2011 (3) TMI 1186 - HC - Income Tax

Reopening of assessment - block assessment - addition made in respect of bogus purchases - Held that - Tribunal, after recording a finding to the effect that the order of the Assessing Officer on the point of bogus purchases was fallacious, when in respect of the same purchases the Tribunal has already set aside the addition, it is now not permissible for the Assessing Officer to reopen the assessment in respect of the very same items, the very basis for reopening the assessment is misconceived inasmuch as the same is based upon the very ground, which has been set aside by the Tribunal on the merits in block assessment proceedings - notice, issued by the respondent under section 148 of the Act is hereby quashed and set aside.

Summary

Issues:
Challenge to notice under section 148 of the Income-tax Act, 1961 for reopening assessment for the assessment year 1992-93.

Analysis:
The petitioner, a registered partnership firm, challenged the notice issued by the respondent under section 148 of the Income-tax Act, 1961, reopening the assessment for the assessment year 1992-93. The petitioner had filed its return of income for the said year, which was scrutinized, and an assessment was framed under section 143(3) of the Act. The notice for reopening the assessment was challenged by the petitioner, citing that the same issues had been considered in a block assessment previously, where the Tribunal had set aside the addition made in respect of bogus purchases. The respondent, on the other hand, argued that the assessment was reopened based on observations made by the Tribunal during the block assessment proceedings. The petitioner contended that the Tribunal's observations were only passing remarks and that the addition on account of bogus purchases had been deleted on merits, not on the grounds of regular assessment or reassessment proceedings.

In this case, the assessment for the assessment year 1992-93 was reopened after the expiry of four years from the end of the relevant assessment year. The proviso to section 147 of the Act would be attracted, requiring the Assessing Officer to have a reason to believe that income chargeable to tax has escaped assessment due to the petitioner's failure to file a return or disclose all material facts. The reasons recorded for reopening the assessment indicated that it was based on material gathered during a search operation, specifically related to alleged bogus purchases. The Tribunal had previously set aside the addition made in the block assessment proceedings regarding these purchases, finding the Assessing Officer's order fallacious. Therefore, the Assessing Officer could not reopen the assessment in respect of the same items, as the issue had become final based on the Tribunal's order.

The Court found that the basis for reopening the assessment was misconceived, as it relied on grounds previously set aside by the Tribunal. Consequently, the assumption of jurisdiction by the Assessing Officer under section 147 of the Act was deemed invalid, leading to the quashing and setting aside of the impugned notice under section 148 of the Act. The petition was allowed, with no order as to costs.