Madras HC Holds Income Tax Revision u/s 263 Time-Barred as Limitation Must Be Computed from Original Assessment Date [Read Order]

The High Court of Madras, held that the revision order passed under Section 263 of the Income Tax Act,1961, was time-barred, as the two-year limitation period must be computed from the date of the original assessment order,not the reassessment order.

The Revenue-appellant filed an appeal under Section 260A of the Act, challenging the Income Tax Appellate Tribunal (ITAT)’s order dated 18.09.2012 for the Assessment Year (AY) 2004-05.

Ganga Textiles Ltd,respondent-assessee, filed its return for AY 2004-05 on 01.11.2004, declaring a loss of ₹11.81 crore. The case was scrutinised, and the Assessing Officer (AO ) passed an order on 31.08.2006 under Section 143(3), disallowing certain deductions, including under Section 43B, which the assessee accepted.

Later, the assessment was reopened and completed under Section 143(3) read with Section 147 on 30.12.2009, relating to capital gains from sale of land and building. The assessee appealed, and the Commissioner of Income Tax (Appeals)[ CIT(A) ] allowed the appeal on 09.02.2011. This order was not contested by either party.

On 30.03.2012, the Revenue revised the reassessment order under Section 263. The assessee challenged it as time-barred, arguing it was beyond two years from the original order of 31.08.2006.

The tribunal accepted the assessee’s stand and set aside the revision order. The Revenue filed the present appeal against this decision.

The Revenue counsel argued that the revision order was within the two-year limit since the period should be counted from the reassessment order dated 30.12.2009, not the original order dated 31.08.2006.

The assessee’s counsel disagreed, stating that the revision related to a deduction under Section 43B, which was part of the original assessment and not considered during the reassessment. He argued that the two-year period should be calculated from the original order, making the revision time-barred. He also stated that the tribunal rightly accepted this view.

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Chief Justice K.R.Shriram and Justice Sunder Mohan noted that the original assessment order was passed on 31.08.2006 and had dealt with the issue under Section 43B. The reassessment was done only to compute capital gains from the sale of land and building and did not touch upon the Section 43B deductions. Hence, the original order on that issue remained intact and did not merge with the reassessment order.

The Court held that since the revision under Section 263 related to a matter covered in the original assessment, the two-year limitation under Section 263(2) had to be counted from 31.08.2006.

Relying on the Bombay High Court’s ruling in CIT v. ICICI Bank and its own decision in Indira Industries v. Principal Commissioner of Income Tax, the bench concluded that the revision order dated 30.03.2012 was time-barred.

Accordingly, it upheld the tribunal’s decision to set aside the revision order and dismissed the appeal, answering the questions of law in favour of the assessee.