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2009 (9) TMI 647 - AT - Income TaxReassessment - Addition - Notice u/s 148 - Computation of period of four years - Held that - the observation of the CIT(A) is patently not correct and against the provisions of law. - four years have to be counted from the end of the assessment year and not from the date of passing of the assessment order as stated by the CIT(A). In the instant case, admittedly, the assessment year ended on 31st March. 1996 and, therefore, the notice issued on 20th March, 2002 under s. 148 was served upon the assessee on 28th March, 2002 was beyond four years from the end the assessment year. Change of opinion - Reason to believe - assessee had disclosed and specific information was submitted at the time of original assessment proceedings. - the reopening of the assessment, in the instant case was bad in law and thus, the consequential order passed under s. 143(3) r/w s. 147 of the Act dt. 30th Sept., 2002 is liable to be quashed.
Issues Involved:
1. Validity of the reassessment order under Section 143(3) read with Section 147 of the Income Tax Act, 1961. 2. Legality of the penalty levied under Section 271(1)(c) of the Income Tax Act, 1961. Issue-wise Detailed Analysis: 1. Validity of the reassessment order under Section 143(3) read with Section 147 of the Income Tax Act, 1961: - Background: The assessee, a company engaged in investment in movable and immovable properties, had its original assessment completed under Section 143(3) on 12th March 1998, with a total income determined at Rs. 17,87,790. Subsequently, the AO issued a notice under Section 148 for reassessment, citing underassessment of income due to financial charges including interest of Rs. 15,30,000 pertaining to an earlier year. - Assessee's Argument: The assessee contended that there was no omission on their part to furnish or disclose necessary information. They argued that the interest of Rs. 15,30,000 was crystallized in the year under consideration and was disclosed in the notes to accounts. The reassessment notice issued on 20th March 2002 was beyond the four-year limit from the end of the relevant assessment year (31st March 1996), making the reassessment invalid. - CIT(A)'s Decision: The CIT(A) dismissed the appeal, stating that the notice under Section 148 was issued within four years from the date of the original assessment order. However, the CIT(A) misinterpreted the law by counting the four-year period from the assessment order date instead of the end of the assessment year. - Tribunal's Analysis: The Tribunal held that the four-year period should be counted from the end of the relevant assessment year. Since the assessment year ended on 31st March 1996, the notice issued on 20th March 2002 was beyond the permissible period. The Tribunal noted that the assessee had disclosed all material facts during the original assessment, and the reassessment was merely a change of opinion by the AO. - Legal Precedents Cited: The Tribunal referred to several judgments, including: - Fenner (India) Ltd. vs. Dy. CIT: Reassessment after four years requires a failure to disclose material facts. - Duli Chand Singhania vs. Asstt. CIT: Absence of failure to disclose material facts bars reassessment after four years. - Haryana Acrylic Manufacturing Co. vs. CIT: Reassessment beyond four years without failure to disclose material facts is barred by limitation. - Krishna Metal Industries vs. H.M. Algotar, Asstt. CIT: Similar holding on the necessity of failure to disclose for reassessment beyond four years. - Avani Corporation vs. ITO: Reassessment without failure to disclose material facts beyond four years is without jurisdiction. - Vareli Weavers (P) Ltd. vs. Dy. CIT: Reassessment beyond four years without failure to disclose material facts is barred by time. - Conclusion: The Tribunal concluded that the reassessment was invalid and quashed the order passed under Section 143(3) read with Section 147. 2. Legality of the penalty levied under Section 271(1)(c) of the Income Tax Act, 1961: - Background: The CIT(A) had confirmed a penalty of Rs. 6,57,900 levied under Section 271(1)(c) for the assessment year 1995-96. - Tribunal's Analysis: The Tribunal noted that the penalty could not stand if the assessment itself was set aside. Since the reassessment proceedings were quashed, the basis for the penalty no longer existed. - Legal Principle: It is a well-settled law that if the assessment or reassessment order on which the penalty is based is set aside or cancelled, the penalty cannot survive. - Conclusion: The Tribunal cancelled the penalty levied under Section 271(1)(c). Final Decision: Both the appeals were allowed, the reassessment order under Section 143(3) read with Section 147 was quashed, and the penalty under Section 271(1)(c) was cancelled.
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