2012 (12) TMI 746 - AT - Income Tax

Re opening of assessment Held that - Once the notice under section 142(1) had been issued, the machinery for assessment was already set in motion for the words in section 142(1) for the purpose of making assessment under this Act, the AO was required to complete the assessment u/s 143(3) without issue of notice u/s 148, on or before the expiry of period ending on 31.12.2008 under section 143(3). Though assessment has been made in the present case on 26.12.2008 with out issuing notice under section 143(2). At the same time, the AO cannot enter into jurisdiction for reassessment u/s 147/ 148 when there was time left for completion of assessment under section 143(3) for which notice under section 142(1) had already been issued and the assessment proceedings had already been started. Therefore, the notice issued u/s 148 by the AO was bad in law and therefore, assessment so framed was bad in law and therefore, assessment so framed is quashed - in favour of assessee.

Summary

Issues:
Validity of assessment under section 148 of the Income Tax Act, 1961 based on initiation of proceedings under section 142(1) of the Act.

Analysis:
The appellant challenged the assessment framed by the Income Tax Officer under section 148 of the Income Tax Act, 1961, contending that the initiation of proceedings under section 148 was illegal and void ab initio. The appellant argued that the machinery for assessment was already in motion with the issuance of notice under section 142(1) of the Act. The appellant relied on various judicial precedents to support the contention that initiating proceedings under section 148 without fresh evidence or material is impermissible. The appellant emphasized that the failure to issue notice under section 143(2) despite possessing relevant information rendered the notice under section 148 invalid. The appellant also highlighted the importance of the term "may" in section 143(2) to emphasize the necessity of issuing a notice when the Assessing Officer is not satisfied with the return filed by the assessee.

The Tribunal examined the sequence of events, noting that the assessee had been issued a notice under section 142(1) of the Act before the Assessing Officer proceeded to issue a notice under section 148. The Tribunal observed that the machinery for assessment had already been set in motion by the notice under section 142(1), and the Assessing Officer was not authorized to reassess under section 147/148 when the assessment proceedings were already underway. Relying on various court decisions, the Tribunal concluded that the notice under section 148 was invalid, leading to the quashing of the assessment made under section 143(3) of the Act. The Tribunal emphasized the distinct nature of assessments under sections 143(3) and 147/148, highlighting the procedural irregularity in initiating reassessment proceedings when the assessment under section 143(3) was pending.

In light of the above analysis, the Tribunal allowed the legal grounds raised by the appellant, quashed the assessment under section 143(3) of the Act, and held the notice under section 148 as invalid. The Tribunal refrained from deciding on the merits of other issues raised in the appeal, ultimately allowing the appeal of the assessee in the case.