The Mumbai Bench of the Income Tax Appellate Tribunal (ITAT) has quashed a revision order passed under Section 263 of the Income Tax Act, holding that the Principal Commissioner of Income Tax (PCIT) cannot revive issues arising from an original assessment by invoking revisionary powers against a subsequent reassessment order when those issues were never part of the reassessment proceedings. 

The bench of Anikesh Banerjee (Judicial Member) and Bijayananda Pruseth (Accountant Member) has observed that the limitation period prescribed under Section 263(2) must be reckoned from the date of the original assessment order where the proposed revision concerns issues examined in the original assessment and not the reassessment. 

The assessee, Lupin Limited, had filed its return for Assessment Year 2018-19 declaring income under both the normal provisions and Section 115JB. The case was selected for complete scrutiny, during which the Assessing Officer examined multiple issues including Section 14A disallowance, CSR-related deductions, international transactions, stock valuation, transfer pricing matters, deductions under Chapter VI-A and several other tax issues before completing the original assessment under Section 143(3) read with Sections 144C and 144B on 18 November 2021. 

Buy Now: INCOME TAX E-COMPILATION – JUNE 2026

Subsequently, a notice under Section 148 was issued in April 2022 solely on the allegation that the company had availed bogus purchase bills from a supplier. During the reassessment proceedings, the company voluntarily disallowed expenditure relating to gifts provided to doctors, amounting to approximately ₹124.21 crore, in light of the Supreme Court’s decision in Apex Laboratories. Accepting the returned income, the Assessing Officer completed the reassessment under Section 147 on 29 February 2024 without making any further additions. 

Meanwhile, the Revenue Audit Party had raised three audit objections concerning: expenditure on gifts to doctors allegedly violating Medical Council of India (MCI) Guidelines; alleged short disallowance under Section 14A; and deduction claimed under Section 80G on CSR expenditure.

The PCIT initiated proceedings under Section 263 and ultimately set aside the reassessment order, holding that it was erroneous and prejudicial to the interests of the Revenue because these issues had not been examined during reassessment. 

The assessee challenged the revision before the Tribunal, contending that all three issues sought to be revised had already been examined during the original scrutiny assessment completed in November 2021.

It argued that the reassessment proceedings were confined exclusively to the allegation of bogus purchases and did not concern Section 14A, CSR deduction or expenditure on gifts to doctors. Consequently, the limitation period for invoking Section 263 had to be computed from the original assessment order rather than the reassessment order.

The assessee further submitted that the Revenue Audit Party’s objections had existed even before completion of the reassessment proceedings, yet the Assessing Officer chose not to expand the scope of reassessment to those issues. Therefore, the Department could not indirectly enlarge the limitation period by subsequently revising the reassessment order on matters unrelated to the reassessment itself. 

The Tribunal observed that the reassessment was initiated exclusively on the allegation of bogus purchases from a single supplier.

The Bench found that the issues relating to gifts to doctors, Section 14A disallowance and CSR deduction had already formed part of the original scrutiny assessment and were never the subject matter of reassessment proceedings. 

The Tribunal noted that the Revenue Audit Party had raised its objections as early as May 2022 and that the PCIT’s office had communicated those objections to the Assessing Officer well before completion of reassessment. Nevertheless, no enquiry or addition was made on those issues during reassessment. 

According to the Tribunal, allowing the Department to invoke Section 263 against the reassessment order for matters wholly unrelated to the reassessment would effectively defeat the statutory limitation contained in Section 263(2).

The Tribunal relied heavily upon the Supreme Court’s decisions in CIT v. Alagendran Finance Ltd. and Industrial Development Bank of India Ltd., which hold that where reassessment concerns issues distinct from those proposed to be revised, the limitation under Section 263 must be calculated from the original assessment order.

The Bench observed that only where the issue sought to be revised is itself the subject matter of reassessment would limitation run from the reassessment order.

Since the issues raised by the PCIT were entirely independent of the bogus purchase issue for which reassessment had been initiated, the limitation period had expired with reference to the original assessment order passed on 18 November 2021. 

The department relied on an earlier Kolkata Bench decision in Bhargab Engineering Works, arguing that reassessment orders constitute independent orders capable of revision under Section 263.

However, the Mumbai Bench rejected this reliance, holding that the binding law laid down by the Supreme Court under Article 141 of the Constitution prevails over any contrary Tribunal decision. 

The ITAT held that the revision proceedings initiated under Section 263 were barred by limitation because the issues sought to be revised emanated from the original assessment and not from the reassessment proceedings.

Membership Required to Access Case Details & Order Copy

To view the complete Case Details and Download Order Copy, you must have an active membership. Please subscribe to continue.

Read More: Orissa High Court Quashes GST Appellate Order After DRC-07 Error Wrongly Treated Interest as Tax