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Income Tax Appellate Tribunal, ‘D’ BENCH, CHENNAI
Before: SHRI V.DURGA RAO & SHRI G. MANJUNATHA
PER G.MANJUNATHA, AM:
This appeal filed by the assessee is directed against order
of the learned PCIT, Salem, dated 23.03.2020 passed u/s.263
of the Income Tax Act, 1961, and pertains to assessment year
2011-12.
The assessee has raised following grounds of appeal:-
“1. The order of the Commissioner of Income Tax passed under sec.263 of the Act is contrary to law, erroneous and unsustainable on the facts of the case.
The CIT erred in passing the impugned order under sec.263 dated 22.3.2020 with a direction to the officer to re-do the assessment.
The CIT ought to have seen that the impugned proceedings are barred by limitation as the issue emanates from the order u/s.143(3) r.w.s. 147 dated 28.3.14, which assessment was ipso facto accepted in the subsequent order dated 22.6.18.
ITA No. 90/Chny/2021
The CIT failed to appreciate that the capitalization of tax and interest as per the order under sec.245D(4) of the ITSC was carried out in the return filed on 30.3.2013 and the assessment completed on 28.3.14 and that the later order passed u/s.147 dated 22.6.18 had accepted the income returned and determined in the earlier order of the officer and hence the present proceedings u/s.263 are clearly barred by limitation and hence are to be annulled.
The CIT failed to appreciate that the order of the assessing officer is neither erroneous nor prejudicial to the interests of the revenue and the officer having considered the issue while passing the order dated 28.3.14, his direction to examine the issues afresh amounts to review of the order of officer and hence is untenable in law.
The CIT failed to appreciate that the AC had examined the ITSC Order and accepted that the capitalization of tax and interest were carried out in accordance with the directions of ITSC and thus accepted the income returned in the proceedings and his observation that proper investigation was not done by the officer cannot be a reason to warrant the exercise of revisionary jurisdiction under sec.263 of the Act.
The CIT was not justified in substituting his views over that of the officer arrived at after examination of the records in the assessment proceedings and treating the conclusion of officer as erroneous clearly tantamounts to review of the proceedings, which is impermissible in law.
The CIT further failed to appreciate the settled law that revision u/s.263 is permissible only in the event of lack of enquiry and where the officer has examined the records and passed the assessment order, invoking the powers under sec.263 is wholly opposed to intent and purpose of the revisionary jurisdiction vested by the statute and so is not accordance with law.
The CIT, in any event, was not justified in passing the order under sec.263 without satisfying both the parameters, namely, erroneous and prejudicial to the interests of revenue in the order passed by the officer and also barred by limitation and hence the order of CIT is liable to be annulled.”
3 ITA No. 90/Chny/2021
At the outset, learned A.R for the assessee submitted that
there is a delay of 291 days in filing present appeal for which a
petition along with affidavit has been filed explaining reasons for
delay in filing appeal. The learned A.R referring to petition filed
for condonation of delay in filing appeal submitted that if we
exclude limitation period extended by the Hon'ble Supreme
Court on account of Covid-19 - Pandamic, then there is no
delay in filing appeal in the present case, because, if we
consider date of order of the learned PCIT passed u/s.263 of the Income Tax Act, 1961, and date of filing of appeal, said
period falls within the extended period of limitation by the
Hon'ble Supreme Court and thus, there is no delay in filing of
appeal and hence, delay noticed by the Registry may be
condoned in the interest of justice.
The learned DR, on the other hand, fairly agreed that
delay period noticed by the Tribunal is covered under general
exemption granted by the Hon'ble Supreme Court for extending
limitation for various proceedings, including appellate
proceedings before the Tribunal and thus, delay may be decided on merits.
4 ITA No. 90/Chny/2021
Having heard both the sides and considered petition filed
by the assessee for condonation of delay, we find that the
assessee has received order passed by the learned PCIT on
15.04.2020 and the last date for filing of appeal before Tribunal
was on 15.06.2020. The assessee has filed present appeal on
01.04.2021. Therefore, the Registry has intimated delay of 291
days in filing appeal. We have gone through delay noticed by
the Registry in light of petition filed by the assessee and find
that delay noticed by the Registry falls within the period of general exemption granted by the Hon'ble Supreme Court in
computing period of limitation for any suit, appeal, application or
proceedings and thus, we are of the considered view that there
is no delay in filing present appeal and hence, appeal filed by
the assessee is admitted for hearing.
