JUDGMENT
1. The Income Tax Appellate Tribunal, Delhi pas referred the following question of law under Section 256(1) of the Income Tax Act, 1961 (hereinafter referred to as "the Act") for opinion to this Court:-
"Whether on the facts and in the circumstances of the case the Tribunal was correct in law to hold that amendment in Section 263 incorporated w.e.f. 1.6.1988 was inapplicable to a case in respect of which the period of limitation had already expired at the time of amendment?"
2. The Reference relates to the Assessment Year 1981-82.
3. Briefly stated the facts giving rise to the present Reference are as follows:
4. The respondent assessee is a; Public Limited Company and derives income from manufacture and sale of vegetable ghee, refined oil, soap and other allied goods and following the mercantile method of accounting, the accounting period ended with 30th June, 1980 for the Assessment Year 1981-82, filed its return on 12th October, 1981 declaring a total income of Rs. 34,20,080/- and a carried over capital loss of Rs. 13,85,099/-. This return was revised on 20th November, 1982 at Rs. 32,83,7607- and Rs. 13,85,0997- respectively. This return was again revised on 15th March, 1984 declaring total income of Rs.19,97,160/- and showing long term capital loss to be carried forward at Rs. 13,85,099/- and benefit under Section 80J of the Act carried forward at Rs. 12,20,9537-. The assessment was made under Section 254(3)/144B. of the Act by order dated 23th August, 1984 computing the total income of the respondent at Rs. 70,80,460/- and the benefit under Section 80J of the Act amounting to Rs. 10,01,915/- to be carried over for set off as per law. On appeal, the Commissioner of Income tax (Appeal's) partly allowed the appeal of the respondent by order dated 6th February, 1985. Yet, the respondent went on second appeal being I.T.A.No. 2556(DEL}/1985 before the Tribunal, which, by its order dated 4th May, 1987 was allowed partly. In the meantime, a notice dated 5th February, 1987 was issued to the respondent by the Commissioner of Income Tax to show cause on the points raised therein as to why order under Section 263 of the Act should not be passed as he was satisfied on examination that the assessment order was erroneous and prejudicial to; the interests of the Revenue. The respondent relied by its letter dated 24th February, 1987 and 25th February, 1987. The Commissioner of Income Tax, not being satisfied 'with the objections of the respondent, set aside the assessment by directing the Assessing Officer to reexamine and reassess for the reasons contained in and in the light of his order dated 6th March 1987. Reassessment order was also accordingly passed on 30th March 1989 by the Assessing Officer by recomputing the total income of Rs. 76,04,254/-. Before doing such reassessment the respondent came on appeal challenging the said revisionary order before the Tribunal. Besides ground of appeal taken before the Tribunal, following additional grounds were raised! to contend that preliminarily, the re visionary order was beyond the period of limitation as it was not passed within two years from the date of the assessment order dated 23rd August, 1984. The limitation extended with effect from 10th October. 1984 was not available ;in the instant case as the assessment order was passed prior to that date obviously. The Commissioner has erroneously dismissed the respondent's, contention. He has also failed on erroneous considerations to follow the Central Board of Direct Daxes's Circular. The order of revision passed under Section 263 being beyond the period of limitation prescribed under law, deserves to be vacated. Finally, the assessment order dated 23rd August 1984 being the subject matter of appeal before the Commissioner of Income Tax (Appeals) and the Tribunal thereafter, the Revisional Commissioner became functus officio and was wrong to assume power of revision of the assessment order under Section 263 as, the principle of merger applied in the instant case. The Tribunal after hearing the rival submissions made on behalf of the parties as well as the documents on record and the orders of the authorities below held as under:-
"We appreciate that the issue in question before us is identical with those of the case pertaining to the earlier order of the Tribunal in respect of the same assessee herein for the immediately succeeding year of 1982-83, as it self evident from; the identical additional grounds raised therein at page 3 para 4 thereof. The submission of the respective parties on the point of admission of the additional grounds are furnished at paragraphs 5 to 7 and the finding of the admission thereof at para.8. Para.9 proceeds to dispose of the additional ground on merits after duly giving the respective submissions of the parties in paras 10 and 11. Para 12 discusses the relevant case laws and gives its finding against the Revenue after a careful consideration of the issue, besides dealing with the aspect of the amendment of Section 263 in para 13, ultimately allowing the appeal of the assessee on the additional grounds of legal nature, resulting thus in redundancy of dealing with the merits of the case on its main grounds of appeal.
6. Being the issues involved particularly on the additional grounds of the appeal are admittedly and squarely covered by the aforesaid earlier order of the Tribunal in respect of the same assessee herein for the subsequent year of 1982-83 we are respectfully following the aforesaid order of the Tribunal by adopting the same reasons herein too consequently making it unnecessary for us to narrate the discussion on the issues and the case laws dealing with.
