2013 (3) TMI 245 - HC - Income Tax

Reopening of assessment - disallowance u/s 36 & 37 - Held that - The provisions of Section 147 clearly prescribe that if the Assessing Officer has reason to believe that income chargeable to tax has escaped assessment, he can initiate proceeding. So, at present, only proceeding has been initiated. Prima facie,it cannot be said that the notice is without jurisdiction. The petitioner is at liberty to participate in the proceeding. The petitioner has already participated in the proceeding and tomorrow is the date of hearing. In such circumstances, it would not be just and proper to entertain the petition at this stage. It is hereby dismissed.

Summary

Issues:
Jurisdiction of issuance of show cause notice under Section 147 of the Income Tax Act, 1961.

Analysis:

The petitioner challenged the jurisdiction of the show cause notice issued against them, arguing that the notice was without jurisdiction as the income was disclosed in the return and there was no question of income escaping assessment. The petitioner's counsel contended that under Section 147 of the Income Tax Act, 1961, proceedings can only be initiated if the assessing officer has reason to believe that income has escaped assessment. The petitioner relied on various judgments to support their argument.

On the other hand, the respondents' senior counsel argued that the petition was premature as only a show cause notice had been issued, and the proceedings were pending. It was emphasized that the notice was not issued by an incompetent authority, and the petitioner themselves admitted to claiming the penalty in the assessment year 2006-07, even though it was paid after the relevant financial year. The respondents maintained that the penalty could not be treated as expenses under Sections 36 & 37 of the Income Tax Act, 1961.

The High Court noted that Section 147 of the Income Tax Act allows the Assessing Officer to initiate proceedings if there is a reason to believe that income has escaped assessment. As the proceedings had been initiated, the court held that it was not just and proper to entertain the petition at that stage. The petitioner was given the opportunity to participate in the proceedings, and the court dismissed the petition without costs.

In conclusion, the High Court dismissed the petition challenging the jurisdiction of the show cause notice under Section 147 of the Income Tax Act, 1961, stating that the petitioner could participate in the ongoing proceedings initiated by the Assessing Officer based on the belief that income had escaped assessment.