Commissioner Of Income Taxcentral-I, Kolkata v. Bharat Hydro Powercorporation

OD-11 A.F.R. ITA/14/2012 IN THE HIGH COURT AT CALCUTTA SPECIAL JURISDICTION (Income Tax)ORIGINAL SIDE COMMISSIONER OF INCOME TAXCENTRAL-I, KOLKATA -Versus- BHARAT HYDRO POWERCORPORATION BEFORE :THE HON’BLE JUSTICE SURYA PRAKASH KESARWANIAndTHE HON’BLE JUSTICE RAJARSHI BHARADWAJDate : 24[th] 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 theappellant/income tax department and Mr. J. P. Khaitan, learned seniorcounsel assisted by Mr. Avra Mazumdar and Mr. Samrat Das, learnedAdvocates for the respondent/assessee.appellant/income tax department and Mr. J. P. Khaitan, learned seniorcounsel assisted by Mr. Avra Mazumdar and Mr. Samrat Das, learnedAdvocates for the respondent/assessee. 2.This appeal has been filed praying to set aside the order dated 24.06.2011passed in ITA No.427/Kol/2011 (Bharat Hydro Power Corporation Ltd. vs.Commissioner of Income Tax, Central-1, Kolkata) passed by the Incomepassed 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 bythe respondent/assessee to challenge the order of the Commissioner ofIncome Tax (Central-1), Kolkata dated 14.01.2011 under Section 263 ofthe Income Tax Act, 1961 was allowed and the aforesaid order of theCommissioner of Income Tax under Section 263 of the Act, 1961 was setaside. While allowing the appeal of the respondent/assessee, the Tribunalhas solely relied upon a judgment of the Hon’ble Supreme Court in thecase 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 assessmentorder stood merged with the re-assessment order and, as such, thelimitation under Section 263 of the Act, 1961 would start from the date ofre-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 ofIncome Tax Officer, Azamgarh vs. M/s. Mewalal Dwarka Prasad reportedin 1989 (176) ITR 529.order stood merged with the re-assessment order and, as such, thelimitation under Section 263 of the Act, 1961 would start from the date ofre-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 ofIncome Tax Officer, Azamgarh vs. M/s. Mewalal Dwarka Prasad reportedin 1989 (176) ITR 529. 4.We have carefully considered the submission of the learned counsel forthe parties and perused the paper book.the parties and perused the paper book. 5.Briefly stated facts of the present case are that an assessment order forthe assessment year 2004-05 was passed by the assessing officer on20.03.2006 under Section 143(3) of the Act, 1961. Thereafter, theassessing officer initiated proceedings under Section 147/148 of the Act,1961 and passed a re-assessment order dated 05.12.2008 under Sectionthe assessment year 2004-05 was passed by the assessing officer on20.03.2006 under Section 143(3) of the Act, 1961. Thereafter, theassessing officer initiated proceedings under Section 147/148 of the Act,1961 and passed a re-assessment order dated 05.12.2008 under Section 4.We have carefully considered the submission of the learned counsel forthe parties and perused the paper book.the parties and perused the paper book. 5.Briefly stated facts of the present case are that an assessment order forthe assessment year 2004-05 was passed by the assessing officer on20.03.2006 under Section 143(3) of the Act, 1961. Thereafter, theassessing officer initiated proceedings under Section 147/148 of the Act,1961 and passed a re-assessment order dated 05.12.2008 under Sectionthe assessment year 2004-05 was passed by the assessing officer on20.03.2006 under Section 143(3) of the Act, 1961. Thereafter, theassessing 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, theassessee 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 theAct, 1961 was issued by the Commissioner of Income Tax on three pointswhich were not the subject-matter of re-assessment proceedings or the re-assessment order. The Commissioner passed the order under Section263 of the Act, 1961 on 14.01.2011. Aggrieved with the aforesaid orderdated 14.01.2011 under Section 263 of the Act, 1961, therespondent/assessee filed the aforesaid appeal being ITANo.427/Kol/2011 before the Income Tax Appellate Tribunal, Bench- “B”,Kolkata which has been allowed by the impugned order dated 24.06.2011relying upon the aforesaid judgment of Hon’ble Supreme Court in the caseof 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 ofthe re-assessment order or re-assessment proceedings.assessment order on three points which were not the subject-matter ofthe 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 oftwo years from the end of the financial year in which the ordersought to be revised was passed.”two years from the end of the financial year in which the ordersought to be revised was passed.” 9.The present appeal was admitted by this Court by order dated 25.01.2012on the following substantial question of law:on the following substantial question of law: 1.Whether on the facts and in the circumstances of the case thelearned Tribunal was justified in law in not appreciating the ratiolaid down by the Hon’ble Apex Court in the case of AlagendranFinance Limited (2931 ITR 1) ?learned Tribunal was justified in law in not appreciating the ratiolaid down by the Hon’ble Apex Court in the case of AlagendranFinance Limited (2931 ITR 1) ? 2.Whether on the facts and in the circumstances of the case thelearned Tribunal was justified in holding that the notice underSection 263 of the Act dated 8.9.2010 is barred by limitationdespite the fact that the original assessment order dated20.3.2006 stand merged with the re-assessment order dated5.12.2008 in view of the amendment made by insertingexplanation 3 to section 147 by Finance Act, 2009 withretrospective effect from 1.4.1989 ?learned Tribunal was justified in holding that the notice underSection 263 of the Act dated 8.9.2010 is barred by limitationdespite the fact that the original assessment order dated20.3.2006 stand merged with the re-assessment order dated5.12.2008 in view of the amendment made by insertingexplanation 3 to section 147 by Finance Act, 2009 withretrospective effect from 1.4.1989 ? 