Calcutta High Court
Central-I vs Bharat Hydro Power on 24 January, 2024
Author: Rajarshi Bharadwaj
Bench: Rajarshi Bharadwaj
OD-11 A.F.R.
ITA/14/2012
IN THE HIGH COURT AT CALCUTTA
SPECIAL JURISDICTION (Income Tax)
ORIGINAL SIDE
COMMISSIONER OF INCOME TAX
CENTRAL-I, KOLKATA
-Versus-
BHARAT HYDRO POWER
CORPORATION
BEFORE :
THE HON'BLE JUSTICE SURYA PRAKASH KESARWANI
And
THE HON'BLE JUSTICE RAJARSHI BHARADWAJ
Date : 24th January, 2024
Appearance:
Ms. Smita Das De, Adv.
...for the appellant.
Mr. J. P. Khaitan, Sr. Adv.
Mr. Avra Mazumdar, Adv.
Mr. Samrat Das, Adv.
...for the respondent.
1. Heard Ms. Smita Das De, learned standing counsel for the
appellant/income tax department and Mr. J. P. Khaitan, learned senior
counsel assisted by Mr. Avra Mazumdar and Mr. Samrat Das, learned
Advocates for the respondent/assessee.
2. This appeal has been filed praying to set aside the order dated 24.06.2011
passed in ITA No.427/Kol/2011 (Bharat Hydro Power Corporation Ltd. vs.
Commissioner of Income Tax, Central-1, Kolkata) passed by the Income
Tax Appellate Tribunal, Bench- "B" , Kolkata whereby the appeal filed by
the respondent/assessee to challenge the order of the Commissioner of
Income Tax (Central-1), Kolkata dated 14.01.2011 under Section 263 of
the Income Tax Act, 1961 was allowed and the aforesaid order of the
Commissioner of Income Tax under Section 263 of the Act, 1961 was set
aside. While allowing the appeal of the respondent/assessee, the Tribunal
has solely relied upon a judgment of the Hon'ble Supreme Court in the
case of Commissioner of Income Tax vs. Algendran Finance Ltd. reported in
(2007) 293 ITR 1(SC) .
3. Learned counsel appearing for the appellant submits that the assessment
order stood merged with the re-assessment order and, as such, the
limitation under Section 263 of the Act, 1961 would start from the date of
re-assessment order and not from the date of original assessment order.
She relied upon a judgment of the Hon'ble Supreme Court in the case of
Income Tax Officer, Azamgarh vs. M/s. Mewalal Dwarka Prasad reported
in 1989 (176) ITR 529.
4. We have carefully considered the submission of the learned counsel for
the parties and perused the paper book.
5. Briefly stated facts of the present case are that an assessment order for
the assessment year 2004-05 was passed by the assessing officer on
20.03.2006 under Section 143(3) of the Act, 1961. Thereafter, the
assessing officer initiated proceedings under Section 147/148 of the Act,
1961 and passed a re-assessment order dated 05.12.2008 under Section
148/143 of the Act, 1961. Aggrieved with this re-assessment order, the
assessee filed an appeal before the Commissioner of Income Tax (Appeal)
which was allowed by the CIT(A) by order dated 29.10.2009.
6. It is thereafter that a notice dated 08.11.2010 under Section 263 of the
Act, 1961 was issued by the Commissioner of Income Tax on three points
which were not the subject-matter of re-assessment proceedings or the re-
assessment order. The Commissioner passed the order under Section
263 of the Act, 1961 on 14.01.2011. Aggrieved with the aforesaid order
dated 14.01.2011 under Section 263 of the Act, 1961, the
respondent/assessee filed the aforesaid appeal being ITA
No.427/Kol/2011 before the Income Tax Appellate Tribunal, Bench- "B",
Kolkata which has been allowed by the impugned order dated 24.06.2011
relying upon the aforesaid judgment of Hon'ble Supreme Court in the case
of Algendran Finance Ltd. (supra).
7. It is undisputed that the Commissioner has sought to revise the re-
assessment order on three points which were not the subject-matter of
the re-assessment order or re-assessment proceedings.
8. Sub-section (2) of Section 263 of the Act, 1996 is reproduced below:
"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."
9. The present appeal was admitted by this Court by order dated 25.01.2012
on the following substantial question of law:
1. Whether on the facts and in the circumstances of the case the
learned Tribunal was justified in law in not appreciating the ratio
laid down by the Hon'ble Apex Court in the case of Alagendran
Finance Limited (2931 ITR 1) ?
2. Whether on the facts and in the circumstances of the case the
learned Tribunal was justified in holding that the notice under
Section 263 of the Act dated 8.9.2010 is barred by limitation
despite the fact that the original assessment order dated
20.3.2006 stand merged with the re-assessment order dated
5.12.2008 in view of the amendment made by inserting
explanation 3 to section 147 by Finance Act, 2009 with
retrospective effect from 1.4.1989 ?
3. Whether on the facts and in the circumstances of the case the
learned Tribunal was justified in holding that the original
assessment is modified to the extent and only in respect of those
items which have been considered in the re-assessment order
and does not make the original assessment order non-existent in
respect of concluded items which were not the subject matter of
re-assessment proceeding?"
