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Friday, 17 June 2016 11:56

When the Order Under Section 263 Sought to Revise the Issue Decided in the Original Assessment Order then the Limitation Must Necessarily Begin to Run from the Order Under Section 143(3) and Not from Order Under Section 147 - Cochin Tribunal

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Time Barring - Section 263 Time Barring - Section 263

Time Limit for Revising Order Under Section 263 

The order of the CIT u/s 263 of the Act has not been passed with any of the issues which has been decided in the reassessment order dated 25.2.2013; but sought to revise the issue decided in the original assessment order dated 28.12.2009 passed us 143(3) of the Act which continue to hold the field as regards to the issue of sale proceeds of rubber trees whether is to be included for the purpose of computation of book profits u/s 115JA of the Act. Therefore, the assessment order dated 28.12.2009 did not merge with the order of the reassessment dated 25.2.2013 in respect of the issue which did not form part of the subject matter of reassessment. Hence, according to us, the CIT can only revise the assessment order u/s 143(3) dated 28.12.2009 which is clearly barred by limitation

Facts

1. This appeal, at the instant of the assessee, is directed against the CIT’s order dated 26.3.2015 passed u/s 263 of the Act

2. The assessee is a company derived income from rubber plantation

3. For the assessment year under consideration, return of income was filed on 27th Oct 2007 declaring ‘nil’ income and book profits ‘nil’

4. The assessment was taken up for scrutiny and the assessment was completed u/s 143(3) vide order dated 28.12.2009 fixing the total income at Rs. 40,42,740/- and the book profit of Rs.78,61,212/-

5. Thereafter, the assessment was reopened by issuance of notice u/s 148 on 23.02.2012 and the reassessment u/s 143 r.w.s 147 was completed vide order dated 25.2.2013 fixing the total income under the normal provisions at Rs. 67,08,710/-

6. Subsequently, the CIT issued notice u/s 263 of the Act for the reasons that when the assessment u/s 143(3) r.w.s 147 was completed vide order dated 25.2.2013, the AO omitted to calculate the book profits as per section 115JA(1) of the Act

7. The CIT relied on the CBDT circular no.495 dated 22.91987, explaining that the AO should compute the total income of a company as per the normal provisions of the income tax Act as well as the book profits under section 115JA of the Act

8. The proposed revision was objected to by the assessee by stating that the same was barred by limitation within the meaning of section 263 (2) of the Act

9. The assessee submitted that the order sought to be revised, is the order u/s 143(3) passed on 28.12.2009 and hence, the same is beyond two years for passing the revision under section 263 of the Act

10. The CIT, however, rejected the objections raised by the assessee and order passed u/s 263 of the Act setting aside the assessment us 143(3) r.w.s 147 dated 25.2.2013

11. The CIT was of the view that the AO having not computed the book profit as required under section115JA(1), the assessment order passed u/s 143 r.w.s 147 is passed without proper application of mind

12. Aggrieved, the assessee is in appeal before ITAT

13. Honb. ITAT decided the issue in favour of the Assessee and held that the impugned order passed u/s 263 of the Act is barred by limitation 

Adjudication

We have heard the rival submissions and perused the material on record. The solitary issue that arises for our consideration is whether the impugned order date 26.3.2015 passed u/s 263 of the Act is barred by limitation. To examine the issue, we have to understand which is the order sought to be revised u/s 263 of the Act. If it is the assessment order dated 28.12.2009 passed u/s 143(3) of the Act is sought to be revised, the same is barred by limitation. On the other hand, if it is the reassessment order dated 25.2.2013 passed u/s 143(3) r.w.s 147 of the Act is sought to be revised; the same is well within the time limit prescribed u/s 263 of the Act. The reassessment u/s 143(3) rw.s 2147 of the Act was completed on 25.2.2013 to bring to tax a sum of Rs. 26,65,965/- being the provision created for wage arrears. The AO held that the provision does not relate to the relevant Assessment Year and the expenditure claimed was added back to the income returned....

The revision u/s 263 of the Act was initiated for the reason that the AO ought to have calculated the book profit u/s 115JA of the Act, without reducing 65% of the total sale proceeds of old and unyielding rubber trees amounting to Rs. 46,37,757/-. Here, it is pertinent to note that the original assessment order was completed u/s 143(3) on 28.12.2009, wherein the AO had reduced 65% of the sale proceeds of un-yielded rubber trees while computing the book profits u/s 115JA of the Act. As mentioned earlier, the reassessment order dated 25.2.2013 is concerned only with regard to the disallowance of certain expenses on the ground that the expenditure does not relate to the current assessment year. The reassessment order is unrelated to the issue whether the sale proceeds of rubber trees are to be included for the purpose of computation of book profits. The order of the CIT u/s 263 of the Act has not been passed with any of the issues which has been decided in the reassessment order dated 25.2.2013; but sought to revise the issue decided in the original assessment order dated 28.12.2009 passed us 143(3) of the Act which continue to hold the field as regards to the issue of sale proceeds of rubber trees whether is to be included for the purpose of computation of book profits u/s 115JA of the Act. Therefore, the assessment order dated 28.12.2009 did not merge with the order of the reassessment dated 25.2.2013 in respect of the issue which did not form part of the subject matter of reassessment. Hence, according to us, the CIT can only revise the assessment order u/s 143(3) dated 28.12.2009 which is clearly barred by limitation.

In view of the aforesaid reasons and the judicial pronouncements, cited supra, we hold that the impugned order passed u/s 263 of the Act is barred by limitation and the same is hereby quashed. It is ordered accordingly.

Cases Referred to

CIT v. Alagendran Finance Ltd. [2007] 293 ITR 1 (SC)

Additional Info

Read 19204 times Last modified on Thursday, 05 January 2017 21:32
Anil B.

A practicing Chartered Accountant Anil B. acquired CA, CS and LL.B degrees with over 12 years of rich and diverse management experience across Banking & Financial Services, Insurance and the Logistics industry spanning various markets and geographies globally.

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