2011 (7) TMI 586 - HC - Income Tax

Validity of assessment framed after issuance of second notice u/s 148, while proceedings initiated under first notice was not concluded - jurisdiction of AO to issue second notice u/s 148 - whether the reasons recorded for the issuance of such a notice has a nexus to the material on record - period of limitation - Held that - In present case, assessee failed to file return in respect of AY 91-92 within time prescribed and also mere declaration of income was made after conduct of search. In pursuance of notice issued u/s 148 on 14.12.92, assessee filed return on 22.12.92. Hence, in the absence of any return being filed, notice u/s 148 dated 14/12/1992 was rightly issued. Assessing officer after considering the return filed on 22.12.92, found that there was escapement of income, and issued notice dated 24/11/1994 which was also responded to by the assessee only on 20/10/1995 by filing a revised return. Therefore the notice dated 24/11/1994 is infact not a second notice , u/s 148 during the pendency of an earlier notice u/s 148 and is validly issued. Further, notice dated 24/12/1994 was issued after considering the return filed by the appellant on 22/12/1992, therefore, reasons recorded on 23.11.1994 in our view are sufficient to establish nexus with the material on record which have rational connection to the material coming to the notice of the AO and the formation of his opinion that there has been escapement of income. Assessing Officer concluded the assessment order on 27.3.1997 which is within the period of two years from the end of the AY having regard to the fact that the assessee had filed the revised return on 20.10.1995. Therefore, the assessment order dated 27.3.1997 is made within the prescribed period of limitation - Decided in favor of Revenue

2019 (7) TMI 2036 - AT

Issues Involved:
1. Jurisdiction of the Assessing Officer to issue a second notice under Section 148 of the Income Tax Act.
2. Validity of the second notice under Section 148 issued on 24.11.1994.
3. Sufficiency and relevance of the reasons recorded for issuing the second notice under Section 148.
4. Compliance with mandatory conditions for issuing the second notice under Section 148.
5. Whether the assessment order dated 27.3.1997 is barred by limitation under Section 153 of the Income Tax Act.
6. Tribunal's decision on not canceling the assessment.

Detailed Analysis:

1. Jurisdiction of the Assessing Officer to Issue a Second Notice under Section 148:
The appellant argued that the second notice dated 24.11.1994 was invalid as it was issued during the pendency of the first notice dated 14.12.1992. It was contended that the first notice should have been concluded by 31.3.1995, and the issuance of the second notice was barred by law. The Tribunal held that the second notice was within the jurisdiction of the Assessing Officer since the appellant had not filed a return by the prescribed date and the first notice was issued when no return was filed. The return filed on 22.12.1992 was considered, and the second notice was issued based on the assessment of that return. The High Court upheld this view, stating that the second notice was validly issued after considering the return filed on 22.12.1992, and there was no bar in law to issue such a notice.

2. Validity of the Second Notice under Section 148 Issued on 24.11.1994:
The appellant argued that the second notice was barred by limitation and invalid. The Tribunal found that the first notice dated 14.12.1992 was validly issued when no return was filed. The second notice issued on 24.11.1994 was also valid as it was based on the return filed on 22.12.1992. The High Court concurred, stating that the second notice was not a "second notice" during the pendency of an earlier notice, but a valid notice issued after assessing the return filed on 22.12.1992.

3. Sufficiency and Relevance of the Reasons Recorded for Issuing the Second Notice under Section 148:
The appellant contended that the reasons recorded for issuing the second notice were mere surmise and presumption. The Tribunal held that the reasons recorded were sufficient and had a direct nexus to the escapement of income. The High Court agreed, noting that the reasons recorded on 23.11.1994 were based on the return filed on 22.12.1992 and were sufficient to establish a rational connection to the material on record, forming a valid basis for the belief that income had escaped assessment.

4. Compliance with Mandatory Conditions for Issuing the Second Notice under Section 148:
The appellant argued that the mandatory conditions for issuing the second notice were not complied with. The Tribunal found that the conditions were met, and the reasons recorded were sufficient. The High Court upheld this view, stating that the reasons recorded on 23.11.1994 were in accordance with law and established a rational connection to the material on record, fulfilling the mandatory conditions for issuing the notice.

5. Whether the Assessment Order Dated 27.3.1997 is Barred by Limitation under Section 153 of the Income Tax Act:
The appellant contended that the assessment order dated 27.3.1997 was barred by limitation. The Tribunal held that the assessment order was valid as it was completed within two years from the end of the assessment year, considering the revised return filed on 20.10.1995. The High Court agreed, stating that the assessment order dated 27.3.1997 was made within the prescribed period of limitation, as the revised return was filed on 20.10.1995.

6. Tribunal's Decision on Not Canceling the Assessment:
The appellant argued that the Tribunal should have canceled the assessment. The Tribunal upheld the validity of the assessment, finding no grounds to cancel it. The High Court concurred, stating that the Tribunal was justified in concluding that the assessment was not bad in law and that the issuance of the second notice and the assessment order were valid.

Conclusion:
The High Court dismissed the appeal, holding that the Tribunal was right in law in concluding that the assessment was not bad in law. The second notice dated 24.11.1994 was valid, and the reasons recorded for its issuance were sufficient and relevant. The mandatory conditions for issuing the notice were complied with, and the assessment order dated 27.3.1997 was not barred by limitation. The substantial questions of law were answered against the appellant and in favor of the revenue.

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