- (1.) Leave granted.
(2.) Whether for the purpose of computing the period of limitation envisaged under Sub-section (2) of Section 263 of the Income Tax Act, 1961 (for short "the Act"), the date of order of assessment or that of the reassessment, is to be taken into consideration is the question involved in this appeal which arises out of a judgment and order dated 18.01.2006 passed by a Division Bench of the High Court of Judicature at Madras passed in Income Tax Appeal No. 1384 to 1386 of 2005.
(3.) The said question arises on the following facts : Respondent is a company incorporated under the Indian Companies Act, 1956. It filed its returns for assessment under the Act for the assessment years 1994-95, 1995-96 and 1996-97 on 23.11.1994, 27.11.1995 and 26.11.1997 respectively. Assessment for the year 1994-95 was completed on 27.02.1997 and those of the Assessment Years 1995-96 and 1996-97 were completed on 12.05.1997 and 30.03.1998 respectively. In the said orders of assessment, the assessee's return under the Head 'Lease Equalization Fund' was accepted. However, proceedings for reassessment were initiated by the assessing officer on 05.03.2004. Orders of reassessment were passed on 28.03.2002. Proceedings for reassessment, however, were initiated only in respect of three items, viz., (i), the expenses claimed for share issue, (ii), bad and doubtful debts and (iii), excess depreciation on gas cylinders and goods containers. Although the assessee's return in respect of lease equalization was not the subject matter of the reassessment proceedings, the Commissioner of Income Tax purported to invoke his revisional jurisdiction in terms of Section 263 of the Act and by an order dated 29.03.2004 held as under: "5. In short, from the example given it is the depreciation on the leased assets that is clamed as Book Depreciation and disallowed in the computation of income, the assessee sought to claim in the form of Lease Equalisation from the lease rentals by virtue of the guidelines note of the Institute of Chartered Accountants of India. xx xx xx xx 7. Since the assessee has not given the complete details, the method adopted by the assessee in arriving at the correct profit for the corresponding year cannot be checked. I clearly feel that the orders by the Assessing Officer are prejudicial to the interest of the revenue as the lease rentals had not been properly brought to tax. Hence, all the three assessments are reopened u/s 263 and the Assessing Officer is directed to check and assess the lease rentals from Lease equalisation fund, if any, and to bring to tax the same for all the above three years." Pursuant to or in furtherance of the said order, reassessment proceedings were carried out in respect of the aforementioned assessment years by the Assistant Commissioner of Income Tax only in respect of the income on equalization reserve stating: "I have considered the various arguments of the assessee's representative and I am satisfied that the deduction made from the gross lease rent is only a provisional and not an actual expenditure and therefore the same is to be disallowed and added to the income returned." The matter came up for consideration before the Income Tax Appellate Tribunal wherein the contention of the respondent that the said purported proceedings under Section 263 of the Act were barred by limitation, found favour with, opining: "6. We have carefully gone through the record and considered the rival submissions. In our view, the contentions of the Assessee deserve to succeed. The facts of the case clearly show the claim of lease equalisation fund, if at all accepted, is an error committed by the Assessing Officer in his order passed under Sec. 143 (3) of the Act for the Asst. Year 94-95 on 27.2.97, for the Asst. Year 95- 96 on 12.5.97 and for the Asst. Year on 30.3.98. The Assessee, no doubt, took up these assessments in appeal before the CIT (Appeals) and thereafter the assessment itself was subject to proceedings under Sec. 148 and ultimately, the orders of reassessment were framed on 28.3.2002. All the subsequent events are in respect of matters other than the allowance of lease equalization fund. In other words, the error, if any, has been committed, it was done in the order of the Assessing Officer passed Asst. the year 97-98. Therefore, these orders very much subsist despite the subsequent proceedings under sec. 148 of the Act." The learned Tribunal referred to several decisions of this Court and other High Courts for arriving inter alia at the following conclusion: "8. In the light of the above decisions and authorities, we are of the opinion that the impugned order passed under Sec. 263 on 29.03.2004 are clearly barred by limitation with reference to the orders passed under Sec. 143 (3) by the Assessing Officer for the above Asst. years on 27.2.97; 25.12.97 and 30.3.98 respectively. Accordingly, the orders of the CIT under Sec. 263 are vacated and the ground taken by the Assessee is allowed." Revenue preferred an appeal thereagainst before the High Court which was dismissed by a Division Bench stating: "2. Learned Senior Central Government Standing Counsel submits that the very same issue has been raised and decided by the Court against the Revenue in the case of CWT Vs. A.K. Thanga Pillai (252 ITR 260)." Aggrieved by and dissatisfied therewith, the Revenue is before us.;