Supreme Court clarifies the limitation period for revisions under Section 263 of the Income Tax Act: Commissioner of Income Tax vs. Mohammed Meeran Shahul Hameed (2021)

Introduction

Date of the Judgment: October 7, 2021

Citation: 2021 INSC 678

Judges: M. R. Shah, J. and A. S. Bopanna, J.

What is the deadline for the tax authorities to revise an assessment order? The Supreme Court of India addressed this question in a recent case, clarifying the interpretation of Section 263 of the Income Tax Act, 1961, which deals with the revision of assessment orders by the Commissioner of Income Tax. The core issue revolved around whether the limitation period for such revisions should be calculated from the date the order is “made” or the date it is “received” by the assessee. This judgment provides clarity on the timelines for tax revisions, impacting both taxpayers and tax authorities.

Case Background

The case involves an assessment order for the assessment year 2008-09, which was initially passed by the Assessing Officer (AO) on December 30, 2010. The Commissioner of Income Tax initiated revision proceedings under Section 263 of the Income Tax Act, 1961, believing the assessment order was erroneous and prejudicial to the revenue’s interests. A notice was issued to the assessee, Mohammed Meeran Shahul Hameed, on February 1, 2012. The assessee submitted written responses on March 7 and March 12, 2012. On March 26, 2012, the Commissioner passed an order under Section 263, setting aside the original assessment order and directing the AO to conduct further inquiries. This order was dispatched by the Commissioner’s office on March 28, 2012.

The assessee claimed to have received the notice of the revision order only on August 6, 2012, when they received a notice from the Assessing Officer. Upon request, the assessee received a copy of the Commissioner’s order on November 29, 2012. The assessee then appealed to the Income Tax Appellate Tribunal (ITAT), arguing that the Commissioner’s order was time-barred under Section 263(2) of the Income Tax Act, 1961.

Timeline

Course of Proceedings

The assessee challenged the Commissioner’s order before the Income Tax Appellate Tribunal (ITAT), arguing it was barred by limitation under Section 263(2) of the Income Tax Act, 1961. The ITAT agreed with the assessee, setting aside the revision order on April 4, 2013. The revenue then appealed to the High Court of Judicature at Madras, which dismissed the appeal on July 3, 2019, upholding the ITAT’s decision. The High Court held that the relevant date for calculating the limitation period was the date the assessee received the order, not the date it was passed. The revenue then appealed to the Supreme Court of India.

Legal Framework

The core legal provision in question is Section 263(2) of the Income Tax Act, 1961, which states:

“(2) 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.”

This section specifies the time limit within which the Commissioner can revise an assessment order. The key point of contention is the interpretation of the word “made.” The revenue argued that “made” refers to the date the order was passed, while the assessee and the High Court contended it meant the date the order was received by the assessee.

Arguments

Arguments by the Revenue (Appellant):

• The Additional Solicitor General (ASG) argued that the High Court and ITAT misinterpreted Section 263(2) of the Income Tax Act, 1961.
• The ASG emphasized that the provision states “no order shall be made” after two years from the end of the financial year in which the order sought to be revised was passed.
• The revenue contended that the relevant date is when the order was “made” (i.e., passed on March 26, 2012), not when it was received by the assessee.
• The revenue pointed out that the order was passed on March 26, 2012, and dispatched on March 28, 2012, both within the limitation period.
• The revenue argued that the High Court erred in considering the date of receipt of the order by the assessee (November 29, 2012) to determine the limitation period.

Arguments by the Assessee (Respondent):

• The assessee’s counsel argued that the issue had become academic since the Commissioner’s order had already been acted upon and a fresh assessment order was passed.
• The assessee relied on the fact that the order was served on the assessee on November 29, 2012, which was beyond the two-year limitation period.

Issues Framed by the Supreme Court

The Supreme Court framed the following issues for consideration:

1. Whether the High Court and the ITAT were correct in holding that the order passed by the Commissioner under Section 263 of the Income Tax Act, 1961, was barred by the limitation period provided under Section 263(2) of the Act?
2. Whether the High Court was correct in holding that the relevant date for considering the limitation period under Section 263(2) of the Income Tax Act, 1961, is the date on which the order passed under Section 263 is received by the assessee?

Treatment of the Issue by the Court

Authorities

Judgment

How each authority was viewed by the Court?

The Supreme Court relied on the plain reading of Section 263(2) of the Income Tax Act, 1961*, emphasizing that the word “made” refers to the date of passing the order, not the date of its receipt by the assessee. The court stated that the provision should be read as it is, without adding or subtracting anything from its plain language.

What weighed in the mind of the Court?

The Supreme Court’s decision was primarily influenced by the literal interpretation of Section 263(2) of the Income Tax Act, 1961. The court emphasized that the word “made” in the provision clearly indicates the date on which the order was passed, not the date when it was received by the assessee. The court’s reasoning focused on the principle that statutory provisions should be read as they are, without adding or subtracting from their plain meaning. This approach ensured that the court’s decision was grounded in the explicit language of the law.

The court’s reasoning was based on the following points:

• The plain language of Section 263(2) of the Income Tax Act, 1961, uses the word “made,” which refers to the act of passing the order.
• The date of receipt of the order by the assessee is not mentioned in Section 263(2) and is therefore irrelevant for determining the limitation period.
• Adding the requirement of receipt would be adding something to the provision that is not there.

The court emphasized that the statute must be read as it is, without adding or subtracting anything from its provisions.

The Supreme Court stated:

“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).”

“Receipt of the order passed under Section 263 by the assessee has no relevance for the purpose of counting the period of limitation provided under Section 263 of the Income Tax Act.”

“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.”

Key Takeaways

✓ The limitation period for revision orders under Section 263 of the Income Tax Act, 1961, is calculated from the date the order is “made” (passed), not the date it is received by the assessee.

✓ The date of receipt of the order by the assessee is irrelevant for determining the limitation period under Section 263(2) of the Income Tax Act, 1961.

✓ Tax authorities must ensure that revision orders are passed within two years from the end of the financial year in which the original assessment order was passed.

✓ This judgment clarifies the interpretation of Section 263(2) and provides certainty for both taxpayers and tax authorities regarding the timelines for revision orders.

Directions

The Supreme Court allowed the appeal, setting aside the High Court’s decision. The Court held that the order passed by the Commissioner under Section 263 of the Income Tax Act, 1961, was within the limitation period prescribed under Section 263(2).

Development of Law

The ratio decidendi of this case is that the term “made” in Section 263(2) of the Income Tax Act, 1961, refers to the date when the order is passed, not when it is received by the assessee. This clarifies the limitation period for revision orders and settles the dispute regarding the interpretation of this provision. This ruling establishes that the date of receipt is irrelevant for calculating the limitation period under Section 263(2), thereby settling a previously ambiguous point of law.

Conclusion

The Supreme Court’s judgment in Commissioner of Income Tax vs. Mohammed Meeran Shahul Hameed clarifies that the limitation period for revision orders under Section 263 of the Income Tax Act, 1961, is determined by the date the order is “made,” not when it is received by the assessee. This ruling provides much-needed clarity on the timelines for tax revisions, ensuring that tax authorities act within the prescribed legal framework. The decision emphasizes the importance of adhering to the plain language of the law, without adding or subtracting from its explicit terms.