In a major relief of Indian Overseas Bank, the Madras High Court quashed the revision proceedings by the Commissioner as it was time-barred.
The assessee, M/s.Indian Overseas Bank filed their return of income for the year under consideration and it was processed under Section 143(1) of the Act. Subsequently, the case was selected for scrutiny and a notice under Section 143(2) of the Act was issued. After the case was discussed, the assessment was completed under Section 143(3) of the Act vide order. Thereafter, the assessment was reopened by notice. The assessee addressed to the Assessing Officer requesting reasons for reopening. Further, the reasons were communicated to the assessee by letter.
The Commissioner of Income Tax (Large Taxpayer Unit) issued a notice under Section 263(1) of the Act stating that the assessment proceedings were erroneous and prejudicial to the interest of Revenue. The case was discussed by affording an opportunity for a personal hearing. The assessee objected to the exercise of power under Section 263(1) of the Act on the ground of limitation as well as on merits. However, by order dated 26.3.2014, the objections raised by the assessee were rejected by the CIT, the reassessment order was set aside and the matter was sent back to the Assessing Officer for de novo consideration with regard to the claim of business loss of Rs.72.75 Crores.
The re-assessment was completed by order dated 30.12.2011. If according to the CIT, the order of reassessment was erroneous and prejudicial to the interest of Revenue, he could have exercised his powers under Section 263(1) of the Act within the period of limitation under Section 263(2) of the Act i.e before the expiry of two years from the end of the financial year, in which, the order sought to be revised was passed. Therefore, the period of limitation would commence from 31.3.2007 and would come to an end on 31.3.2009.
The division bench of Justice T.S. Sivagnanam and Justice Sathi Kumar Sukumara Kurup held that the jurisdiction under Section 263(1) of the Act was exercised with reference to an issue, which was covered in the original assessment order dated 28.12.2006 and it was not an issue, based on which, the reopening of assessment was made under Section 143 of the Act. For all purposes, the period prescribed under Sub-Section (2) of Section 263 of the Act should commence from 31.3.2007 and the two years’ period would come to an end on 31.3.2009. As it is not in dispute that the proceedings under Section 263 of the Act were initiated well beyond the said date, the exercise of such power has to be held to be without jurisdiction and barred by limitation.
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