Brief facts of the case are that the assessee Company is
running group of educational institutions. A search and seizure
operation u/s.132 of the Income Tax Act, 1961, was conducted
on 12.08.2019 in the premises of the assessee company. The
search assessments of the group were completed for impugned assessment year. The assessee company had filed application
with the Income Tax Settlement Commission for settlement of
5 ITA No. 90/Chny/2021
its dispute for assessment years 2004-05 to 2010-11. The
assessee company did not file its return of income for
assessment year 2011-12 till 05.09.2012. The case has been
subsequently, reopened u/s.147 of the Income Tax Act,
1961,by issuing notice u/s.148 of the Act, dated 05.09.2012
and served on the assessee on 17.09.2012. In response to
notice, the assessee has filed its return of income on
30.03.2013 declaring total income of Rs.4,21,39,620/-. The
assessment has been completed u/s.143(3) r.w.s. 147 of the
Act, on 28.03.2014 and accepted income declared by the
assessee. The case was once again reopened u/s.147 of the
Act vide notice u/s.148 of the Act dated 22.03.2018. In
response to notice, the assessee has filed its return of income
on 24.04.2018 disclosing total income at Rs.4,21,39,620/-. The
assessment has been completed u/s.143(3) r.w.s. 147 of the
Income Tax Act, 1961, on 22.06.2018 by accepting returned
income as per return filed by the assessee.
The learned PCIT, Salem, issued show-cause notice
dated 04.03.2020 u/s.263 of the Act, and called upon the
assessee to explain as to why assessment order passed by the
6 ITA No. 90/Chny/2021
Assessing Officer u/s.143(3) r.w.s. 147 of the Act, dated
22.06.2018 shall not be revised, for the reasons stated in his
show cause notice. The learned PCIT in the said show-cause
notice has taken up revision proceedings on two issues and as
per which, the assessee has claimed credit for taxes paid on
undisclosed income offered before Settlement Commission for
assessment years 2004-05 to 2010-11 at Rs.8,67,47,215/- from
net profit of the company for assessment year 2011-12 as tax
credit allowed by the Income Tax Settlement Commission for
earlier years. Similarly, the learned PCIT has taken up another
issue for revision, as per which the assessee has deducted a
sum of Rs.5,11,38,500/- from business profit of the company
for assessment year 2011-12 towards pre-due receipts.
According to the PCIT, above two issues were not examined by
the Assessing Officer in the assessment proceedings
completed u/s.143(3)r.w.s. 147 of the Act, dated 22.06.2018
and thus, opined that assessment order passed by the
Assessing Officer is erroneous, insofar as prejudicial to the
interests of revenue and thus, called upon the assessee to
explain as to why assessment order passed by the Assessing
Officer cannot be set aside.
7 ITA No. 90/Chny/2021
In response, the assessee submitted that proposed
revision proceedings u/s.263 of the Act, is barred by limitation,
because issues taken up by learned PCIT for revision
proceedings were not emanating from reassessment order
passed by the Assessing Officer u/s.143(3) r.w.s. 147 dated
22.06.2018 and thus, period of limitation for above two issues
should be reckoned from first reassessment order passed by
the Assessing Officer dated 28.03.2014. Therefore, if we
consider period of two years for revision of assessment order by the learned PCIT from the date of first reassessment order, i.e.
28-03-2014, then the learned PCIT ought to have issued show-
cause notice on or before 28.03.2016 and hence, the show-
cause notice issued u/s.263 dated 04.03.2020 is clearly barred
by limitation and consequently, proceedings become time
barred.
The learned PCIT, after considering relevant submissions
of the assessee and also has taken note of various facts,
including limitation issue raised by the assessee observed that
although, the Income Tax Settlement Commission has allowed 50% of tax and interest calculated as per its order to be
capitalized for assessment years 2004-05 to 2010-11, but the
8 ITA No. 90/Chny/2021
assessee has claimed it as tax credit allowed by Income Tax
Settlement Commission for earlier assessment years. The claim
made for this assessment year is not covered by the Income
Tax Settlement Commission order. The Assessing Officer has
not considered above aspect. Therefore, he opined that there is
an error in the second reassessment order passed by the
Assessing Officer u/s.143(3) r.w.s.147 of the Act, dated
22.06.2018 and thus, rejected arguments of the assessee on
the issue of limitation and set aside assessment order passed
by the Assessing Officer u/s.143(3) r.w.s. 147 of the Act, dated
22.06.2018 and directed the Assessing Officer to examine two
issues taken up by the learned PCIT for revision proceedings
and redo assessment afresh, after giving opportunity of hearing
to the assessee. Being aggrieved by the revision order, the
assessee filed present appeal before us.
