A time barred order u/s 263 is bad in law.

Begani Dyeing Mills Pvt.Ltd., Surat v. The Pr.CIT., Surat [ITA 404/SRT/2019]

Facts of the case
The case of the assessee was selected for scrutiny through CASS and accordingly original assessment in case of assessee was completed u/s. 143(3) of the Income Tax Act, 1961. Subsequently, the case of the assessee was reopened u/s 147 of the Act by issuing notice u/s 148 on the ground that assessee has claimed deduction u/s. 80IA of the Act.
Further, the assessee preferred an appeal before CIT-(A), Surat against the re-assessment proceedings where Ld. CIT(A) dismissed the assessee’s appeal. Thereafter, assessee had filed an appeal before Honorable Tribunal, Surat bench. In the result, appeal of the assessee was allowed.
Assessee’s Contention
The ld. Counsel for the assessee contented that the issue was of section 14A of the Act was examined by AO in the assessment order passed under section 143(3) of the Act on 30.01.2015. Later, the assessment was reopened under section 147 on the issue of deduction under section 80IA and there was no issue with regard to the disallowance of 14A of the Act. Thereafter, the order under section 263 of the Act was passed on 07.12.2018, which is beyond the prescribed period of limitation of 2 years from the end of relevant assessment year when the assessment order was passed i.e. upto 31.03.2017. Another contention the learned AR of the assessee submitted that the assessee earned exempt income of Rs.2,02,337/- which the AO already disallowed more than the exempt income i.e. Rs.2,35,039/-. Therefore, the order passed by the AO was not erroneous as per the settled law that disallowance under section 14A of the Act should not exceed the exempt income.
Crux of the case
The Ld. Tribunal held that the issue of section 14A of the Act was discussed and disallowance was made by the AO in the assessment order dated 30.01.2015 and the case was reopened under section 147 on the issue of deduction under section 80IA of the Act. The ld. PCIT passed order under section 263(1) of the Act on 07.12.2018, which is beyond the 2 years period of limitation, therefore, the order passed by the ld. PCIT is barred by limitation. Even on merit, it was observed that the Ld. PCIT instead of accepting the contention of assessee proceeded to direct the AO to frame the de-novo assessment. Considering the fact that it is settled law that disallowance under section 14A of the Act should not exceed the exempt income. The assessee has earned total exempt income of Rs.2,02,337/- and the maximum disallowance do not exceed to the exempt income. Thus, the assessee succeeded on merit also.
Reliance Placed upon
CIT Vs. Alagendran Finance Lt. [162 Taxmann 465] (SC) and
CIT Vs. ICICI Bank Ld., [19 taxmann.com 142] (Bombay HC)
Download judgement from here:
https://www.itatorders.in/appeal/ita-404-srt-2019-14-begani-dyeing-mills-pvt-ltd-surat-the-pr-cit-circle-1-surat

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