Madras High Court
Commissioner Of Income Tax vs M/S.Ganga Textiles Ltd on 1 July, 2025
T.C.A. No.340 of 2013
IN THE HIGH COURT OF JUDICATURE AT MADRAS
DATED: 01.07.2025
CORAM
THE HON'BLE MR.K.R.SHRIRAM, CHIEF JUSTICE
AND
THE HON'BLE MR.JUSTICE SUNDER MOHAN
Tax Case Appeal No.340 of 2013
Commissioner of Income Tax,
Coimbatore.
.. Appellant
-vs-
M/s.Ganga Textiles Ltd.,
1547-A, Avinashi Road,
Peelamedu, Coimbatore 641 004
PAN : AABCG1029P.
.. Respondent
Prayer: Appeal filed under Section 260A of the Income Tax Act, 1961,
against the order dated 18.09.2012 passed in ITA No.1305/Mds/2012 on
the file of Income Tax Appellate Tribunal, Madras 'B' Bench, Chennai for
the Assessment Year 2004-05.
For Appellant : Mr.V.Mahalingam
Sr. Stdg. Counsel
For Respondent : Mr.V.S.Jayakumar
Senior Counsel
for Mr.Sandeep Bagmar
*****
Page 1 of 9
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T.C.A. No.340 of 2013
JUDGMENT
(Judgment of the Court was delivered by Sunder Mohan, J.)
On 23.07.2013, the above Tax Case Appeal was admitted on the
following substantial questions of law:
1. Whether under the facts and circumstances of the case,
the Income Tax Appellate Tribunal was correct in
holding that the order of the Commissioner of Income
Tax under Section 263 is time barred and not in
accordance with the provisions of the Income Tax Act?
2. Whether under the facts and circumstances of the case,
the Income Tax Appellate Tribunal was correct in
holding that 2 years from the end of the relevant
financial year as per Section 263(2) of the Income Tax
Act is to be considered from the date of original
assessment and not from the date of reassessment ?
3. Whether under the facts and circumstances of the case,
the Income Tax Appellate Tribunal was right in
narrowing scope of Section 263 and powers of the
Commissioner under that Section when the assessment
was found to be erroneous and prejudicial to the
interests of the Revenue ?
2. The brief facts leading to the filing of the above appeal are as
follows:
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(a) Respondent/Assessee is a limited company. On 01.11.2004,
assessee filed return of income for Assessment Year 2004 – 2005 admitting
a loss of Rs.11,81,35,170/-. The case was selected for scrutiny. The
Assessing Officer passed an order on 31.08.2006 under Section 143(3) of
the Income Tax Act, 1961 (in short 'the Act') disallowing certain deductions
claimed by the assessee, including a portion of a deduction claimed under
Section 43B of the Act. Assessee accepted the said assessment.
(b) The assessment was reopened and was completed under Section
143(3) read with Section 147 of the Act on 30.12.2009 qua computation of
capital gains regarding assessee's sale of its land and building.
(c) Aggrieved by the said order, assessee filed an appeal before
Commissioner of Income Tax (Appeals) – I, Coimbatore, who allowed the
appeal on 09.02.2011. Neither the assessee nor the revenue challenged the
said order.
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(d) On 30.03.2012, appellant/Revenue, under Section 263 of the Act,
revised the assessment order passed under Section 143(3) read with
Section 147 of the Act for the said Assessment Year.
(e) Assessee challenged the said order, inter alia, on the ground that
the order under Section 263 of the Act was beyond the statutory period of
two years prescribed under Section 263(2) of the Act from the date of the
original assessment order dated 31.08.2006.
(f) The Tribunal accepted the submissions of the assessee and set
aside the order passed under Section 263 of the Act. It is against this order,
Revenue is on appeal.
3. Mr.Mahalingam, learned standing counsel for the
appellant/Revenue, submitted that the order passed by the appellant is
within the statutory period of two years, as the said period has to be
reckoned from the date of the reassessment order passed under Section
143(3) read with Section 147 of the Act, i.e. 30.12.2009 and not from the
date of the original assessment order, i.e., 31.08.2006.
