2010 (7) TMI 626 - HC - Income Tax

Reopening - Rectification of mistakes - Deduction u/s 80HHC - It is well settled that the power of rectification can be invoked only to correct a mistake apparent on the face of the record and cannot be exercised on a debatable issue - Assessing Officer cannot simultaneously proceed under sections 147 and 154 of the Act.Section 154(7) of the Act prescribes limitation for amending any order passed under the Act by rectifying any mistake apparent on the face of the record - Notice under section 154 of the Act having been issued on January 23, 2002, was clearly barred by time and thus, initiation of action was invalid - Held that there was no impediment before the Assessing Officer to initiate reassessment proceedings after complying with the requirements of sections 147 and 148 of the Act, for which notice was issued on March 22, 2002 - Decided against the assessee

Summary

Issues:
1. Validity of reassessment proceedings in light of pending notice under section 154 of the Income-tax Act, 1961.

Analysis:
The appeal before the Punjab and Haryana High Court involved the Revenue challenging the order of the Income-tax Appellate Tribunal regarding the validity of reassessment proceedings for the assessment year 1995-96. The primary issue was whether the reassessment proceedings were justified despite the pendency of a notice under section 154 of the Act. The assessee, an export company, had claimed deductions under section 80HHC of the Act, which was later disputed by the Assessing Officer leading to the initiation of reassessment proceedings. The Tribunal held that the reassessment was not permissible due to the pending notice under section 154, which the Revenue contested.

The Revenue argued that the notice under section 154 should not be equated with assessment proceedings and that it was invalid due to being issued beyond the prescribed limitation period. The counsel relied on the decision of the Allahabad High Court in a similar case. On the other hand, the assessee supported the Tribunal's view. The High Court considered the submissions and referred to the Supreme Court's ruling that rectification can only be done for apparent mistakes. It was assumed that the Assessing Officer cannot simultaneously proceed under sections 147 and 154 of the Act.

The Court analyzed section 154(7) of the Act, which sets a limitation for amending any order, and concluded that the notice issued in this case was time-barred. As a result, the initiation of action based on this notice was deemed invalid. Therefore, there was no hindrance for the Assessing Officer to proceed with reassessment after complying with the requirements of sections 147 and 148 of the Act. The High Court found the Tribunal's decision erroneous and ruled in favor of the Revenue, setting aside the Tribunal's order and remanding the matter for a fresh decision.

In conclusion, the High Court directed the parties to appear before the Tribunal for further proceedings and disposed of the appeal. The judgment clarified the interplay between rectification proceedings and reassessment under the Income-tax Act, emphasizing the importance of adhering to statutory limitations and procedures in such cases.