High Court Of Madras
CIT vs. Shriram Engineering Construction Company Ltd.
Asst. Year 2000-01
K. Raviraja Pandian & M.M. Sundresh, JJ.
Tax Case (Appeal) No. 1386 of 2009
21st December, 2009
Counsel appeared :
K. Subramaniam, for the Appellant
ORDER
K. RAVIRAJA PANDIAN, J. :
The Revenue on appeal against the order of the Tribunal dt. 27th June, 2008 made in IT Appeal No. 1359 of
2006 relating to the asst. yr. 2000-01, by formulating the following question of law: “Whether in the facts and circumstances of the case, the Tribunal was right in holding that the order of the CIT passed under s. 263 of the IT Act for the asst. yr. 2000-01 was barred by limitation by taking the date of assessment year and not the date of the order of rectification under s. 154 as the date with reference to which the period of limitation under s. 263(2) has to be reckoned”.
2. The facts: The assessee company engaged in the construction of Water Treatment Plant filed its return of income for the asst. yr. 2000-01 on 30th Nov., 2000 admitting total income of Rs. 4,48,84,554. The return of income was processed under s. 143(1) on 6th July, 2001 and the returned income was accepted. Subsequently, an order under s. 143(3) was passed on 31st March, 2003 on a total income of Rs. 52,07,877. While completing the assessment the AO among other things disallowed deduction under s. 80-IA relating to the water treatment project. However, a sum of Rs. 31,46,497 being the profit of water supply project has been allowed as deduction under s. 80-IA. This was subsequently modified by the AO by an order under s. 154 dt. 19th June, 2003 and the deduction was restricted to Rs. 2,89,93,730. The CIT(A) on perusal of the records found that the nature of work done by the assessee in respect of project was only that of a contractor and at no point of time the project was owned by the assessee, confirmed the opinion that the allowance of deduction was contrary to the provisions of s. 80-IA(4) and hence initiated proceedings under s. 263 of the Act. The assessee objected the revisional proceedings. The CIT(A) passed an order confirming its proposal made in the show cause notice. That order was carried by way of appeal to the Tribunal and the Tribunal held that the order under s. 263 was barred by limitation since the period has to be reckoned with reference to the date of assessment order i.e., 31st March, 2003 and quashed the order of the CIT passed under s. 263 on that ground. The said order is assailed before this Court in this appeal by formulating the above question of law.
The learned counsel for the Revenue reiterated the grounds of appeal precisely to the effect that once the order passed under s. 143(3) is rectified under s. 154, as per the theory of merger, the order passed under s. 143(3) got automatically merged with the order passed under s. 154. So the period of limitation has to be reckoned from the date of passing of the order under s. 154 of the Act. For which he relied on the decision of the Supreme Court in the case of Hind Wire Industries Ltd. vs. CIT (1995) 124 CTR (SC) 219 : (1995) 212 ITR 639 (SC).
We have heard the argument of the learned counsel and we are not able to subscribe our view with the argument of the learned counsel for sustaining the case. There is no dispute about the facts and dates as stated above. Sec.263 reads as follows : “263 Revision of orders prejudicial to revenue—(1) The CIT may call for and examine the records of any proceedings under this Act, and if he considers that any order passed thereon by the AO is erroneous insofar as it is prejudicial to the interests of the Revenue, he may, after giving the assessee an opportunity of being heard and after making or causing to be made such inquiry as he deems necessary, pass such order thereon as the circumstances of the case, justify including an order enhancing or modifying the assessment, or cancelling the assessment and directing a fresh assessment. Explanation : For the removal of doubts, it is hereby declared that for the purpose of this subsection,— (a)… (b)… (c)… (2) No order shall be made under sub-s. (1) after the expiry of two years from the end of the financial year in which the order sought to be revised was passed….”
