2011 (11) TMI 751 - AT - Income Tax

Summary

Issues involved: Appeal against the order of Commissioner of Income Tax(A) for Assessment Year 2003-04 challenging the validity of reassessment proceedings u/s.147 r.w.s. 148.

Summary:

Issue 1: Validity of reassessment proceedings

The assessee-company, engaged in manufacturing shampoos and cold creams, filed its return of income for Assessment Year 2003-04, declaring total income. Reassessment proceedings u/s.147 r.w.s. 148 were initiated due to claimed wrong deduction u/s.80 IB. The Ld. Commissioner of Income Tax(A) held the reassessment invalid as no addition was made for the reason of reopening. The Revenue appealed, contending the reassessment was valid u/s.147. The Tribunal noted that reassessment without actual addition renders the jurisdiction u/s.147 invalid, citing the decision of the Bombay High Court in C.I.T. Vs. Jet Airways (I) Ltd. The Tribunal upheld the Commissioner's decision, emphasizing the necessity to assess or reassess the income that escaped assessment. The appeal of Revenue was dismissed.

Issue 2: Interpretation of Explanation 3 to section 147

The Tribunal referred to the Explanation 3 to section 147 inserted by the Finance Act of 2009, emphasizing that the Assessing Officer must assess or reassess the income that escaped assessment and any other income subsequently noticed during proceedings. The Tribunal highlighted the importance of fulfilling conditions set in section 147 and the inability to independently assess other income if the initial reason for reassessment is found invalid. The decision aligned with previous judgments, including those of the Bombay, Rajasthan, and Delhi High Courts. The Tribunal confirmed the impugned order, dismissing the appeal of Revenue.

Conclusion:
The Tribunal upheld the Ld. Commissioner of Income Tax(A)'s decision, emphasizing the necessity to assess or reassess the income that escaped assessment and the invalidity of reassessment without actual addition. The appeal of Revenue challenging the validity of reassessment proceedings was dismissed.