2011 (7) TMI 520 - HC - Income Tax

Reopening of assessment - whether barred by limitation and bad in law? - Held that - On perusal of the above order of this Court, it is amply clear that the issue relating to validity of notice issued under Section 148 of the Act has not been adjudicated by this Court in OJC No.16437 of 1998. The said writ petition was disposed of giving liberty to the petitioner to file objection before the AO & was directed to pass final order after hearing the parties. Therefore, AO as well as Counsel is not correct to say that the writ petition (O.J.C. No.16347 of 1998) in which the petitioner had challenged the validity of the notice issued under Section 148 of the Act was dismissed. The proper course open to the petitioner was to approach the appellate authority in terms of order dated 26.06.2001 passed in O.J.C. No.16437 of 1998. Therefore, the present writ petition is not entertained.

Issues Involved:
1. Validity of the notice issued under Section 148 of the Income Tax Act, 1961.
2. Legality of the reassessment order passed under Sections 147/143(3) of the Income Tax Act.
3. Applicability of the Supreme Court judgment in Chief Commissioner of Income Tax vs. N.C. Budharaja.
4. Procedural compliance with the directions of the High Court in previous writ petitions.
5. Availability of alternative remedies for the petitioner.

Detailed Analysis:

1. Validity of the Notice Issued Under Section 148 of the Income Tax Act, 1961:
The petitioner challenged the notice issued under Section 148 dated 13.01.1997 on the grounds that it was barred by limitation and thus bad in law. The petitioner argued that the notice was issued beyond the statutory period of four years provided under the Act. The Department contended that the notice was valid as it was issued after obtaining due approval from the CIT, Bhubaneswar, and that the assessment could be reopened up to a period of 10 years. The Court found that the issue of the validity of the notice under Section 148 had not been adjudicated in the previous writ petition (O.J.C. No.16437 of 1998), and thus the petitioner was not estopped from challenging it in the present writ petition.

2. Legality of the Reassessment Order Passed Under Sections 147/143(3) of the Income Tax Act:
The petitioner claimed that the reassessment order was a result of a change of opinion, which is not permissible under the law. The initial assessment had allowed the deduction under Section 32-A after due consideration, and the reassessment was based on the Supreme Court's judgment in N.C. Budharaja, which did not constitute new information. The Department argued that the reassessment was based on new information from judicial pronouncements and was therefore valid. The Court did not express an opinion on this issue but directed the petitioner to approach the appellate authority.

3. Applicability of the Supreme Court Judgment in Chief Commissioner of Income Tax vs. N.C. Budharaja:
The petitioner contended that the Supreme Court's decision in N.C. Budharaja was not applicable to its case and that the reassessment based on this judgment was incorrect. The Department maintained that the judgment constituted new information justifying the reassessment. The Court did not adjudicate this issue, leaving it open for the appellate authority to decide.

4. Procedural Compliance with the Directions of the High Court in Previous Writ Petitions:
The petitioner argued that the reassessment order was passed in violation of the High Court's directions in O.J.C. No.16437 of 1998, which required the Assessing Officer to pass a final order after considering the petitioner's objections. The Department claimed that the directions had been duly complied with. The Court found that the previous writ petition had not adjudicated the validity of the notice under Section 148 and had only remanded the matter to the Assessing Officer for a final decision after hearing the parties.

5. Availability of Alternative Remedies for the Petitioner:
The Department argued that the writ petition was not maintainable as the petitioner had an alternative remedy of filing an appeal under Section 246-A of the Act before the Commissioner of Income Tax (Appeals). The Court agreed, stating that the proper course for the petitioner was to approach the appellate authority as per the order dated 26.06.2001 in O.J.C. No.16437 of 1998. The Court directed the petitioner to file an appeal within four weeks and instructed the appellate authority to decide the appeal on its merits in accordance with the law.

Conclusion:
The High Court disposed of the writ petition, directing the petitioner to approach the appellate authority within four weeks. The Court did not express any opinion on the merits of the issues raised, leaving them open for the appellate authority to decide.

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