COMMISSIONER OF INCOME TAX, CHENNAI versus M/S. ALAGENDRAN FINANCE LTD.

Citation: [2007] 8 S.C.R. 558 · Decided: 27-07-2007 · Supreme Court of India · Bench: S.B. SINHA · Disposal: Dismissed

Judgment (excerpt)

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A 
COMMISSIONER OF INCOME TAX, CHENNAI 
v. 
MIS. ALAGENDRAN FINANCE LTD. 
JULY 27, 2007 
B 
[S.B. SINHA AND HARJIT SINGH BEDI, JJ.] 
Income Tax Act, 1961-s. 263-Assessment-Revision by Commissioner-
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limitation period-Date of commencement-Commissioner exercising its 
C revisional jurisdiction reopened order of assessment only in relation to 'lease 
equalization fund', which being not the subject of the reassessment 
proceedings, period of/imitation provided for under s. 263(2) would commence 
from the date of original assessment order and not from the date of order of 
reassessment-Doctrine of merger not applicable in a case of this nature. 
D 
The Commissioner of Income Tax exercising its revisional jurisdiction 
in terms of Section 263 of the Income Tax Act, 1961 reopened the order of 
assessment only in relation to 'lease equalization fund' which was not the 
subject of the reassessment proceedings. 
In appeal before this Court, the question which arose for consideration 
E is whether the period of limitation provided for under Sub-section (2) of Section 
263 of the Act would begin to run from the date of the order of assessment 
and not from the order of reassessment and that the doctrine of merger would 
not apply in a case of this nature. 
F 
Dismissing the appeal, the Court 
HELD: ·J.J. A bare perusal of the order passed by the Commissioner of 
Income Tax would clearly demonstrate that only that part of order of 
assessment which related to 'lease equalization fund' was found to be 
prejudicial to the interest of the Revenue. The proceedings for reassessment 
G have nothing to do with the said head of income. Doctrine of merger, therefore, 
would not apply in a case of this nature. Furthermore, Explanation (c) appended 
to Sub-section (1) of Section 263 of the Act is clear and unambiguous as in 
terms thereof doctrine of merger applies only in respect of such items which 
were the subject matter of appeal. (Paras 7 and 8) (564-A-C) 
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558 
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COMMNR. OF INCOME TAX, CHENNAI v. ALAGENDRAN FINANCE LID. [S.B. SINHA, J.) $59 
1.2. Once an order of assessment is reopened, the previous A 
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underassessment will be held to be set aside and the whole proceedings would 
start afresh but the same would not mean that even when the subject matter 
of reassessment is distinct and different, the entire proceeding of assessment 
would be deemed to have been reopened. It is not a case where the subj~ct 
matter of reassessment and subject matter of assessment were the same. Th~y B 
were not. [Paras 10 and 12) (565-H; 566-A-B; 567-F-G) 
1.3. Keeping in view the facts and circumstances of this case and, In 
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particular, having regard to the fact that the Commissioner of Income Tax 
exercising its revisional jurisdiction reopened the order of assessment only 
in relation to lease equalization fund which being not the subject of the c 
reassessment proceedings, the period of limitation provided for under Sub-
section (2) of Section 263 of the Act would begin to run from the date of the 
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order of assessment and not from the order of reassessment. 
[Para 15) (569-B-DJ 
Commissioner of Wealth-Tax v. A.K. Thanga Pillai, 252 ITR 260 an~ D 
Commissioner of Income-Tax v. Kanubhai Engineers (P.) Ltd, 241 ITR 665, 
t· 
approved. 
Commissioner of Income-Tax v. Shri Arbuda Mills Ltd, 231ITR50, relied 
on. 
Hind Wire Industries Ltd v. Commissioner of Income Tax, 212 ITR 639;
1 E 
Commissioner of Income Tax v. Sun Engineering Works P. Ltd, 198 ITR 297, 
and V Jaganmohan Rao v. CIT and CEPT, 75 ITR 373, referred to. 
CIVIL APPELLATE JURISDICTION : Civil Appeal No. 3301 of2007. 
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From the Judgment & Order 18.01.2006 of the High Cout of Judicature F 
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at Madras in Tax Appeal No. 1384 to 1386 of2005 and TCMP Nos. 1203-1204 
of2005. 
Rajiv Dutta, B.L. Chiber, M.F. Humayunisa, Kumar Dushyant Singh and · 
B. V. Balaram Das for the Appellant. 
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Anil Diwan, T.N. Seetharaman, Bina Gupta and Shweta Venna for the 
Respondents. 
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The Judgment of the Court was delivered by 
S.B. SINHA, J. 1. Leave granted. 
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560 
SUPREME COURT REPORTS 
[2007] 8 S.C.R. 
A 
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 
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(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 a

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