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| DATE: | May 1, 2010 (Date of publication) |
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| Click here to download the judgement (ashoka_buildcon_reassessment_revision_time_limit.pdf) |
Assessment order is not effaced in respect of items that are not subject of reassessment. Time limit for s. 263 begins from date of original order for such items
An assessment order u/s 143(3) was passed on 27.12.2006. A reassessment order u/s 147 was passed on 27.12.2007. A show-cause notice u/s 263 was issued by the CIT on 30.4.2009 in respect of issues that were not the subject matter of the reassessment order. The s. 263 notice was time-barred if reckoned from the date of the assessment order but was within time if reckoned from the reassessment order. The revenue urged that the time limit should be reckoned from the date of the reassessment order on the basis of ITO vs. K.L. Srihari (HUF) 250 ITR 193 (SC) where it was held that the reassessment order “made a fresh assessment of the entire income of the assessee” and “the original order stood effaced by the reassessment order“. HELD rejecting the plea of the department:
(i) In CIT vs. Alagendran Finance 293 ITR. 1 (SC) it was held that the doctrine of merger does not apply where the subject matter of reassessment and original assessment is not one and the same. Where the assessment is reopened on a specific ground and the reassessment is confined to that ground, the original assessment continues to hold the field except for those grounds on which a reassessment has been made. Consequently, an appeal on the grounds on which the original assessment was passed and which does not form the subject of reassessment continues to subsist and does not abate. The order of assessment is not subsumed in the order of reassessment in respect of those items which do not form part of the order of reassessment;
(ii) Consequently, the time limit for exercise of power u/s s. 263 with reference to issues which do not form the subject of the reassessment order commences from the date of the original order and not the reassessment order;
(iii) The principle laid down in K. L. Srihari applies to a case where the subject matter of the original assessment as well as of the reassessment was the same and not to a case like Alagendran Finance where the subject matter of the original assessment and the reassessment were not the same;
(iv) The fact that under Explanation 3 to s. 147 inserted by the Finance (No.2) Act 2009 with retrospective effect from 1.4.1989 the AO can reassess even in respect of items that are not the subject-matter of the recorded reasons makes no difference to this principle of law.
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