2010 (4) TMI 767 - HC - Income Tax

Reopening - Income escaping assessment - Time barred - It is very clear from the facts that the respondent issued a notice under Section 148 of the Income Tax Act - Since the petitioner had already paid the return for the assessment year 1995-96 on 29.02.1996 admitting nil income and an order of assessment had already been passed under Section 143(3) of the Income Tax Act on 31.03.1998 accepting the petitioner s return, in the above said circumstances, the present impugned notices were issued, for which the petitioner submitted his explanation stating that he had already submitted return of income for the assessment year 1995-96 on 29.02.1996 - ssessing Officer is under a mandate to dispose of such preliminary objection by passing speaking order, before proceeding with the assessment in respect of the assessment year for which such notice has been issued After a notice for reassessment has been issued, an assessee is required to file the return and seek reasons for issuance of such notice - The two notices has not complied with the command of Section 151, which clearly rules that no notice shall be issued under Section 148, by an Assessing Officer, unless, the Joint Commissioner is satisfied on the reasons recorded by such assessing officer that it is a fit case for the issue of such notice - Writ petition is allowed

Summary

Issues Involved:
1. Validity of the notice issued under Section 148 of the Income Tax Act for reopening the assessment for the year 1995-96.
2. Compliance with the procedure laid down by the Supreme Court in GKN Driveshafts (India) Ltd. Vs. Income Tax Officer.
3. Bar of limitation under Sections 149 and 151 of the Income Tax Act.

Issue-wise Detailed Analysis:

1. Validity of the notice issued under Section 148 of the Income Tax Act for reopening the assessment for the year 1995-96:
The respondent issued a notice under Section 148 of the Income Tax Act to reopen the assessment for the year 1995-96. The petitioner challenged this notice on the grounds that the assessment proceedings initiated were beyond the limitation period. The petitioner had already filed a return for the assessment year 1995-96 on 29.02.1996, admitting nil income, and an order of assessment had been passed under Section 143(3) on 31.03.1998. The petitioner argued that there was no escapement of income or change in the income declared earlier, and thus, the return already filed should be treated as having been filed pursuant to the notice under Section 148.

2. Compliance with the procedure laid down by the Supreme Court in GKN Driveshafts (India) Ltd. Vs. Income Tax Officer:
The petitioner relied on the Supreme Court's decision in GKN Driveshafts (India) Ltd. Vs. Income Tax Officer, which mandates that the petitioner is entitled to be furnished a copy of the reasons recorded by the Assessing Authority before the issue of notice under Section 148. The petitioner submitted that the respondent had not followed the procedure set out by the Supreme Court, which requires the Assessing Officer to dispose of preliminary objections by passing a speaking order before proceeding with the assessment. The respondent, however, issued a notice under Section 143(2) proposing to make an assessment and for enquiry in connection therewith, which the petitioner contended was illegal and violative of the procedure established by the Supreme Court.

3. Bar of limitation under Sections 149 and 151 of the Income Tax Act:
The petitioner argued that the notice issued under Section 148 was barred by limitation as per Section 149 of the Income Tax Act, which prescribes the time limit for issuing such notices. According to Section 149(1), no notice under Section 148 shall be issued if four years have elapsed from the end of the relevant assessment year, unless the case falls under clause (b), where the period extends to six years if the income chargeable to tax which has escaped assessment amounts to or is likely to amount to one lakh rupees or more for that year. The petitioner contended that the impugned notices were issued after a period of 13 years, making them legally unsustainable. Additionally, Section 151 requires that no notice under Section 148 shall be issued by an Assessing Officer below the rank of Assistant Commissioner or Deputy Commissioner unless the Joint Commissioner is satisfied with the reasons recorded by the Assessing Officer. The petitioner argued that the respondent failed to comply with these provisions, making the notices invalid.

Conclusion:
The court examined the relevant provisions of Sections 149 and 151 of the Income Tax Act and found that the notices issued by the respondent were contrary to the legal requirements. The court noted that the respondent did not provide the necessary certification from the Joint Commissioner or Chief Commissioner as required under Section 151. Furthermore, the notices were issued 13 years after the relevant assessment year, exceeding the limitation period prescribed under Section 149. Consequently, the court held that the impugned notices were legally unsustainable and set them aside. The writ petition was allowed, and the connected miscellaneous petition was closed.