Once order u/s 263 of Income tax Act was ‘made’ within period of 2 years from end of F.Y in which order sought to be revised was passed, such order is not time barred u/s 263(2):SC

Read Judgment: COMMISSIONER OF INCOME TAX vs. MOHAMMED MEERAN SHAHUL HAMEED

Pankaj Bajpai

New Delhi, October 8, 2021: The Supreme Court has ruled that once it is established that order u/s 263 was passed within period of two years from end of financial year in which order sought to be revised was passed, such an order cannot be said to be beyond period of limitation prescribed u/s 263(2) of Income tax Act, 1961. 

A Division Bench of Justice M.R. Shah & Justice A.S. Bopanna observed that receipt of order passed u/s 263 by the assessee has no relevance for the purpose of counting period of limitation provided u/s 263 of Income Tax Act. 

Going by the background of the case, the AO during the course of assessment, passed an assessment order u/s 143(3). Later, the CIT initiated revision proceeding u/s 263 and issued a notice to the assessee, who filed written submissions. 

Thereafter, the CIT passed an order u/s 263 holding that the AO had failed to make relevant and necessary enquiries and to make correct assessment of income after due application of mind and thus the assessment order made u/s 143(3) was held to be erroneous and prejudicial to the interest of the Revenue.

The assessee challenged the action of CIT before the ITAT contending that the order passed by him was beyond the period of limitation prescribed u/s 263(2), which came to be accepted. 

The High Court also confirmed the order passed by ITAT holding that the order passed by the Commissioner u/s 263 was barred by limitation. The High Court held that the date on which the order was received by the assessee was the relevant date for the purpose of determining the period of limitation u/s 263(2).

Hence, present appeal. 

After considering the arguments, the Apex Court observed that on a fair reading of Section 263(2), it can be seen that as mandated by sub-section (2) of Section 263 no order u/s 263 shall 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. 

Therefore the word used is “made” and not the order “received” by the assessee. Even the word “dispatch” is not mentioned in Section 263 (2). Therefore, once it is established that the order u/s 263 was made/passed within the period of two years from the end of the financial year in which the order sought to be revised was passed, such an order cannot be said to be beyond the period of limitation prescribed u/s 263(2) of the Act, opined the Court. 

The Top Court made it clear that receipt of the order passed u/s 263 by the assessee has no relevance for the purpose of counting the period of limitation provided u/s 263 of Income Tax Act. 

Speaking for the Bench, Justice Shah pointed out that in the present case, the order was made/ passed by the Commissioner on March 26, 2012 and according to the department it was dispatched on March 28, 2012. 

Therefore, relevant last date for the purpose of passing the order u/s 263 considering the fact that the assessment was for the financial year 2008-09 would be March 31, 2012 and the order might have been received as per the case of the assessee on November 29, 2012, concluded the Bench. 

However, the Bench observed, that the date on which the order u/s 263 has been received by the assessee is not relevant for the purpose of calculating/considering the period of limitation provided u/s 263(2). 

Therefore the Apex Court ruled that the High Court as such has misconstrued the provision of sub-section (2) of Section 263 of the Act, because, as per the cardinal principle of law the provision of the statue/act is to be read as it is and nothing is to be added or taken away from the provision of the statue.