As per the provisions of s. 263 (2) of the IT Act, no order shall be made under sub s. (1) of s. 263, after the expiry of 2 years from the end of financial year in which the order sought to be revised was passed. From the above, it is clear that the revisional order under s. 263 has to be passed within two years from the end of the financial year in which the order sought to be revised was passed. While issuing the show-cause notice, for the purpose of revision of assessment under s. 263, the CIT has stated that for the asst. yr. 2000-01, it was seen that the assessee have filed return of income on 30th Nov., 2000 admitting nil income, that the assessment was subsequently completed under s. 143(3) of the Act assessing the income for the year at Rs. 1,21,82,188,that while completing the assessment, the AO had among other things disallowed deduction under s. 80-IA relating to Water Treatment Projects, that a sum of Rs. 3,14,46,497 being the profit on Water Supply Project had been allowed as deduction under s. 80-IA, that was subsequently modified vide order under s. 154 dt. 19th June, 2003 and the deduction under s. 80-IA had been restricted to Rs. 2,89,93,730. It was further stated that the nature of work done by the assessee in respect of the projects was only that of a contractor and at no point of time the project was owned by the assessee, that factum has been admitted by the assessee in letter dt. 24th March, 2003. The reason shown in the show-cause notice manifest that what was sought to be revised was the assessment order and not the rectification order passed because the rectification order was passed for the limited purpose of reduction of deduction under s. 80-IA of the Act. That part of the order which sought to be revised as seen from the show cause notice has not been merged with the order passed under s. 154.
8. With reference to the reasoning stated in the show cause notice, we are of the view that the CIT has referred to only an order passed under s. 143(3). If that order is sought to be revised the limitation prescribed under s.
263(2), it is barred. The issue is also covered by the decision of the Supreme Court in the case of CIT vs. Alagendran Finance Ltd. (2007) 211 CTR (SC) 69 : (2007) 293 ITR 1 (SC). In that case, the Doctrine of merger has also been considered and explained. The Supreme Court has held as follows : “Assessments for the asst. yrs. 1994-95, 1995-96 and 1996-97 on the assessee were completed in 1997 and 1998. In the orders of assessment, the assessee’s claim relating to ‘lease equalisation fund’ was accepted. Thereafter orders of reassessment were initiated in respect of three other items but not the item relating to ‘Lease Equalisation Fund’ and reassessments were made. Thereafter, the CIT, by an order dt. 29th March, 2004, initiated revision proceedings only in relation to the item ‘lease equalisation fund’. The Tribunal held that the revision proceedings were barred by limitation as they were initiated more than four years after the original assessments; and the High Court dismissed the appeal therefrom. The Department appealed to the Supreme Court”
The Supreme Court further held as follows : “Affirming the decision of the High Court, that the CIT had sought to revise only that part of the order of assessment which related to lease equalisation fund; but the proceedings for reassessment had nothing to do with that item of income. The doctrine of merger did not apply in a case of this nature; the period of limitation commenced from the dates of the original assessments and not from the reassessments since the latter had not had anything to do with the Lease Equalisation Fund. This was not a case where the subject-matter of reassessment and the subject matter of the assessment were the same”.
The Supreme Court relied on the earlier decision in the case of CIT vs. Shri Arbuda Mills Ltd. (1998) 147 CTR (SC) 474 : (1998) 231 ITR 50 (SC) and the order of this Court in CWT vs. A.K. Thanga Pillai (2002) 172 CTR (Mad) 250 : (2001) 252 ITR 260 (Mad) approved.
In the decision relied on by the learned senior counsel in the case of Hind Wire Industries Ltd. vs. CIT (supra), the Supreme Court where explaining the word “order” explained in the provision s. 154(7) held that since the word “order” in the expression “from the date of the order sought to be amended” in s. 154(7) was not qualified in any way, it would not necessarily mean the original order. It could be an order including the amended or rectified order. In the provision under consideration also, 263(1) refers to ‘any order’. The word “any order” would only mean any order under this Act, and if he considers that any order passed therein by the AO is erroneous insofar as it is prejudicial to the interests of the Revenue, the section definitely gives power to the CIT. The deciding factor in the present case is that the complaint of the CIT, refers to the order passed under s. 143(3) and not the amended order under s. 154. Hence the decision of the Supreme Court in 212 is no way applicable to the facts of the case.
11. For the foregoing reasons and in the light of the Supreme Court judgment in the case of CIT vs. Alagendran Finance Ltd. (supra) referred to above, we are of the view that there is no question of law much less substantial question of law for determination in this case and hence the appeal is dismissed as such. No costs.
[Citation : 330 ITR 568]
