2007 (11) TMI 657 - HC - Income Tax

Summary

Issues involved: Validity of reopening assessment u/s 147 for asst. yr. 1998-99 based on directions by CIT(A) and subsequent cancellation of reopened assessment.

Validity of Reopening Assessment u/s 147:
The assessee filed the return of income for the assessment year 1998-99, and the assessment was completed under section 143(1). Assessments for the preceding years were reopened under section 147, and the CIT(A) directed the AO to reopen the assessment for 1998-99 to investigate the source of investment in property. The Tribunal held that the CIT(A) could not give directions to reopen assessments for other years. Subsequently, the AO reopened and completed the assessment. The CIT(A cancelled the reopened assessment for 1998-99, deeming the reopening as wrong and bad in law. The Tribunal upheld the CIT(A)'s decision, leading to the Revenue filing an appeal. The Revenue contended that previous judgments in similar cases supported their position, but the Tribunal dismissed the appeal, citing that the CIT(A) had the authority to give directions under section 246 of the Act. The Tribunal found no irregularity in its order and dismissed the appeal based on precedent, emphasizing that the appellate authority cannot exceed its power under the statute.

Cancellation of Reopened Assessment:
The Tribunal's decision to cancel the reopened assessment for the assessment year 1998-99 was based on the finding that the reopening under section 147 was incorrect and against the law. The Tribunal referenced a previous judgment involving similar factual aspects and held that the CIT(A) had the power to direct the reopening of assessments, and the AO was obligated to comply with such directions. The Tribunal emphasized that the AO must adhere to the orders of the appellate authority within the bounds of the law. The Tribunal concluded that there was no defect in its order and dismissed the appeal, aligning with the principles established in the cited case.

In conclusion, the High Court of Madras upheld the Tribunal's decision to cancel the reopened assessment for the assessment year 1998-99, emphasizing the authority of the CIT(A) to issue directions for reopening assessments and the AO's obligation to comply within legal boundaries.