2011 (3) TMI 589 - HC - Income Tax

Reopening / reassessment - Validity of notice - Amendment to Section 148 vide Finance Act, 2006 - Issuance of notice u/s 143(2) for the purpose of proceedings u/s 147 / 148 - Period of limitation of 12 months - Held that - Period of limitation as specified u/s 143(2) is not application for reassessment proceedings. Non furnishing of the copies of the reasons by the AO for reopening of the case - Held that - Decided in favor of assessee on the ground of non supply of grounds of reopening and tax effect are below monetary limit of Rs. 2 lakhs

Issues Involved:

1. Validity of reopening the assessment under Section 147 without issuing a notice under Section 143(2) within 12 months.
2. Validity of non-furnishing of the reasons by the Assessing Officer for reopening the case under Section 147.

Detailed Analysis:

1. Validity of Reopening the Assessment under Section 147 without Issuing a Notice under Section 143(2) within 12 Months:

The appeals were admitted on the question of whether the reopening of the assessment under Section 147 and completion of assessment without issuing a notice under Section 143(2) within 12 months is valid. The Tribunal held that the provisions applicable for a regular assessment under Section 139 would also apply to the return filed in response to a notice under Section 148. The Tribunal concluded that Section 143(2) is a mandatory procedure and must be complied with. Since the notice was issued beyond the prescribed 12 months, the Tribunal deemed the assessment null and void.

The Revenue argued that the retrospective amendment brought to Section 148(1) under the Finance Act, 1996, effective from 01.10.1991, should be considered. The amendment inserted a proviso to Section 148(1), which deemed notices served under Section 143(2) after the expiry of 12 months but before the expiry of the time limit for making the assessment as valid. Therefore, the limitation provided under Section 143(2) does not apply to assessments under Section 148.

The Court agreed with the Revenue, stating that the proviso to Section 148(1) has retrospective application and saves the limitation on notices issued under Section 143(2) beyond 12 months. The Court held that the only limitation to be considered is the time limit for making the assessment as specified in Section 153(2). Consequently, the first question was answered in favor of the Revenue.

2. Validity of Non-Furnishing of the Reasons by the Assessing Officer for Reopening the Case under Section 147:

The Tribunal found that the Assessing Officer only provided the gist of the reasons for reopening the assessment and not the entire reasons. The Revenue contended that the assessee needed to apply for certified copies and pay the necessary charges. The Tribunal rejected this argument, stating that there was no confidentiality attached to the reasons recorded for reopening the case, and thus the non-furnishing of the reasons violated statutory provisions, rendering the order illegal.

The Court emphasized that furnishing the grounds for reopening the assessment is a compliance with the principles of natural justice. The Revenue is duty-bound to provide the reasons for initiating proceedings under Section 148. The failure to provide reasons does not make the proceedings void but requires the Officer to proceed from the stage where the illegality occurred and furnish the grounds to the assessee.

Conclusion:

While the Court agreed with the Revenue on the aspect of limitation due to the retrospective amendment to Section 148(1), it acknowledged the assessee's argument regarding the non-furnishing of reasons and the monetary limit. The Court decided that no useful purpose would be served by remanding the matter back to the Assessing Officer to furnish the reasons, considering the tax effect and the time it would take to settle the issue. Thus, the appeal was partly allowed with reference to the first question alone, and no costs were imposed.

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