Date of receipt of the order passed by Commissioner of Income Tax is irrelevant for computing limitation under Section 263(2) of the Income Tax Act

Factual Matrix

The Hon’ble Supreme Court in its judgment dated 08.10.2021 in the matter of “The Commissioner of Income Tax, Chennai vs. Mohammed Meeran Shahul Hameed (Civil Appeal No. 6204 of 2021)” had the occasion to deal with the issue as to whether the date of passing of the order of the Commissioner of Income Tax (hereinafter referred to as CIT) is relevant for computing limitation under Section 263(2) of the Income Tax Act, 1961 (hereinafter referred to as Act) or the date of receipt of such an order by the assessee.

 

Section 263(1) of the Act gives the power to the CIT to revise the assessment order passed by the Assessing Officer (hereinafter referred to as AO). The CIT under Section 263(1) may modify or enhance or cancel the assessment order passed by the AO if the said order is found to be erroneous in so far as it is prejudicial to the interests of the revenue department.

 

In the present matter, the Assessing Officer (hereinafter referred to as AO) had passed an assessment order against the Respondent under Section 143(3) of the Act for the AY 2008-09 on 30.12.2010. Using the power under Section 263 of the Act, the CIT initiated revision proceedings and passed an order on 26.03.2012 setting aside the assessment order passed by the AO. Thus, the AO was directed to make necessary enquiries on the aspects mentioned in the order under Section 263 of the Act.

 

Aggrieved by the order of the CIT, the Respondent filed an appeal before the ITAT, Chennai contending that the order passed by the CIT under Section 263(1) of the Act was barred by limitation as per Section 263(2) of the Act which states that the CIT shall not pass an order under Section 263(1) after the expiry of 2 years from the end of the FY in which the order sought to be revised was passed by the AO. It was the Respondent’s case that even though the order of the CIT was passed before the expiry of 2 years, the said order was only supplied to him on 29.11.2012 which was beyond the period of 2 years and thus was barred by limitation. The ITAT vide order dated 04.04.2013 allowed the appeal filed by the Respondent and held that the order of the CIT was beyond the period of limitation.

Aggrieved, the Appellant i.e. the Revenue filed an appeal before the Madras High Court, which vide order dated 03.07.2019 dismissed the appeal and upheld the judgment passed by the ITAT, Chennai which led the Appellant to file a Civil Appeal before the Hon’ble Supreme Court.

 

Analysis of the Judgment:

 

The Hon’ble Supreme Court vide order dated 07.10.2021 allowed the appeal filed by the Appellant and set aside the order passed by the Madras High Court and the ITAT, Chennai.

 

The Supreme Court held that Section 263(2) of the Act states that no order under Section 263(1) shall be “made” after the expiry of 2 years from the end of the FY in which the order sought to be revised was passed.  The fact that Section 263(2) of the Act uses the word “made” instead of the phrase “received by the assessee”, it is fairly certain that once it is established that the order under Section 263(1) was made/passed by the CIT within the period of limitation as prescribed in Section 263(2) of the Act, such an order cannot be said to be beyond the period of limitation only because it was received by the Assessee after the expiry of 2 years.

 

Thus, the date on which the order under Section 263(1) has been received by the assessee is not relevant for the purpose of calculating the period of limitation provided under Section 263 (2) of the Act. Therefore the High Court as well as the ITAT have misconstrued the provision of sub­section (2) of Section 263 of the Act.