Supreme Court on the Period of Limitation for Revising an Order of Assessment under Income Tax Act

 

INTRODUCTION

 

Today, I will talk about the case of Commissioner of Income Tax, Chennai v. Mohammed Meeran Shahul Hameed, 2021 SCC OnLine SC 901, wherein the Hon’ble Supreme Court interpreted S. 263 (2) of the Income Tax Act, 1961 that provides for the period of limitation for revising an order of assessment. The facts of the case are not necessary for our purposes and hence, the same are not being discussed.

 

PROVISION OF LAW

 

Briefly speaking, Section 263 (1) of the Income Tax Act, 1961 deals with revision of orders that are prejudicial to revenue. It provides that the concerned authority may interfere with an Order passed by the Assessing Officer if the same is prejudicial to the interests of the revenue. However, S. 263 (2) puts an embargo upon the exercise of powers under S. 263 (1) by stating that: -

 

“No order shall be made under sub-section (1) after the expiry of two years from the end of the financial year in which the order sought to be revised was passed.”

 

Thus, a period of limitation of two years has been provided in S. 263 (2) for exercising the powers under S. 263 (1). This two years period is to be calculated from the end of the financial year in which the impugned order was passed. Generally, a financial year commences from 1^st of April and ends on 31^st of March of every year. Hence, if an order was passed on 1^st October 2020, then the financial year of 2020-21 would end on 31.03.2021 and two years from 31.03.2021 would be 31.03.2023. Hence, for an Order dated 01.10.2020, the period of limitation as per S. 263 (2) would expire on 31.03.2023.

 

QUESTION OF LAW

 

In the present case, a question arose that whether the relevant date for the purposes of considering the period of limitation under S. 263 (2) would be the date on which the order passed under S. 263 (1) is received by the Assessee, or not? Here, the Court looked into the relevance of the date of service of the impugned Order on the Assessee under S. 263 (2). In order to understand this conundrum, let us go through the pertinent observations by the Court.

 

OBSERVATIONS BY THE COURT

 

Firstly, the Court observed that “receipt of the order passed under Section 263 by the assessee has no relevance for the purpose of counting the period of limitation.”

 

Secondly, the Court noted that “no order under Section 263 of the Act 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.”

 

Thirdly, the Court further clarified that “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.”

 

 

Fourthly, according to the Court, “the date on which the order under Section 263 has been received by the assessee is not relevant for the purpose of calculating/considering the period of limitation provided under Section 263(2) of the Act.”

 

And lastly, the Court also emphasized that if it is accepted that the date of receipt of the impugned Order under S. 263 (1) is relevant for computing the period of limitation, then “in that case it will be violating the provision of Section 263(2) of the Act and to add something which is not there in the section. As observed hereinabove, the word used is “made” and not the “receipt of the order”. As per the cardinal principle of law the provision of the statute/act is to be read as it is and nothing is to be added or taken away from the provision of the statute.”

 

Thus, it was held that the date of receipt of order is not to be taken into account while computing the period of limitation under S. 263 (1) of the Income Tax Act, 1961.

 

That was all about the case. So, what are my concluding remarks?

 

CONCLUDING REMARKS

 

I concur with the reasoning of the Supreme Court that words of the statute are to be given paramount importance and the same are to be interpreted without adding or subtracting anything in it. In any case, taxation laws are to be interpreted strictly keeping in mind their true purpose i.e., fulfilling the interests of the revenue.