2012 (7) TMI 758 - AT - Income Tax

Re-assessment order u/s. 143(3)/147 - Held that - It is well settled law that unless the return of income already filed and disposed of notice for reassessment u/s. 148 cannot be issued - no reassessment proceedings can be initiated so long as the assessment proceedings pending on the basis of the return already filed are not terminated. In this case, it is admitted fact that the AO could have issued notice u/s. 143(2) at the time of reopening of the assessment. Therefore, reassessment proceedings are invalid, as the time of issuance of notice u/s. 143(2) had not expired - in favour of assessee.

Summary

Issues involved:
1. Validity of reassessment proceedings under section 148 of the Income Tax Act.
2. Merits of restricting the addition to the assessed income.

Detailed Analysis:
1. Validity of Reassessment Proceedings:
The appeal before the Appellate Tribunal ITAT, Agra involved a challenge by the Revenue against the order of the ld. CIT(A)-II, Agra for the assessment year 2005-06. The primary issue was the validity of the reassessment proceedings initiated under section 148 of the IT Act. The assessee, an employee of LIC of India, had filed the return of income, which was processed under section 143(1) of the Act. Subsequently, a notice under section 148 was issued, leading to reassessment. The assessee contended that the reassessment proceedings were invalid as the time for issuing notice under section 143(2) had not expired, and the AO had issued the notice under section 148 when a valid return was pending. The ld. CIT(A) accepted the assessee's contention, citing legal precedents and held that the notice under section 148 was not justifiable due to the availability of the statutory time limit for issuing a notice under section 143(2). Consequently, the reassessment proceedings were quashed. However, on the merits, the ld. CIT(A) restricted the addition made by the AO, providing relief to the assessee.

2. Merits of Restricting the Addition:
The Revenue appealed the order of the ld. CIT(A) on the merits of restricting the addition to the assessed income. The Revenue did not challenge the quashing of the reassessment proceedings but sought to raise an additional ground of appeal to challenge the same. The ld. DR argued that the reassessment was valid as long as the requirements of section 147 were met. Legal precedents were cited to support the position that the notice under section 143(2) was not necessary before issuing a notice of reassessment. On the other hand, the assessee's counsel reiterated that the issue was in favor of the assessee based on the legal decisions relied upon earlier. The Appellate Tribunal, after considering the submissions and legal position, upheld the quashing of the reassessment proceedings under section 148. The Tribunal emphasized the principle that reassessment proceedings cannot be initiated until the assessment proceedings based on the return already filed are concluded. The Tribunal rejected the additional ground raised by the Revenue, citing relevant legal judgments, including a recent decision of the Hon'ble Supreme Court. Consequently, the departmental appeal was dismissed, and the issue on merits regarding the addition was not adjudicated upon, as it would not impact the outcome of the appeal.