10. The main issue involved in the impugned order the Tribunal is as to
whether the proceedings initiated by the Commissioner of Income Tax and
the order passed under Section 263 of the Act, 1961 is beyond the
limitation provided under sub-Section (2) of Section 263. This question
depends upon the question as to whether the limitation would start from
the date of passing of the assessment order or from the date of passing of
the re-assessment order.
11. From bare perusal of the scheme of the Act, 1961 and more
particularly, the provisions of Sections 143(3), 147/148 and Section 263
of the Act, 1961 we are of the considered view that the limitation would
normally start from the date of the assessment order under Section 143(3)
of the Act, 1961. But if the grounds on which the order is sought to be
revised by the Commissioner of Income Tax under Section 263 of the Act,
1961 was subject-matter of re-assessment order, then the limitation for
the purpose of Section 263(2) of the Act, 1961 would start from the date of
re-assessment. In the present set of facts, the grounds on which Section
263 was attempted to be involved by the Commissioner of Income Tax,
were not subject-matter of re-assessment proceedings or re-assessment
order. Under the Circumstances, the date of assessment order
(20.03.2006) would be relevant for the purpose of sub-Section (2) of
Section 263. Since the notice under Section 263 was issued by the
Commissioner of Income Tax on 08.11.2010, therefore, it was clearly
barred by time. Hence, the entire proceedings initiated by the
Commissioner of Income Tax under Section 263 of the Act, 1961 was
without jurisdiction being barred by limitation.
12. The issue as has been raised in the present appeal is also covered by
the judgment of the Hon'ble Supreme Court in the case of Commissioner
of Income Tax, vs. Alagendran Finance Ltd. (supra) (paragraphs 14, 20
and 25) which is reproduced below:
14. A bare perusal of the order passed by the Commissioner of
Income-tax would clearly demonstrate that only that part of
the order of assessment which related to lease equalisation
fund was found to be prejudicial to the interests of the
Revenue. The proceedings for reassessment have nothing
to do with the said head of income. The doctrine of merger,
therefore, would not apply in a case of this nature.
20. We may at this juncture also take note of the fact that
even the Tribunal found that all the subsequent events
were in respect of matters other than the allowance of
"lease equalisation fund". The said finding of fact is
binding on us. The doctrine of merger, therefore, in the
fact situation obtaining herein cannot be said to have any
application whatsoever. It is not a case where the subject-
matter of reassessment and the subject-matter of
assessment were the same. They were not.
25. We, therefore, are clearly of the opinion that keeping in
view the facts and circumstances of this case and, in
particular, having regard to the fact that the Commissioner
of Income-tax exercising his revisional jurisdiction reopened
the order of assessment only in relation to lease
equalisation fund which being not the subject of the
reassessment proceedings, the period of limitation provided
for under sub-section (2) of section 263 of the Act would
begin to run from the date of the order of assessment and
not from the order of reassessment. The revisional
jurisdiction having, thus, been invoked by the
Commissioner of Income-tax beyond the period of
limitation, it was wholly without jurisdiction rendering the
entire proceeding a nullity."
13. For all the reasons afore-stated, we hold that in respect of the grounds
on which powers under Section 263 of the Act, 1961 were invoked by the
Commissioner of Income Tax, being not part of or subject-matter of re-
assessment proceedings under Section 147/148 of the Act, the doctrine of
merger of the original assessment order with the subsequent re-
assessment order would not apply.
14. Since the Commissioner of Income Tax has not invoked the powers
under Section 263 on any of the grounds or subject matters on which
reassessment order was based, therefore, the principle of merger for the
purposes of limitation would not apply and the limitation under sub-
section (2) of Section 263 would start keeping in mind the date of
assessment order i.e. 20.03.2006. Thus, having regard to the fact that
the Commissioner of Income Tax had exercised his revisional jurisdiction
on grounds which were not subject matter of reassessment proceedings,
the period of limitation provided for in sub-section (2) of Section 263 of
the Act would begin to run from the date of order of assessment and not
from the date of order of reassessment. The revisional jurisdiction having
been invoked by the Commissioner of Income Tax beyond the period of
limitation, it was wholly without jurisdiction rendering the entire
proceedings a nullity.
15. We have also perused the judgment of Hon'ble Supreme Court in the
case of Messrs. Mewalal Dwarka Prasad (supra) heavily relied by learned
counsel for the appellant/department. We find that the said judgment
has no relevance on facts of the present case inasmuch as it relates to the
validity of a reassessment proceeding. In the present set of facts, we are
mainly concerned with the running of limitation under sub-section (2) of
Section 263 of the Act 1961 and which issue stands concluded directly by
the judgment of Hon'ble Supreme Court in the case of Alagendran Finance
Limited (supra).
16. Under the circumstances, the Income Tax Appellate Tribunal has not
committed any manifest error of law to set aside the order dated
14.01.2011 passed by the Commissioner of Income Tax under Section 263
of the Act 1961. All the three substantial questions of law, as reproduced
above, are answered in favour of the assessee against the revenue. The
appeal (ITA/14/2012) is dismissed.
(SURYA PRAKASH KESARWANI, J.)
(RAJARSHI BHARADWAJ, J.)
As./S.Kumar
