[Section 263 IT Act] Receipt of order by the assessee has no relevance for calculating limitation: Supreme Court

[Section 263 IT Act] Receipt of order by the assessee has no relevance for calculating limitation: Supreme Court

Receipt of Order passed under Section 263 by the assessee has no relevance for the purpose of counting the period of limitation, said the Supreme Court in its judgement delivered on October 7, 2021. [Commissioner of IT, Chennai v. Mohammed Meeran Shahul Hameed]

A Division Bench of Justice MR Shah and AS Bopanna, while interpreting the aforementioned provision of the Income Tax Act, noted, "… 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 under Section 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 under Section 263(2) of the Act."

Brief Facts

An assessment order under Section 143(2) of the IT Act was passed on December 30, 2010.

In a revision proceeding under Section 263 by the Commissioner of Income Tax, the order was set aside holding it erroneous and prejudicial to the interest of revenue.

Notably, the order was passed on March 26, 2012 – dispatched by the office of Commissioner on March 28, 2012 – and received by the Assessee on August 6, 2012.

An appeal was filed by the assessee before the ITAT on November 29, 2012 contending that the order passed by Commissioner was beyond the period of limitation under Section 263(2).

Both ITAT and the High Court in appeal, decided in favour of the assessee.

Contentions

ASG Vikramjit Banerjee, appearing for the revenue-applicant submitted that the High Court as well as the ITAT, misconstrued and misinterpreted the provision of Section 263.

Sub-section (2) of Section 263 provides that no order shall be "made" under sub-section (1) of Section 263 after the expiry of 2 years from the end of the concerned Financial Year – The relevant date in the present case to pass the order under Section 263, as contended, would be March 31, 2012.

The fact that the order was passed on March 26, 2012 and dispatched on March 28, 2012, very well establish that the same was within the period of Limitation.

R. Sivaraman, appearing for the assessee submitted that since the order of the assessing officer was acted upon before it was set aside by the Commissioner, a fresh assessment order was passed – making the entire issue 'academic'

Question of Law

1. Whether ITAT and the High Court was correct in holding that the order passed by Commissioner was barred by Limitation?

2. Whether the date of receipt has relevance for deciding limitation?