The learned A.R for the assessee submitted that the
learned PCIT has erred in revision of assessment order on the
issue of tax credit claimed by the assessee for assessment
year 2011-12 on the basis of Income Tax Settlement
Commission order beyond prescribed time limit provided under
sub-section (2) of section 263 of the Act, without appreciating
9 ITA No. 90/Chny/2021
fact that issue of tax credit claimed by the assessee was not
subject matter of reassessment order passed by the Assessing
Officer u/s.143(3) r.w.s 147 of the Act dated 22.06.2018. The
learned AR further submitted that as per provisions of section
263 of the Act, the Principal CIT, if he satisfies that assessment
order passed by the Assessing Officer is erroneous and
prejudicial to the interests of revenue, then said assessment
order can be revised at any time before expiry of two years from
the end of financial year in which order to be revised was
passed. In this case, original reassessment order was passed
u/s.143(3) r.w.s 147 of the Act on 28.03.2014. Although, there
was one more reassessment order u/s.143(3) r.w.s. 147 of the
Act, dated 22.06.2018, but issues on which revision
proceedings was initiated by the learned Principal CIT was
either part of reassessment proceedings and further, any
discretion by the Assessing Officer on the issues. Therefore, for
the purpose of limitation prescribed u/s.263 of the Act, date of
original order should be considered and if said date is
considered, then the learned PCIT ought to have completed
revision proceedings on or before 28.03.2016. Therefore, show
cause notice issued by the learned PCIT dated 04.03.2020 and
10 ITA No. 90/Chny/2021
subsequent order passed on 23.03.2020 is clearly barred by
limitation. Therefore, he submitted that order passed beyond
prescribed limit cannot be sustained. In this regard, he relied
upon decision of the Hon'ble Supreme Court in the case of CIT
Vs Alagendran Finance Ltd. (2007) 293 ITR 001 (SC).
The learned DR, on the other hand, supporting order of
the learned PCIT submitted that once case is reopened and
assessment is framed, then earlier proceedings gets wiped out
and the Assessing Officer shall have powers to assess /
reassess total income including income escaped from
assessment. Therefore, when there is subsequent assessment
order which is passed u/s.143(3) r.w.s. 147 of the Act, then
limitation provided u/s. 263(2) starts from date of subsequent
assessment order, but not from the date of original order is
passed. Therefore, if subsequent order passed u/s 143(3) r.w.s.
147 of the Act, dated 22.06.2018 is considered, then show
cause notice issued u/s.263 of the Act, dated 04.03.2020 and
subsequent order dated 23.03.2020 is well within two years
time prescribed for revision of any order and thus, there is no
11 ITA No. 90/Chny/2021
merit in the arguments taken by the assessee and accordingly,
revision order passed by the learned PCIT should be upheld.
We have heard both the parties, perused material
available on record and gone through orders of the authorities
below. The provisions of section 263 of the Income Tax Act,
1961, empowers Pr.CIT / CIT to revise assessment order
passed by the Assessing Officer, if PCIT satisfies that
assessment order passed by the Assessing Officer is
erroneous insofar as it is prejudicial to the interests of revenue.
Sub-section (2) of section 263 prescribes time limit for
passing revision order, as per which no order shall be made
under sub-section (1) after expiry of two years from the end of
financial year in which order sought to be revised was passed.
Therefore, If a combined reading of sub-section (1) and (2) of
section 263 of the Act, it is very clear from the provisions of the
Act that, if the PCIT wants to exercise his powers u/s.263 of
the Act, then he should be satisfied himself that order passed
by the Assessing Officer is erroneous insofar as it is prejudicial
to the interests of revenue and further, such power can be
12 ITA No. 90/Chny/2021
exercised within two years from the end of the financial year
in which order sought to be revised was passed.
In light of above legal position, if you examine facts of
present case one has to see whether revision order passed by
the learned PCIT u/s 263 of the Act, dated 23.03.2020 is within
the time limit prescribed under the Act, or barred by limitation.
In this case, admittedly, first reassessment order was passed
u/s. 143(3) r.w.s.147 of the Act on 28.03.2014. In the said
assessment, the AO has accepted income declared by the
assessee without any additions/disallowances, including on two
issues questioned by the PCIT in revision proceedings. The
case was once again reopened u/s 147 of the Act, and the
second reassessment order was passed u/s 143(3) rws 147 of
the Act, on 22.06.2018. In the said reassessment order, the AO
had considered the issues of reconciliation of gross receipts as
compared to the Form 26AS and ITR filed and details of cash
deposits in to the Bank accounts and source of cash deposits.