7. Accordingly, we are of the considered view that the Commissioner of Income Tax has exceeded his jurisdiction by passing the order impugned under Section 263 of the Act in the matter where the assessment order had been the subject matter of appeal before the appellate authorities. As we are quashing the order impugned, on the additional ground itself, the necessary to deal with the merits of the main grounds of appeal has become' infructuous."
5. We have heard Sri R.K.Upadhyaya, learned standing counsel for the Revenue and Sri S.D.Singh, learned counsel appearing on behalf of the respondent assessee.
6. The learned standing counsel submitted that as amendment in Clause (c) of the Explanation to Sub-section (1) of Section 263 where in the following words "and shall be deemed always to have extended have been inserted by the Finance Act, 1939 w.e.f. l st June, 1988, the Commissioner had the power to revise that part of the assessment order which was not the subject matter of appeal. He submitted that the Apex Court in the case of Commissioner of Income Tax v. Shri Arbuda Mills Ltd. (1998 23 ITR 50 has held such amendment to be retrospective in nature and, therefore, the order of Commissioner passed before that amendment, became proper being in conformity with the provisions of the Act and the question of the limitation, therefore did not arise as the Commissioner had passed the order under Section 263 of the Act well within the stipulated period of limitation as provided under Sub-section (2) of Section 263 of the Act. Fie further submitted that the decision of the Apex Court in Shri Arbuda Mills Ltd. (supra) has been followed by this Court in the case of Commissioner of Income Tax v. Span International (2004) 270 ITR 538.
7. Sri S.D.Singh, teamed counsel for the respondent assessee submitted that Clause (c) of the Explanation to Sub-section (l) of Section 263 of the Act had been .amended by Section 23 of the Finance Act, 1989. The amendment made in Sub-section (iii) in Clause (c) of the Explanation to Sub-section (1) of Section 263 of the Act by the Finance Act is reproduced below:
"(iii) in clause (c)-
(a) after the words 'of any appeal', the words, figures and letters 'filed on or before or after the lst day, of June, 1988' shall be Inserted and shall be deemed to have been inserted with effect from 1st day of June, 1988.
(b) after the words `shall extend', the words 'and shall be deemed always to have extended' shall be inserted and shall be deemed to have been inserted with effect from the 1st day of June, 1988."
8. According to him as the amendment in Clause (c) has been made w.e.f. 1 st June, 1988, the retrospectively cannot be considered beyond that date and. therefore as the limitation had already expired recourse to that amendment could not have been taken. He relied upon a decision of the Apex Court in the case of Additional Commissioner (Legal) and Anr. v. Jyoti Traders and Anr. ( 1999 UPTC 45) wherein the Apex Court has held that the date of commencement of the proviso 10 Section 21(2) of the Act does not control its retrospective operation and earlier the assessment/ reassessment could have been completed within :four years of that particular assessment year and now by the amendment adding:proviso to Section 21(2) of the Act it is eight years. The Apex Court has further held that the only safeguard being that it is after satisfaction of the Commissioner of Sales Tax. It has further held that from a bare reading of the proviso it appears, that the operation of this proviso relates and encompasses back to previous eight assessment years as the proviso is operative from February 9, 1991. He further submitted that prior to amendment of Sub-section (2) of Section 263 of the Act by the Taxation Laws (Amendment) Act, 1984 w.e.f. 1.10.1984 the Commissioner could have revised the order after expiry of two years from the date of the order sought to be revised and as in the present case the assessment order was passed on 23rd August, 1984 the Commissioner could have revised the same only upto 23rd August, 1986 and the amendment made w.e.f. l.10.1984 which provided for making the order after expiry of two years from the end of the financial year in which the order sought to be revised was passed would not be applicable; In this view of the matter, he submitted that the order of the Commissioner of Income Tax is barred by limitation.
9. Having given our anxious consideration to the various pleas raised by the learned counsel for the parties, we find that it is not in depute that the assessment order was passed on 23rd August, 1984. The respondent assessee had preferred an appeal before the Commissioner of "Income Tax (Appeals) against some part of the assessment, order which had been decided by the Commissioner of Income Tax (Appeals) vide order dated 6th February, 1985. The Commissioner of Income Tax had issued notice under Section 263 of the Action 5th February l987 and after giving art opportunity of hearing to the respondent had passed the order on 6th March, 1987. When the assessment order was passed on 23rd August 1984, no doubt the unamended provisions of Sub-section (2) of Section 263 of the Act which provides as follows:
"(2) No order shall be made under Sub-section (1)
(a) to revise an order of reassessment rnade under Section 147, or
(b) after the expiry of two years from the date of the order sought to be revised"
providing limitation for passing the order of the Coimmissioner of Income Tax was applicable.