3.Whether on the facts and in the circumstances of the case thelearned Tribunal was justified in holding that the originalassessment is modified to the extent and only in respect of thoseitems which have been considered in the re-assessment orderand does not make the original assessment order non-existent inrespect of concluded items which were not the subject matter ofre-assessment proceeding?”learned Tribunal was justified in holding that the originalassessment is modified to the extent and only in respect of thoseitems which have been considered in the re-assessment orderand does not make the original assessment order non-existent inrespect of concluded items which were not the subject matter ofre-assessment proceeding?” 10.The main issue involved in the impugned order the Tribunal is as towhether the proceedings initiated by the Commissioner of Income Tax andthe order passed under Section 263 of the Act, 1961 is beyond thelimitation provided under sub-Section (2) of Section 263. This questiondepends upon the question as to whether the limitation would start fromthe date of passing of the assessment order or from the date of passing ofthe re-assessment order.whether the proceedings initiated by the Commissioner of Income Tax andthe order passed under Section 263 of the Act, 1961 is beyond thelimitation provided under sub-Section (2) of Section 263. This questiondepends upon the question as to whether the limitation would start fromthe date of passing of the assessment order or from the date of passing ofthe re-assessment order. 11.From bare perusal of the scheme of the Act, 1961 and moreparticularly, the provisions of Sections 143(3), 147/148 and Section 263of the Act, 1961 we are of the considered view that the limitation wouldnormally 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 berevised by the Commissioner of Income Tax under Section 263 of the Act,1961 was subject-matter of re-assessment order, then the limitation forthe purpose of Section 263(2) of the Act, 1961 would start from the date ofre-assessment. In the present set of facts, the grounds on which Section263 was attempted to be involved by the Commissioner of Income Tax,were not subject-matter of re-assessment proceedings or re-assessmentorder. Under the Circumstances, the date of assessment order(20.03.2006) would be relevant for the purpose of sub-Section (2) ofSection 263. Since the notice under Section 263 was issued by theCommissioner of Income Tax on 08.11.2010, therefore, it was clearlybarred by time. Hence, the entire proceedings initiated by theCommissioner of Income Tax under Section 263 of the Act, 1961 waswithout jurisdiction being barred by limitation. 12.The issue as has been raised in the present appeal is also covered bythe judgment of the Hon’ble Supreme Court in the case of Commissionerof Income Tax, vs. Alagendran Finance Ltd. (supra) (paragraphs 14, 20and 25) which is reproduced below:the judgment of the Hon’ble Supreme Court in the case of Commissionerof Income Tax, vs. Alagendran Finance Ltd. (supra) (paragraphs 14, 20and 25) which is reproduced below: 14. A bare perusal of the order passed by the Commissioner ofIncome-tax would clearly demonstrate that only that part ofthe order of assessment which related to lease equalisationfund was found to be prejudicial to the interests of theRevenue. The proceedings for reassessment have nothingto do with the said head of income. The doctrine of merger,therefore, would not apply in a case of this nature.Income-tax would clearly demonstrate that only that part ofthe order of assessment which related to lease equalisationfund was found to be prejudicial to the interests of theRevenue. The proceedings for reassessment have nothingto do with the said head of income. The doctrine of merger,therefore, would not apply in a case of this nature. 14. A bare perusal of the order passed by the Commissioner ofIncome-tax would clearly demonstrate that only that part ofthe order of assessment which related to lease equalisationfund was found to be prejudicial to the interests of theRevenue. The proceedings for reassessment have nothingto do with the said head of income. The doctrine of merger,therefore, would not apply in a case of this nature.Income-tax would clearly demonstrate that only that part ofthe order of assessment which related to lease equalisationfund was found to be prejudicial to the interests of theRevenue. The proceedings for reassessment have nothingto 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 thateven the Tribunal found that all the subsequent eventswere in respect of matters other than the allowance of“lease equalisation fund”. The said finding of fact isbinding on us. The doctrine of merger, therefore, in thefact situation obtaining herein cannot be said to have anyapplication whatsoever. It is not a case where the subject-matter of reassessment and the subject-matter ofassessment were the same. They were not.even the Tribunal found that all the subsequent eventswere in respect of matters other than the allowance of“lease equalisation fund”. The said finding of fact isbinding on us. The doctrine of merger, therefore, in thefact situation obtaining herein cannot be said to have