The issues of tax credit claimed by the assessee as per
settlement commission and reduction of pre- due receipts from
income of AY 2011-12 is neither subject matter of reopening of
13 ITA No. 90/Chny/2021
assessment nor considered by the AO during reassessment
proceedings. Therefore, it is necessary to examine validity of
263 order passed by the PCIT in light of limitation prescribed
under sub section (2) and the issues considered for revision of
assessment.
It is a well settled principle of law by various courts that
PCIT/CIT can exercise revision powers u/s 263 of the Act on
the issue which was subject matter of assessment/reassessment proceedings whether or not said
issue was discussed by the Assessing Officer. In this case, the
learned PCIT has taken up revision proceedings on two
issues i.e. (i) claim of credit for taxes paid on undisclosed
income offered before Settlement Commission for assessment
years 2004-05 to 2010-11 at Rs.8,67,47,215/- from net profit
of the company for assessment year 2011-12 as tax credit
allowed by the Income Tax Settlement Commission for earlier
years and (ii) Deducted of a sum of Rs.5,11,38,500/- from
business profit of the company for assessment year 2011-12 towards pre-due receipts. Admittedly, above two issues were
not subject matter of assessment in pursuant to second
14 ITA No. 90/Chny/2021
reopening of assessment and consequent reassessment order
u/s.143(3) r.w.s 147 of the Income Tax Act, 1961 dated
22.06.2018. Therefore, once issues on which the PCIT
exercised his revision powers was not subject matter of
assessment proceedings, then for the purpose of limitation date
of assessment goes back to first reassessment order passed
u/s.143(3) rws 147 of the Act dated 28.03.2014 and if you go by
date of said assessment order, then show cause notice issued
u/s 263 of the Act, dated 04.03.2020 and subsequent order
dated 23.03.2020 by the PCIT is clearly beyond two years from
the end of financial year in which order sought to be revised
was passed. Because, if you consider first reassessment order
dated 28.03.2014, then the PCIT should have completed
revision proceedings on or before 31.03.2016. In this case, the
PCIT has passed order u/s 263 of the Act on 23.03.2020 and
thus, in view of limitation provided u/s 263(2) of the Act, the
order dated 23.03.2020 is barred by limitation. This legal
position is fortified by the decision of the Hon’ble Supreme
Court in the case of CIT vs Alagendran Finance Ltd (2007) 293
ITR 1 (SC), where the Hon’ble Supreme Court held that since
Commissioner in exercising its revisional jurisdiction reopened
15 ITA No. 90/Chny/2021
order of assessment in relation to lease equalization fund,
which was not subject of reassessment proceedings, period of
limitation provided for in section 263(2) would begin to run from
date of order of original assessment and not from order of
reassessment. In the case of M/s.Skyline Builders Vs.
CIT(2019) 105 Taxmann.com 207 the Hon’ble High Court of
Kerala under identical set of facts, held that where no revisional
order was passed by CIT at the time of completion of original
assessment, limitation period for passing order u/s.263 had to
commence from first order of assessment. The Hon’ble Madras
High Court in the case of Indira Industries Vs. PCIT (2018) 95
taxmann.com 103 (Mad), had considered an identical issue and
held that when a notice u/s.263 raises new issues, which are
not subject matter of reassessment proceedings, then two
years period contemplated under sub-section (2) of section 263
would begin to run from date of original assessment..
We also find that the co-ordinate Bench of this Tribunal
had considered an identical issue in ITA No.979/Chny/2020
dated 17.09.2021 in the case of M/s. Seyad Shariat Finance
Ltd. and held as under:-
16 ITA No. 90/Chny/2021
“7. We have heard both the parties, perused material available on record and gone through orders of the authorities below. The provisions of section 263 of the Income Tax Act, 1961 empowers Pr.CIT / CIT to revise assessment order passed by the Assessing Officer, if PCIT satisfies that assessment order passed by the Assessing Officer is erroneous insofar as it is prejudicial to the interests of revenue. Sub-section (2) of section 263 prescribes time limit for passing revision order, as per which no order shall be made under sub-section (1) after expiry of two years from the end of financial year in which order sought to be revised was passed. If a combined reading of sub- section (1) and (2) of section 263 of the Act, it is very clear from the provisions of the Act that if the PCIT wants to exercise his powers u/s.263 of the Act, then he should be satisfied himself about assessment order passed by the Assessing Officer and observed that assessment order passed by the Assessing Officer is erroneous insofar as it is prejudicial to the interests of revenue and further, such powers can be exercised within two years from the end of the financial year in which order sought to be revised was passed.
