INDIAN CO-OP NETWORK FOR WOMEN LTD,CHENNAI vs. PCIT , CHENNAI

The only issue in this appeal of assessee is as regards to the revision order passed by PCIT u/s.263 of the Act, revising the assessment framed by the AO u/s.143(3) of the Act vide ordr dated 24.09.2014. As the revision order passed by PCIT is barred by limitation, for this assessee has raised following Ground Nos.2 & 3:- 2. The Ld. Principal Commissioner of Income Tax have erred in issuing notice u/s 263 of I.T. Act, on the basic of the reassessment order dated 31.10.2018 passed under section 147 of IT Act, which is in contravention of the Judgement of Hon'ble Madras High Court (jurisdication high court in our case) in the case of M/s Indira Industries Vs Pr. CIT- 8,Chennai whereby the Hon'ble Court has conferred its judgement stating that the time limit to issue notice u/s 263 shall be based on the date of original assessment ( which is 24-09-2014) and not on the basis of reassessment order. The Ld. Principal Commissioner of Income Tax has erred in not appreciating the fact that the time limit for issue of notice u/s 263 of IT Act has expired on 31.03.2017 as per original assessment order whereas impugned notice has been issued on 08.12.2020 which is already barred by limitation.

The Ld. Principal Commissioner of Income Tax have erred in issuing notice u/s 263 of 1.T. Act, on the basis of the reassessment order dated 31.10.2018 passed under section 147 of IT Act, which is in contravention of the Judgement of Hon'ble Apex Court in the case of Commissioner of Income Tax Vs. Alagendran Finance Ltd (2007) 162 Taxman 465(SC) Whereby the Apex Court has conferred its judgement stating that the time limit to issue notice u/s 263 shall be based on the date of original assessment (which is 24.09.2014)'and not on the basis of reassessment order. The Ld. Principal Commissioner of Income Tax has erred in not appreciating the fact that the time limit for issue of notice u/s263 of IT Act

As regards to this issue of limitation, brief facts are that the assessee, a Multi State Cooperative Society, Ministry of Cooperation, filed its return of income for the relevant assessment year 2012-13 on 20.09.2012. This return was processed by the Department u/s.143(1) of the Act. Subsequently, the case was selected for scrutiny assessment and assessment was framed u/s.143(3) of the Act vide order dated 24.09.2014. Subsequently, the assessment was reopened by issuing notice u/s.148 of the Act for the reason that information received from individual transaction statement data that the assessee had made cash deposits in savings bank account maintained with Union Bank of India as on 31.12.2012 amounting to Rs.8,81,72,986/- and Rs.4,58,400/-. According to reasons recorded, the bank balance as on 31.03.2012 shown in the balance sheet filed along with the return of income is only Rs.5,22,41,618/- whereas deposit made in the savings bank account maintained with Union Bank of India was Rs.8,86,31,386/-. Accordingly notice u/s.148 of the Act dated 31.03.2017 was issued and in response, assessee filed e-return on 12.04.2017 admitting total income of Rs.55,34,894/-. Subsequently, reassessment was

The PCIT subsequently on going through the case records including profit & loss account of the assessee noted that the assessee has earned interest from fixed deposits with bank amounting to Rs.19,46,231/- and interest from savings bank account amounting to Rs.4,83,255/-. According to PCIT, the AO has not made any verification or these interests on fixed deposit and savings bank account interest is not eligible for claim of deduction u/s.80P(2)(d) of the Act and hence, the reassessment order framed u/s.143(3) r.w.s.147 of the Act dated 31.10.2018 is erroneous and prejudicial to the interest of Revenue. The PCIT issued show-cause notice u/s.263 of the Act and show caused, the assessee as to why the reassessment framed by AO be not set aside for fresh examination on the issue of disallowance of claim of deduction u/s.80P(2)(d) of the Act, in regard to interests earned by assessee on bank deposit i.e., FDRs and savings bank account. Therefore, according to PCIT the re-assessment order passed u/s.143(3) r.w.s. 147 of the Act dated 31.10.2018 is without considering the above issue and hence, is erroneous insofar as prejudicial to the interest of

The ld.AR for the assessee stated that the issue in reassessment framed by AO u/s.143(3) r.w.s. 147 of the Act dated 31.10.2018 was only for the examination of deposits made in the assessee’s bank account in cash amounting to Rs.8,86,31,386/-. According to assessee, the AO has examined this issue in reassessment and framed reassessment order accordingly. The ld.AR stated that the issue as regards to allowance of deduction u/s.80P(2)(d) of the Act was not at all in the reassessment order and original order framed by AO u/s.143(3) of the Act dated 24.09.2014 and hence, limitation will start from the original assessment because in the reassessment order, the AO’s power are limited to the issue of reopening. The issue before the AO while framing reassessment u/s.147 r.w.s. 143(3) of the Act is limited to the cash deposit made in the savings bank account of the assessee amounting to Rs.8,86,31,386/- whereas, PCIT want to revise the

On the other hand, the ld. CIT-DR relied on the revision order passed by PCIT and stated that the concept of merger will apply and the reassessment order is merged with the order passed by the PCIT u/s.263 revising the assessment. Apart from this, the ld.CIT- DR could not argue much on this issue.

Having heard rival contentions and going through the facts of the case, we noted that the PCIT has laid total emphasis on the

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."

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

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.

In the result, the appeal filed by the assessee is allowed.