D of the Rules, which was not the subject matter before the FAO in the reassessment proceedings, whereas the disallowance u/s 14A of the Act was the subject matter before the ld. PCIT in the revisionary assessment proceedings and original assessment proceedings which resulted into passing the order dated 17.01.2018 u/s 143(3) r.w.s. 144C of the Act and therefore in our considered view as held above, the time period as prescribed u/s 263(2) of the Act for exercising the revisionary jurisdiction would begin from the date of original assessment order dated 17.01.2018 but not from the date of re-assessment proceedings/order dated 30.03.2022.
Admittedly, the gap between the original assessment order and exercising the revisionary jurisdiction u/s 263(2) of the Act by issuing the notice dated 25.09.2023 u/s 263 of the Act, is more than two years and therefore as held by the Hon’ble Apex Court in the aforesaid cases, the impugned order would be without jurisdiction and render the entire proceedings to nullity and therefore we are inclined to quash the impugned order on the point of limitation itself.
8.9 As we have quashed the impugned order on the legal ground, hence are inclined not to delve into the other issues including on merits raised by the Assessee, as the adjudication of the same would prove futile exercise.
In the result, the appeal filed by the Assessee stands allowed.
Order pronounced in the open court on 10.02.2025.