In light of above legal position, if you examine present case one has to see whether revisional order passed by the learned PCIT is within the time limit prescribed under the Act or barred by limitation. Admittedly, original assessment order was passed u/s. 143(3) of the Act on 28.03.2016 . In the said order, the Assessing Officer has allowed claim of deduction u/s.80IA of the Income Tax Act, 1961. Further, subsequent assessment order was passed in pursuant to search action u/s. 132 of the Act on 24.12.2019. In the said assessment order, except issue of additions towards unexplained cash credit u/s.68 of the Act, no other issue was discussed by the
17 ITA No. 90/Chny/2021
Assessing Officer including deduction claimed u/s.80IA of the Income Tax Act, 1961. The proposed revision proceedings was taken up to examine issue of deduction claimed u/s.80IA of the Act, and said issue was first time examined in original assessment proceedings u/s.143(3) of the Act on 28.03.2016. It is a well settled principles of law by various courts that PCIT/CIT can exercise his revisional powers on the issue which was subject matter of assessment proceedings whether or not said issue was discussed by the Assessing Officer. In this case, the learned PCIT has taken up revision proceedings on the issue of deduction claimed u/s.80IA of the Act, and said issue was not a subject matter of assessment in pursuant to search action u/s.143(3) r.w.s. 153C of the Income Tax Act, 1961. Once issue was not a subject matter of assessment proceedings pursuant to search, then date of assessment goes back to original assessment passed u/s.143(3) of the Act and if you go by said assessment order, then date shall be reckoned from 28.03.2016. If you go by that date, revision order passed by the PCIT dated 09.12.2020 is clearly beyond two years from the end of financial year in which order sought to be revised was passed. This legal position is fortified by the decision of the Hon’ble Kerala High Court in the case of M/s.Skyline Builders Vs. CIT (supra), where under identical set of facts, the Hon’ble High Court held that where no revisional order was passed by CIT at the time of completion of original assessment, limitation period for passing order u/s.263 had to commence from first order of assessment. The Hon’ble Madras High Court in the case of Indira Industries Vs. PCIT (2018) 95 taxmann.com 103 (Mad), had considered an identical issue and held that when a notice u/s.263 raises new issues, which are not subject matter of reassessment proceedings, then two years period contemplated
18 ITA No. 90/Chny/2021
under sub-section (2) of section 263 would begin to run from date of original assessment. The Hon’ble Madras High Court while considering the issue had followed decision of the Hon'ble Supreme Court in the case of CIT Vs.Alagendran Finance Ltd. (293 ITR 1) (SC), where a similar view had been taken by the Hon'ble Supreme Court. As regards case law relied upon by the learned DR in the case of M/s.Canara Housing Development Co. Ltd. Vs. DCIT (supra) and other case law, we find that those case laws rendered under different set of facts and has no application to the facts of the present case and hence, case laws relied upon by the learned DR are not considered.
In this view of the matter and considering facts and circumstance of the case and also by following ratio of various case laws discussed herein above, we are of the considered view that revision order passed by the learned PCIT dated 09.12.2020 is barred by limitation because, said order was passed after expiry of two years from the end of financial year in which order sought to be revised was passed. Hence, we quash revision order passed by the learned PCIT u/s.263 of the Income Tax Act, 1961.
In the result, appeal filed by the assessee is allowed.”
In this view of the matter and considering facts and
circumstance of the case and also by following ratio of various
case laws discussed herein above, we are of the considered
view that revision order passed by the learned PCIT dated
19 ITA No. 90/Chny/2021
23.03.2020 is barred by limitation in terms of section 263(2) of
the Act, because, said order was passed after expiry of two
years from the end of financial year in which order sought to be
revised was passed. Hence, we quash revision order passed by
the learned PCIT u/s.263 of the Income Tax Act, 1961.
In the result, appeal filed by the assessee is allowed.
Order pronounced in the open court on 3rd January, 2022
Sd/- Sd/- (वी.दुगा� राव) (जी.मंजुनाथ) (V.Durga Rao) (G.Manjunatha) "या�यक सद$य /Judicial Member लेखा सद$य / Accountant Member चे"नई/Chennai, 'दनांक/ 3rd January, 2022 DS
आदेश क� ��त+ल,प अ-े,षत/Copy to: 1. Appellant 2. Respondent 3. आयकर आयु.त (अपील)/CIT(A) 4. आयकर आयु.त/CIT 5. ,वभागीय ��त�न2ध/DR 6. गाड� फाईल/GF.