ITAT restores Original Assessment Order as Revision order u/s 263 is barred by Limitation [Read Order]

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The Mumbai Bench of Income Tax Appellate Tribunal (ITAT) restored the original assessment order as a Revision order under section 263 of the Income Tax Act, 1961 is barred by limitation.

The assessee, Royal Western India Turf Club is a resident company engaged in the business of conducting horse races, turf clubhouse, and providing hospitality service to its members and their guests. For the assessment year under dispute, the assessee filed its return of income declaring a total income of Rs.1,49,08,690/-. Assessment in the case of the assessee was originally completed under section 143(3) of the Act vide order dated 06-02-2014 determining the total income at Rs.27,23,84,049/-. Against the assessment order so passed, the assessee preferred appeal before learned Commissioner of Income Tax (Appeals), wherein, substantial relief was granted to the assessee. While giving effect to the order of Commissioner (Appeals), the assessing officer in an order determined the income at nil under the normal provisions of the Act and computed book profit under section 115JB of the Act at Rs.1,39,38,254/-.

When the matter stood thus, the assessing officer received information that the assessee had transferred certain receipts directly to its reserve under the head “life membership fee” etc which included an amount of Rs.2,00,50,000/- representing contribution from certain members towards various infrastructure facilities of the club for the mutual benefit of the members of the club and such contributions are nonrefundable. Being of the view that the receipt of Rs.2,00,50,000/- has escaped assessment, the assessing officer reopened the assessment under section 147 of the Act and ultimately passed an order on 26- 12-2018 under section 143(3) r.w.s. 147 of the Act determining the total income at Rs.2,00,50,000/-.

The assessee submitted the assessment was reopened under section 147 of the Act for the specific purpose of assessing the escaped income of Rs.2,00,50,000/-, being the contribution received from members transferred to the reserve. He submitted the issues on which PCIT held the assessment order to be erroneous and prejudicial for non-inquiry by the assessing officer were never the subject matter of reopening; hence, the assessing officer had no occasion to enquire into those issues.

The coram of Accountant Member, Rajesh Kumar, and Judicial Member, Saktijit Dey held that the original assessment order having been passed on 06-02-2014, the impugned order passed under section 263 of the Act is barred by limitation in view of section 263(2) of the Act.

“We have held that the impugned order passed under section 263 of the Act is barred by limitation, the consequence would be, it has to be declared as invalid and the assessment order has to be restored. Accordingly, we do so,” the ITAT said.

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