2010 (10) TMI 864 - AT - Income Tax

Reassessment - notice under s. 148 - AO passed an order under s. 153(3)(ii) r/w s.254 of the IT Act and added an amount on account of transport subsidy by observing subsequent order of the Hon ble Tribunal C Bench, Kolkata relating to the asst. yr. 1997-98 read together with another order of the Hon ble Tribunal A Bench, Kolkata in respect of the same assessee on a similar point, for the asst. yr. 2001-02 - Held that - AO while assessing the income for another assessment year other than the one decided by the appellate authorities, shall follow the procedure laid down under s. 150. Further, in sub-s. (1) of s. 150, it has been categorically mentioned that notice under s. 148 may be issued for making reassessment or recomputation in consequence of or to give effect to any finding or direction contained in an order passed by the authorities in any proceedings under this Act by way of appeal, reference or revision. Therefore, while doing the reassessment in giving effect to the Tribunal s order in respect of assessment years other than the one involved in the appeal before the Tribunal, the AO should necessarily issue a notice under s. 148 and should have completed assessment under s. 147. Since, in this case, it is apparent that no notice under s. 148 has been issued, orders of CIT(A) set aside, who has confirmed the orders of the AO passed under s. 254 r.w s. 153(3)(ii), as the AO has no jurisdiction in passing the said order for the asst. yr. 1998-99, quashed the assessment order for the asst. yr. 1998-99, the consequential orders passed in the subsequent assessment years have become infructuous and the same are hereby also quashed, all the appeals of the assessee are allowed.

Summary

Issues:
1. Validity of reassessment without issuance of notice under section 148.
2. Application of sections 150 and 153(3)(ii) of the IT Act.
3. Jurisdiction of the Assessing Officer in passing the reassessment order.

Analysis:

Issue 1: Validity of reassessment without issuance of notice under section 148
The assessee contended that the reassessment for the assessment year 1998-99 was barred by limitation as the notice under section 148 was not issued. The contention was supported by the argument that section 150 of the IT Act does not confer new powers of assessment but only lifts the limitation for orders made by appellate authorities. The CIT(A) upheld the AO's action, emphasizing that the transport subsidy received by the assessee was taxable income and the reassessment was valid under section 254 r/w section 153(3)(ii) of the IT Act. However, the ITAT held that the absence of a notice under section 148 rendered the reassessment invalid, quashing the orders of the lower authorities.

Issue 2: Application of sections 150 and 153(3)(ii) of the IT Act
The ITAT analyzed sections 150 and 153(3)(ii) of the IT Act to determine the procedural requirements for reassessment. It noted that section 150 allows for the issuance of a notice under section 148 for making reassessments in consequence of appellate orders. The ITAT highlighted that according to Explanation 2 of section 153, assessments for other years based on appellate findings require compliance with section 150. Therefore, the ITAT concluded that the AO should have followed the procedure under section 147 and issued a notice under section 148 for reassessment, which was not done in this case.

Issue 3: Jurisdiction of the Assessing Officer in passing the reassessment order
The ITAT addressed the jurisdictional aspect of the AO's actions in passing the reassessment order under section 254 r/w section 153(3)(ii) of the IT Act. It was observed that the AO's failure to issue a notice under section 148 for reassessment invalidated the proceedings. The ITAT emphasized that the AO's reliance on Explanation 2 of section 153 did not absolve the requirement of issuing a notice under section 148. Consequently, the ITAT quashed the reassessment order for the assessment year 1998-99, rendering consequential orders for subsequent years irrelevant and quashed as well. Ultimately, all the appeals of the assessee were allowed based on the jurisdictional errors in the reassessment process.