2003 (6) TMI 18 - HC - Income Tax

Reassessment notice exclusion from limitation - A time bared assessment cannot be reopened in the absence of any specific power available to the Revenue in the matter of reassessment. As observed by the apex court, finality has to be at one stage or the other. - These petitions are allowed. The impugned notices are set aside. A direction is issued to the respondent not to proceed further in the given circumstances by way of reopening of the assessment proceedings

Summary

Issues Involved:
1. Limitation for issuing notice under Section 148 of the Income-tax Act.
2. Applicability of Section 150 of the Income-tax Act in the context of escaped assessment.

Detailed Analysis:

1. Limitation for Issuing Notice under Section 148:

The petitioner, Spences Hotels P. Ltd., was assessed for the assessment year 1976-77 under Section 143(3) of the Income-tax Act. A notice under Section 148 was issued on November 17, 1998, for the same assessment year, alleging that income chargeable to tax had escaped assessment. The petitioner objected on the grounds of limitation, stating that the initiation of proceedings for escaped assessment was beyond the period prescribed by law. Specifically, the petitioner argued that the limitation under Section 149(1)(a)(iii) for reopening the assessment ended on March 31, 1987, making any subsequent action barred by limitation.

The court examined the relevant sections, including Section 143 (assessment), Section 147 (income escaping assessment), Section 148 (issue of notice where income has escaped assessment), and Section 149 (time limit for notice). Section 149 provides a four-year period for issuing a notice, which in this case ended on March 31, 1981. The court agreed with the petitioner, noting that the period of limitation was already over, making the notices barred by time as per statutory provisions.

2. Applicability of Section 150:

The respondent contended that Section 150(2) of the Act provided an exemption to the limitation period, allowing the issuance of a notice under Section 148 at any time for making an assessment or reassessment in consequence of or to give effect to any finding or direction contained in an appellate or revisional order. The court examined Section 150, which allows for notices notwithstanding anything contained in Section 149, but clarified that this provision does not apply if the reassessment relates to an assessment year for which reassessment could not have been made at the time the order was made due to any other provision limiting the time for assessment.

The court referred to case laws, including CIT v. G. Viswanatham [1988] 172 ITR 401 (AP) and Parveen Kumari v. CIT [1999] 237 ITR 339 (P&H), which supported the petitioner's contention that reassessment proceedings initiated after the expiry of the limitation period are barred, even if they are in consequence of an appellate order. The court concluded that the facts of the case revealed that the reassessment proceedings were barred by limitation on the date of the appellate order, making the issuance of notices under Section 148 invalid.

Conclusion:

The court allowed the petitions, setting aside the impugned notices and directing the respondent not to proceed with reopening the assessment proceedings for the year 1976-77. The court emphasized that a time-barred assessment cannot be reopened without specific power granted by the statute, ensuring finality to legal proceedings. The judgment underscores the importance of adhering to the limitation periods prescribed by law, providing certainty and finality to tax assessments.