10. However, with effect from 1.10.1984 by the Taxation Laws (Amendment) Act, 1984 Sub-section (2) of Section 263 of the Act has been substituted which reads as under:
"(2) No order shall be made under Sub-section (l) after the expiry of two years from the end of the financial year in which the order sought to be revised was passed."
11. Thus, after 1.10.1984 the Commissioner of Income Tax could have passed the order within two years from the end of the financial year in which the order sought to be revised has been passed. As in the present case the Commissioner of Income Tax has passed the order on 6th March, 1987, under the Sub-section (2) as amended by the Taxation Laws (Amendment) Act, 1984, is held to be within limitation. It is well settled that the prescription of period of, lirritation is a matter of procedure. If before amendment of the prescribed, limitation any vested right has accrued it could continue and if. during, the proceedings the period of limitation has not expired the amended provision enlarging the period of limitation would apply.
12. This Court in the case of Hargu Charan' Srivastava v. Commissioner of Income Tax, Lucknow (1979 UPTC 852)- has held as follows:
"The prescription of period of "limitation is a matter of procedure. Any amendment in this regard is retrospective in the sense it is applicable to ail those matters which are pending and which had not become closed or dead. If in a particular proceedings the period of limitation on 1st April, 1971 was still running the amended provision enlarging the period of limitation would apply. This is the view I taken by the Andhra Pradesh Gujrat, Kaniatak and Orissa High Courts in Additional Commissioner of Income Tax v. Watan Mechanical and Turning Works, 107 ITR 743; Commissioner of Income Tax v. Royal Motor Car Co. 107 ITR 753; Commissioner of Income Tax v. M. Nagappa 114 ITR 707;.Commissioner of Income Tax, Orissa v. Soubhagva Manjri Deyi, .105 ITR 82 and Commissioner of Income Tax, Orissa v. Bhikari Chatan Paida 104 ITR 73, We are in respectful , agreement with these authorities. On facts it :is clear that the amended period of limitation was applicable to the present case.
13. Applying the principle laid down in the afore said case to the facts of the present case, we find that admittedly, in the present" case the period of limitation for passing the order under Section 263 of the Act was available up 23rd August, 1986. Thus the; period of limitation had not expired when the provisions of Sub-section (2) of Section 263 of the Act was amended by the Taxation Laws (Amendment) Act, 1984 w.e.f. 1.10.1984 prescribing a different period of limitation 'which is two years from the end of the financial year in which the order sought to be revised has been passed. Thus the amended provision of Sub-section (2) of Section 263 of the Act is clearly attracted and, therefore the order passed on 6th March, 1987 is within limitation.
14. So far as the question of applicability of Clause (c) of the Explanation to Sub-section (1) lof Section 263 of the Act after its amendment by the Finance Act, 1989 w.e.f. 1.6.1988 is concerned we find that the Apex Court in the case of Sri Arbuda Mills Ltd. (Supra) has held that the provisions of Clause (c) as amended by the Finance Act, 1989 to be retrospective in nature. It has held as follows:
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 hate 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.'
15. It may be mentioned here that in: the case of Jyoti Traders (supra) the Apex Court has held that the date of commencement of the provison to Section 21(2) of the Act dees not control its retrospective operation. Thus, the amendment in Clause (c) by the Finance Act 1989, w.e.f. 1.6.1988 does not control the operation of the amendment made in Clause (c) of the Explanation to Sub-section (1) of Section 263 of the Act.
16. Sri S.D. Singh has submitted that the question of limitation not considered by the Apex Court in the case of Sri Arbuda Mills Ltd. (Supra) and, therefore, the principle laid down could not apply is not correct.
17. In the case of Sri Arbuda Mills Ltd. (Supra) it rnay be mentioned here that the assessment order was passed on 3lst March 1978 and the Commissioner (Appeals) decided the appeal on 15th December, 1979. The Commissioner of Incorne Tax (Appeals) had passed the order under Section 263 of the Act much before the date of the amendment i.e. 1st June, 1988. The Apex Court has held that the amendment made by the Finance Act, 1988 to be retrospective in nature, it would be treated that the Commissioner had the requisite power to revise even that part of the assessment order which was not the subject matter of.appeal. However, no revision of the order could matter of appeal.
18. It may be mentioned here that this Court in I.T.R. No. 224 of l992 which is inter panes decided:on 4 th March, 2005 and related to the Assessment Year 1982-83 has held that the power of the commissioner shall be extended to the matters which have not been considered is appeal.
19. Respectfully following the aforesaid decisions, we are of trip considered opinion that the order of the Tribunal cannot be sustained. We, accordingly, answer the question referred to us in the negative, i.e. in favour of the Revenue and against the assessee. However, there shall be no order as to costs.