(Order of the Court was made by K.RAVIRAJA PANDIAN, J.) The revenue on appeal against the order of the Income Tax Appellate Tribunal dated 27.06.2008 made in I.T.A.No.1359 of 2006 relating to the assessment year 2000-01, by formulating the following question of law:
"Whether in the facts and circumstances of the case, the Appellate Tribunal was right in holding that the order of the Commissioner of Income Tax passed under
Section 263 of the Income Tax Act for the assessment year 2000-01 was barred by limitation by taking the date of assessment year and not the date of the order of rectification under
Section 154 as the date with reference to which the period of limitation under
Section 263(2) has to be reckoned".
2. The facts:- The Assessee company engaged in the construction of Water Treatment Plant filed its return of income for the assessment year 2000-01 on 30.11.2000 admitting total income of Rs.4,48,84,554/-. The return of income was processed under Section 143(1) on 06.07.2001 and the returned income was accepted. Subsequently, an order under Section 143(3) was passed on 31.03.2003 on a total income of Rs.52,07,877/-. While completing the assessment the Assessing Officer among other things disallowed deduction u/s 80IA relating to the water treatment project. However, a sum of Rs.31,46,497/- being the profit of water supply project has been allowed as deduction u/s 80 IA. This was subsequently modified by the Assessing Officer by an order under
Section 154 dated 19.06.2003 and the deduction was restricted to Rs.2,89,93,730/-. The Commissioner of Income Tax (Appeals) on perusal of the records found that the nature of work done by the assessee in respect of project was only that of a contractor and at no point of time the project was owned by the assessee, confirmed the opinion that the allowance of deduction was contrary to the provisions of Section 80 IA(4) and hence initiated proceedings under
Section 263 of the Act. The assessee objected the revisional proceedings. The Commissioner of Income Tax (Appeals) passed an order confirming its proposal made in the show cause notice. That order was carried by way of appeal to the Income Tax Appellate Tribunal and the Tribunal held that the order under
Section 263 was barred by limitation since the period has to be reckoned with reference to the date of assessment order i.e., 31.03.2003 and quashed the order of the Commissioner of Income Tax passed under
Section 263 on that ground. The said order is assailed before this Court in this appeal by formulating the above question of law.
3. The learned counsel for the revenue reiterated the grounds of appeal precisely to the effect that once the order passed under Section 143(3) is rectified under
Section 154, as per the theory of merger, the order passed under Section 143(3) got automatically merged with the order passed under
Section 154. So the period of limitation has to be reckoned from the date of passing of the order under
Section 154 of the Act. For which he relied on the decision of the Supreme Court in the case of Hind Wire Industries Limited vs. Commissioner of Income Tax reported in 212 ITR 639.
4. We have heard the argument of the learned counsel and we are not able to subscribe our view with the argument of the learned counsel for sustaining the case.
5. There is no dispute about the facts and dates as stated above.
Section 263 reads as follows:-
"Revision of orders prejudicial to revenue 263 (1) The Commissioner may call for and examine the records of any proceedings under this Act, and if he considers that any order passed thereon by the Assessing Officer is erroneous in so far as it is prejudicial to the interests of the revenue, he may, after giving the assessee an opportunity of being heard and after making or causing to be made such inquiry as he deems necessary, pass such order thereon as the circumstances of the case, justify including an order enhancing or modifying the assessment, or cancelling the assessment and directing a fresh assessment.
Explanation : For the removal of doubts, it is hereby declared that for the purpose of this sub-section,-
(a)...
(b)...
(c)...
(2) No order shall be made under sub-section (1) after the expiry of two years from the end of the financial year in which the order sought to be revised was passed...."
6. As per the provisions of
Section 263 (2) of the Income Tax Act, no order shall be made under sub section (1) of
Section 263, after the expiry of 2 years from the end of financial year in which the order sought to be revised was passed.
