2010 (12) TMI 772 - HC - Income Tax

Stay Application - Assessment order dated 28-12-2007 under section 143(3) - Question whether the services rendered by the petitioner is a technical service or not, it requires scrutiny in the matter by the Court, therefore, as an interim measure it is directed that till the next date of listing, the assessment proceedings may go on but no final order shall be passed in the assessment proceedings by Assessing Officer - Stay Application stands disposed of.

Summary

Issues:
1. Validity of notice under section 147/148 of the Income-tax Act for assessment year 2005-06.
2. Allegation of escaped assessment and subsequent reassessment.
3. Change of opinion in reassessment process.
4. Interpretation of Proviso first and second appended to section 147 of the Act.
5. Jurisdiction of Assessing Officer to issue notice under section 148 of the Act.

Analysis:
1. The petitioner sought a writ to quash the notice dated 31-3-2010 under section 147/148 of the Income-tax Act for assessment year 2005-06. The original return of income was filed, and assessment proceedings were initiated, leading to an assessment order dated 28-12-2007. The respondent issued a notice proposing reassessment, alleging escaped assessment based on a Division Bench Judgment. The petitioner contended that the notice pertained to the same income declared earlier, falling within Proviso first of section 147.

2. The petitioner argued that the reassessment was a change of opinion, citing a Delhi High Court judgment prohibiting reopening assessments based solely on a change of opinion. The respondent, however, asserted that the Assessing Officer can reassess income under Proviso second of section 147, which covers under-assessed income or income assessed at too low a rate. The jurisdiction to issue a notice under section 148 was emphasized by the revenue's counsel.

3. Section 147 of the Act allows for income escaping assessment to be reassessed, subject to certain conditions. The Assessing Officer's powers are limited by the four-year period unless income has escaped assessment due to the assessee's failure to disclose material facts. The provision also permits reassessment of income not involved in any appeal, reference, or revision.

4. The Delhi High Court's judgment in D.T. & T.D.C. Ltd. held that reopening completed assessments based on a change of opinion is impermissible. In contrast, the Division Bench judgment in O.N.G.C. focused on the technical nature of services rendered, indicating a need for scrutiny. As an interim measure, the Court directed ongoing assessment proceedings without a final order until further review.

In conclusion, the judgment addressed the validity of the notice for reassessment, the prohibition against change of opinion, the interpretation of Proviso first and second under section 147, and the Assessing Officer's jurisdiction to issue reassessment notices. The Court emphasized the need for scrutiny regarding the nature of services provided, leading to a temporary halt in finalizing the assessment proceedings.