anyapplication whatsoever. It is not a case where the subject-matter of reassessment and the subject-matter ofassessment were the same. They were not. 25. We, therefore, are clearly of the opinion that keeping inview the facts and circumstances of this case and, inparticular, having regard to the fact that the Commissionerof Income-tax exercising his revisional jurisdiction reopenedthe order of assessment only in relation to leaseequalisation fund which being not the subject of thereassessment proceedings, the period of limitation providedfor under sub-section (2) of section 263 of the Act wouldbegin to run from the date of the order of assessment andnot from the order of reassessment. The revisionaljurisdiction having, thus, been invoked by theCommissioner of Income-tax beyond the period ofview the facts and circumstances of this case and, inparticular, having regard to the fact that the Commissionerof Income-tax exercising his revisional jurisdiction reopenedthe order of assessment only in relation to leaseequalisation fund which being not the subject of thereassessment proceedings, the period of limitation providedfor under sub-section (2) of section 263 of the Act wouldbegin to run from the date of the order of assessment andnot from the order of reassessment. The revisionaljurisdiction having, thus, been invoked by theCommissioner of Income-tax beyond the period of limitation, it was wholly without jurisdiction rendering theentire proceeding a nullity.” 13.For all the reasons afore-stated, we hold that in respect of the groundson which powers under Section 263 of the Act, 1961 were invoked by theCommissioner of Income Tax, being not part of or subject-matter of re-assessment proceedings under Section 147/148 of the Act, the doctrine ofmerger of the original assessment order with the subsequent re-assessment order would not apply.on which powers under Section 263 of the Act, 1961 were invoked by theCommissioner of Income Tax, being not part of or subject-matter of re-assessment proceedings under Section 147/148 of the Act, the doctrine ofmerger of the original assessment order with the subsequent re-assessment order would not apply. limitation, it was wholly without jurisdiction rendering theentire proceeding a nullity.” 13.For all the reasons afore-stated, we hold that in respect of the groundson which powers under Section 263 of the Act, 1961 were invoked by theCommissioner of Income Tax, being not part of or subject-matter of re-assessment proceedings under Section 147/148 of the Act, the doctrine ofmerger of the original assessment order with the subsequent re-assessment order would not apply.on which powers under Section 263 of the Act, 1961 were invoked by theCommissioner of Income Tax, being not part of or subject-matter of re-assessment proceedings under Section 147/148 of the Act, the doctrine ofmerger 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 powersunder Section 263 on any of the grounds or subject matters on whichreassessment order was based, therefore, the principle of merger for thepurposes of limitation would not apply and the limitation under sub-section (2) of Section 263 would start keeping in mind the date ofassessment order i.e. 20.03.2006. Thus, having regard to the fact thatthe Commissioner of Income Tax had exercised his revisional jurisdictionon grounds which were not subject matter of reassessment proceedings,the period of limitation provided for in sub-section (2) of Section 263 ofthe Act would begin to run from the date of order of assessment and notfrom the date of order of reassessment. The revisional jurisdiction havingbeen invoked by the Commissioner of Income Tax beyond the period oflimitation, it was wholly without jurisdiction rendering the entireproceedings a nullity. 15.We have also perused the judgment of Hon'ble Supreme Court in thecase of Messrs. Mewalal Dwarka Prasad (supra) heavily relied by learnedcounsel for the appellant/department. We find that the said judgmenthas no relevance on facts of the present case inasmuch as it relates to thevalidity of a reassessment proceeding. In the present set of facts, we aremainly concerned with the running of limitation under sub-section (2) ofSection 263 of the Act 1961 and which issue stands concluded directly bythe judgment of Hon'ble Supreme Court in the case of Alagendran FinanceLimited (supra).case of Messrs. Mewalal Dwarka Prasad (supra) heavily relied by learnedcounsel for the appellant/department. We find that the said judgmenthas no relevance on facts of the present case inasmuch as it relates to thevalidity of a reassessment proceeding. In the present set of facts, we aremainly concerned with the running of limitation under sub-section (2) ofSection 263 of the Act 1961 and which issue stands concluded directly bythe judgment of Hon'ble Supreme Court in the case of Alagendran FinanceLimited (supra). 16. Under the circumstances, the Income Tax Appellate Tribunal has notcommitted any manifest error of law to set aside the order dated14.01.2011 passed by the Commissioner of Income Tax under Section 263of the Act 1961. All the three substantial questions of law, as reproducedabove, are answered in favour of the assessee against the revenue. Theappeal (ITA/14/2012) is dismissed.committed any manifest error of law to set aside the order dated14.01.2011 passed by the Commissioner of Income Tax under Section 263of the Act 1961. All the three substantial questions of law, as reproducedabove, are answered in favour of the assessee against the revenue. Theappeal (ITA/14/2012) is dismissed. (SURYA PRAKASH KESARWANI, J.) (RAJARSHI BHARADWAJ, J.)