7. From the above, it is clear that the revisional order under
Section 263 has to be passed within two years from the end of the financial year in which the order sought to be revised was passed. While issuing the show cause notice, for the purpose of revision of assessment under
Section 263, the Commissioner of Income Tax has stated that for the assessment year 2000-01, it was seen that the assessee have filed return of income on 30.11.2000 admitting NIL income, that the assessment was subsequently completed under Section 143(3) of the Act assessing the income for the year at Rs.1,21,82,188/-,that while completing the assessment, the Assessing Officer had among other things disallowed deduction u/s 80IA relating to Water Treatment Projects, that a sum of Rs.3,14,46,497/- being the profit on Water Supply Project had been allowed as deduction u/s 80IA, that was subsequently modified vide order under
Section 154 dated 19.06.2003 and the deduction under Section 80 IA had been restricted to Rs.2,89,93,730/-. It was further stated that the nature of work done by the assessee in respect of the projects was only that of a contractor and at no point of time the project was owned by the assessee, that factum has been admitted by the assessee in letter dated 24.03.2003. The reason shown in the show cause notice manifest that what was sought to be revised was the assessment order and not the rectification order passed because the rectification order was passed for the limited purpose of reduction of deduction under Section 80 IA of the Act. That part of the order which sought to be revised as seen from the show cause notice has not been merged with the order passed under
Section 154.8. With reference to the reasoning stated in the show cause notice, we are of the view that the Commissioner of Income Tax has referred to only an order passed under Section 143(3). If that order is sought to be revised the limitation prescribed under
Section 263(2), it is barred. The issue is also covered by the decision of the Supreme Court in the case of Commissioner of Income Tax vs. Alagendran Finance Limited reported in 293 ITR 1. In that case, the Doctrine of merger has also been considered and explained. The Supreme Court has held as follows:
"Assessments for the assessment years 1994-95, 1995-96 and 1996-97 on the assessee were completed in 1997 and 1998. In the orders of assessment, the assessee's claim relating to "Lease Equalisation Fund" was accepted. Thereafter orders of reassessment were initiated in respect of three other items but not the item relating to "Lease Equalisation Fund" and reassessments were made. Thereafter, the Commissioner, by an order dated March 29, 2004, initiated revision proceedings only in relation to the item "lease Equalisation Fund". The Appellate Tribunal held that the revision proceedings were barred by limitation as they were initiated more than four years after the original assessments; and the High Court dismissed the appeal therefrom. The Department appealed to the Supreme Court"
The Supreme Court further held as follows:
"affirming the decision of the High Court, that the Commissioner had sought to revise only that part of the order of assessment which related to Lease Equalisation Fund; but the proceedings for reassessment had nothing to do with that item of income. The doctrine of merger did not apply in a case of this nature; the period of limitation commenced from the dates of the original assessments and not from the reassessments since the latter had not had anything to do with the Lease Equalisation Fund. This was not a case where the subject matter of reassessment and the subject matter of the assessment were the same".
9. The Supreme Court relied on the earlier decision in the case of Commissioner of Income Tax vs. Shri Arbuda Mills Limited (1998) 231 IT 50 and the order of this Court in Commissioner of Wealth Tax vs. A.K.Thanga Pillai [2001] 252 ITR 260 (Madras) approved.
10. In the decision relied on by the learned Senior Counsel in the case of Hind Wire Industries Limited vs. Commissioner of Income Tax reported in 212 ITR 639, the Supreme Court where explaining the word "order" explained in the provision
Section 154(7) held that since the word "order" in the expression "from the date of the order sought to be amended" in
Section 154(7) was not qualified in any way, it would not necessarily mean the original order. It could be an order including the amended or rectified order. In the provision under consideration also, 263(1) refers to "any order". The word "any order" would only mean any order under this Act, and if he considers that any order passed therein by the Assessing Officer is erroneous in so far as it is prejudicial to the interests of the Revenue, the section definitely gives power to the Commissioner of Income Tax. The deciding factor in the present case is that the complaint of the Commissioner of Income Tax, refers to the order passed under Section 143(3) and not the amended order under
Section 154. Hence the decision of the Supreme Court in 212 is no way applicable to the facts of the case.
11. For the foregoing reasons and in the light of the Supreme Court Judgment in the case of Commissioner of Income Tax vs. Alagendran Finance Limited reported in 293 ITR 1 referred to above, we are of the view that there is no question of law much less substantial question of law for determination in this case and hence the appeal is dismissed as such. No costs.