2006 (11) TMI 147 - HC - Income Tax

Petition to quash the notice issued u/s 148 - barred by limitation - Escaped assessment - provision of section 150 - income-tax liability arising out of an agreement - HELD THAT - The provision of sec 150, begins with the words notwithstanding anything contained in section 149 and it states that notice may be issued at any time to give effect to any finding contained in any order passed by any authority in any proceeding under the Act. The notice issued to the assessee was pursuant to the finding of the Tribunal referred to supra regarding the escaped income for assessment of income-tax. Therefore, the learned single judge committed an error in law by quashing the same, as the same is contrary to the finding recorded by the Income-tax Appellate Tribunal with regard to the escaped taxable income derived by the assessee, in respect of such cases section 150(1) of the Act is applicable which relevant provision of the Act has not been properly considered by the learned single judge by quashing the notice impugned in the writ petition, the legal submission made by learned counsel Mr. Ashok Kulkarni placing reliance upon section 150(2) of the Act in justification of the order of the learned single judge is misplaced for the reason that the above provision is not applicable to the case on hand is the case sought to be established by the Revenue, by refusal of the impugned notice prima facie at this stage the submissions of learned counsel for the Revenue is tenable and the same shall be accepted by us. In view of the decision in GKN Driveshafts (India) Ltd. v. ITO 2002 (11) TMI 7 - SUPREME COURT clarification made by the apex court, the quashing of the notice impugned in the writ petition by the learned single judge is not justified. In view of the foregoing reasons the decisions relied upon by learned counsel for the assessee are of no assistance and in view of what has been stated above, they are not applicable to the facts of the case. In the result, the writ appeal is allowed. The order of the learned single judge is set aside. The assessee is at liberty to file a revised return. The Assessing Officer shall consider the same and pass appropriate order.

Summary

Issues:
1. Validity of the notice under section 148 of the Income-tax Act, 1961.
2. Interpretation of provisions regarding limitation for reopening assessments.
3. Applicability of section 150(1) of the Act in the given case.

Analysis:

Issue 1: Validity of the notice under section 148
The appeal challenges the order allowing writ petitions against a notice issued under section 148 of the Income-tax Act, 1961. The dispute arose from an agreement between the parties, resolved through arbitration, with the tax liability becoming a subject of contention. The Tribunal observed that the amount in question had already been assessed for a prior year, making the issuance of the notice barred by limitation. The appellant argued that the notice was within the time limit for reopening assessments, citing the decision in GKN Driveshafts (India) Ltd. v. ITO [2003] 259 ITR 19 (SC) to support their position.

Issue 2: Interpretation of provisions on limitation
The main objection to quash the notice was on grounds of limitation. The learned single judge held that the notice was indeed barred by limitation. The Tribunal's previous order regarding the escaped tax for a specific year was crucial in determining the validity of the notice. Section 149 of the Act outlines the period within which a notice under section 148 can be issued, emphasizing the importance of adhering to statutory limitations in reopening assessments.

Issue 3: Applicability of section 150(1)
Section 150(1) of the Act allows for the issuance of a notice at any time to give effect to findings in previous orders. The notice in question was issued based on the Tribunal's determination of escaped income. The appellant contended that the notice was justified under this provision, contrary to the single judge's ruling. The High Court found that the notice was valid and set aside the single judge's order, allowing the assessee to file a revised return for further assessment by the Income-tax Department.

In conclusion, the judgment delves into the intricacies of tax law, specifically focusing on the validity of notices under section 148, the interpretation of limitation provisions, and the applicability of section 150(1) in reopening assessments based on previous findings.