2012 (6) TMI 57 - HC - Income Tax

Issue of reassessment notice u/s 147/148 instead of issuing notice u/s 143(2) for scrutiny assessment - held that - we do not think that the Assessing Officer is prevented and barred from recording reasons in writing and issuing fresh notice under Section 148 of the Act in view of the objections raised by the petitioner to the present proceedings or in view of the decision of this Court in Ved & Co. (2007 (2) TMI 212 (HC)). Of course, the petitioner will be entitled to question the reassessment proceedings if initiated on other grounds or reasons as per law. The respondents have agreed to and will be bound by the statement to withdraw notice under Section 147/148 dated 5th July, 2011, but will have liberty and right to issue fresh notice under Section 147/148, after recording reasons to believe. The said notice will not be barred because the respondents had not initiated proceedings by issue of notice under Section 143(2) of the Act or they had earlier issued notice under Sections 147/148 dated 5th July, 2011.

Issues Involved:
1. Validity of notice under Section 148 of the Income Tax Act, 1961.
2. Timing and procedural correctness of issuing notice under Section 147/148 when notice under Section 143(2) could have been issued.
3. Jurisdictional pre-conditions for issuing notice under Section 147.
4. The relevance of precedents and case laws cited by the petitioner.
5. The impact of the Computer Assisted Selection Scrutiny (CASS) on the issuance of notices.
6. The procedural correctness of the assessment proceedings following the issuance of notice under Section 148.
7. The validity of reasons to believe recorded by the Assessing Officer.

Detailed Analysis:

1. Validity of Notice under Section 148:
The petitioner challenged the notice under Section 148 dated 5th July 2011, arguing it was invalid as it was issued when the Assessing Officer (AO) could have issued a notice under Section 143(2). The court noted that while unusual, the issuance of a notice under Section 148 when a notice under Section 143(2) could still be issued does not automatically invalidate the notice under Section 148. The court emphasized that the validity of such a notice depends on the specific facts of the case.

2. Timing and Procedural Correctness:
The petitioner contended that the AO should have issued a notice under Section 143(2) before 30th September 2011, instead of the notice under Section 148. The court observed that the AO had issued the notice under Section 148 based on the information received from the Director of Income Tax (Investigation) related to 2G spectrum cases. The court found that the AO's decision to issue the notice under Section 148, while the time for issuing a notice under Section 143(2) had not expired, was within his jurisdiction.

3. Jurisdictional Pre-conditions for Issuing Notice under Section 147:
The court discussed the jurisdictional pre-conditions for issuing a notice under Section 147, noting that the AO must have "reason to believe" that income had escaped assessment. The court referred to precedents, including the Supreme Court's decision in Rajesh Jhaveri Stock Brokers (P) Ltd., which clarified that at the initiation stage, the AO only needs to have a cause or justification to believe that income had escaped assessment, not conclusive evidence.

4. Relevance of Precedents and Case Laws:
The petitioner relied on several precedents, including Ranchhoddas Karsondas and Nizam's Supplemental Family Trust, to argue that the AO could not issue a notice under Section 148 when a valid return was pending. The court distinguished these cases, noting that they were decided under the Income Tax Act, 1922, and did not have provisions equivalent to Section 143(1) of the Income Tax Act, 1961.

5. Impact of CASS on Issuance of Notices:
The AO had argued that the case could not be taken up for scrutiny under Section 143(2) due to the CASS. The court found this reasoning unmeritorious, stating that approvals or permissions could have been obtained to issue a notice under Section 143(2).

6. Procedural Correctness of Assessment Proceedings:
The court examined the procedural history, noting that the petitioner had engaged with the AO following the issuance of the notice under Section 148 by providing documents and responding to queries. The court found that the petitioner had not objected to the reassessment proceedings until much later, which undermined their argument against the procedural correctness of the notice.

7. Validity of Reasons to Believe:
The petitioner argued that the reasons to believe recorded by the AO were factually incorrect. The court did not delve deeply into this issue, as the Revenue had agreed to withdraw the notice under Section 148 and issue a fresh notice after recording new reasons to believe.

Conclusion:
The court disposed of the writ petition by recording the Revenue's agreement to withdraw the notice under Section 148 dated 5th July 2011 and granted them the liberty to issue a fresh notice under Section 148 after recording new reasons to believe. The court clarified that this new notice would not be barred by the fact that the AO had not initiated proceedings under Section 143(2) earlier or had issued the previous notice under Section 148. The court did not award any costs.

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