2010 (6) TMI 622 - AT - Income Tax

Validity of assessment by issuing notice under section 147 of the Act during the availability of time-limit for issuing notice under section 143(2) of the Act. Held that -Proceedings under section 147 cannot be initiated when time available for issuing notice under section 143(2) has not expired. Assessment proceedings taken under section 144 read with section 147 of the Act are also considered invalid and are liable to be quashed. Decided in favor of the assessee.

Summary

Issues:
1. Challenge to non-deletion of addition on account of part expenses.
2. Validity of assessment under section 147 due to notice under section 148.
3. Entertaining additional grounds challenging reopening of assessment.

Issue 1: Challenge to non-deletion of addition on account of part expenses
The assessee challenged the non-deletion of the addition of Rs. 2,60,000 on account of part expenses out of travelling, conveyance, and telephone disallowed by the Assessing Officer. The issue revolved around the disallowance of these expenses and the subsequent challenge by the assessee.

Issue 2: Validity of assessment under section 147 due to notice under section 148
The core issue was the validity of the assessment under section 147 based on the notice issued under section 148 of the Income Tax Act. The assessee contended that the notice issued on 4th July, 2006, for reopening the assessment was beyond the permissible time limit, rendering the proceedings invalid. The Departmental Representative argued in favor of the validity of the proceedings under section 147.

Issue 3: Entertaining additional grounds challenging reopening of assessment
The assessee filed additional grounds challenging the reopening of the assessment under section 147 of the IT Act. The contention was that the initiation of reassessment proceedings through the notice under section 148 was without jurisdiction and against the law. The assessee relied on legal precedents to support the argument that the assessment order should be quashed.

The Tribunal considered the arguments, legal precedents, and orders of lower authorities. It was noted that the time limit for issuing a notice under section 143(2) had not expired when the notice under section 148 was issued. The Tribunal found the issue to be a pure question of law, requiring no further investigation of facts. Relying on relevant legal decisions, the Tribunal admitted the additional grounds raised by the assessee and held the notice under section 147 as invalid due to the premature issuance of the notice under section 148.

Consequently, the Tribunal deemed the assessment proceedings under section 144 read with section 147 as invalid. The orders of the lower authorities were quashed based on the invalidity of the proceedings under section 147 initiated through the notice under section 148. As a result, the appeal of the assessee was allowed, while the appeal of the Revenue was dismissed.