2009 (1) TMI 871 - AT - Income Tax

Summary

Issues involved: Reopening of assessment u/s 147 of the IT Act, validity of notice issued u/s 148, challenge against initiation of proceedings under s. 148, claim of deduction under s. 80HHC, interest chargeable u/s 234.

Reopening of Assessment u/s 147:
The assessee appealed against the reopening of assessment under s. 147 of the IT Act, challenging the validity of the notice issued under s. 148. The AO reopened the case based on the claim of bad debt amounting to a specific sum during a different assessment year. The AO concluded that the deduction under s. 80HHC had been wrongly claimed and allowed to the assessee. The CIT(A) held that the AO was justified in issuing the notice under s. 148, rejecting the contentions of the assessee that the notice was invalid due to pending rectification proceedings under s. 154. The Tribunal upheld the decision, stating that the initiation of reassessment proceedings was valid.

Validity of Notice u/s 148:
The main argument against the validity of the notice under s. 148 was that the proceedings initiated under s. 154 were pending, making the notice invalid. The Tribunal, following a previous decision, held that during the pendency of rectification proceedings under s. 154, it was not permissible for the AO to resort to assessment proceedings under s. 147 by issuing a notice under s. 148. Consequently, the assessment proceedings completed under s. 147 were deemed invalid and quashed.

Claim of Deduction under s. 80HHC:
The assessee had claimed a deduction under s. 80HHC of the IT Act for the relevant assessment year. The AO contested this claim based on the information regarding bad debt, leading to the reopening of the assessment. The CIT(A) and the Tribunal addressed this issue in the context of the validity of the reassessment proceedings, ultimately deciding in favor of the assessee due to the invalidity of the notice under s. 148.

Interest Chargeable u/s 234:
The ground related to interest chargeable under s. 234 of the IT Act became irrelevant following the decision to quash the reassessment proceedings. As a result, this issue was no longer considered by the Tribunal, as the reassessment proceedings were deemed invalid.

In conclusion, the Tribunal allowed the appeal filed by the assessee, setting aside the order of the CIT(A) and quashing the reassessment proceedings due to the invalidity of the notice issued under s. 148 during the pendency of rectification proceedings under s. 154.