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4.Mr.Jayakumar, learned senior counsel for the
respondent/assessee, per contra, submitted that appellant had sought to
revise the assessment order by holding that the deduction under Section
43B of the Act can be allowed only under the head “Business” and since
there was no business activity, the same could not have been allowed; and
that the said revision in effect is to the original order of assessment dated
31.08.2006. He further submitted that in the reassessment, the deduction
under 43B of the Act was not an issue. Therefore, he submitted that since
the jurisdiction under Section 263(1) of the Act was exercised with
reference to the findings in the original order of the assessment, the date of
the original assessment order has to be reckoned for considering the
statutory period of two years before which the order under Section 263 (1)
of the Act could have been passed. He further submitted that the Tribunal
was right in holding that the order under section 263 (1) is barred by
limitation.
5. It is not disputed that the original assessment order was passed on
31.08.2006. The original assessment order had considered the issue under
Section 43B of the Act. The said assessment order was reopened by the
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Assessing Officer only with regard to the computation of long and short
term capital gains pertaining to assessee's sale deed executed qua the land
and building. The reassessment was not with regard to the deductions
claimed under Section 43B of the Act. Therefore, the order passed under
Section 143(3) on 31.08.2006 cannot be said to have been merged with the
order of reassessment in respect of the deductions under Section 43B of the
Act. The order passed under 263(1) of the Act is with reference to an issue
which is covered by the original assessment order and not with regard to
the issue in the reassessment.
6. Hence, in our considered view, the limitation of two years
prescribed under Section 263(2) of the Act has to be reckoned from the
date of the original assessment order under Section 143(3) of the Act,
which is 31.08.2006. In fact, the Bombay High Court in CIT vs. ICICI
Bank1, had dealt with an identical issue and held as follows:
"Sub-section (2) of Section 263 stipulates a period of limitation of two
years within which an order under sub-section (1) has to be passed.
Under sub-section (2) no order under Section 263(1)can be made
after the expiry of two years from the end of the financial year in
which the order sought to be revised was passed. The order of
assessment under Section 143(3) in the present case allowed the
deduction which was claimed under Section 36(1)(vii), Section
1(2012) 343 ITR 74
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36(1)(viia) and in respect of foreign exchange rate difference. Neither
in the first order of reassessment dated 22 February 2000 nor in the
second order of reassessment dated 26 March 2002 were these aspects
determined. In other words on the aforesaid three issues, the original
order of assessment dated 10 March 1999 passed under Section
143(3) continued to hold the field. Once that is the position, then
clearly the doctrine of merger would not apply. The order under
Section 143(3) passed on 10 March 1999 cannot stand merged with
the orders of reassessment in respect of those issues which did not
form the subject matter of the reassessment. Consequently
Explanation 3 to Section 147 will not alter that position. Explanation
3 only enables the Assessing Officer, once an assessment is reopened,
to assess or reassess the income in respect of any issue, even an issue
in respect of which no reasons were indicated in the notice under
Section 148(2). This, however, will not obviate the bar of limitation
under Section 263(2). Where the jurisdiction under Section 263(1) is
sought to be exercised with reference to an issue which is covered by
the original order of assessment under Section 143(3) and which does
not form the subject matter of the reassessment, as in the present case,
limitation must necessarily begin to run from the order under Section
143(3). Before concluding we may also take notice of the fact that the
second order of reassessment dated 26 March 2002 has been set aside
by the Tribunal on 27 August 2010. An appeal against the order of the
Tribunal is pending before this Court for admission. However, we
have considered this appeal independently and have come to the
conclusion that the invocation of the jurisdiction under Section 263
was barred by limitation."
7. The above observations would squarely apply to the facts of the
instant case. A co-ordinate bench of this Court had also taken a similar
view in Indira Industries v. Principal Commissioner of Income
Tax2. For the aforesaid reasons, we are of the view that the order of the
2 [2018] 305 CTR 314 (MAD)
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appellant/Revenue dated 30.03.2012 under Section 263 of the Act is time-
barred and therefore was rightly set aside by the Tribunal. The substantial
questions of law are answered in favour of the assessee.
Appeal is, accordingly, dismissed. No costs.
(K.R.SHRIRAM, CJ.) (SUNDER MOHAN, J.)
01.07.2025
Index : Yes/No
Neutral Citation : Yes/No
sra
To
1. The Income Tax Appellate
Tribunal Madras 'B' Bench.
2. The Commissioner of Income Tax,
Coimbatore.
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The Hon'ble Chief Justice
and
Sunder Mohan, J.
sra
01.07.2025
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