2013 (4) TMI 447 - HC - Income Tax

Reopening of the assessment u/s 147 (b) - Time barred U/s 153 (1) of the Act - Held that -the return was processed under Section 143 (1) of the Act on 26.12.1973. The assessment proceeding was started on the application of the assessee dated 18.02.1974, which was ultimately held as bad by the appellate authority, by the order dated 15.02.1980, on the ground that assessment was not completed within the time-limit provided under Section 153 of the Act. In the meantime, reassessment proceeding was started by the notice dated 04.02.1978. In view of the judgment of the Supreme Court in Chatturam (1955 (4) TMI 1 - SUPREME Court), the tribunal was not correct in holding that reassessment proceeding could not have been initiated as the assessment proceeding was not completed within time-limit. In view of the aforesaid discussion appeal is allowed in favour of the Revenue.

Issues:
1. Validity of the report of the Inspector as "information" for reopening the assessment under Section 147 (b).
2. Justification of reopening the assessment under Section 147 (b) based on the Inspector's report.
3. Legality of reopening the assessment under Section 147 (b) after the completion of assessment under Section 143 (3) (b).

Issue 1:
The first issue revolves around whether the report of the Income-tax Inspector can be considered as valid "information" for the purpose of reopening the assessment under Section 147 (b). The Tribunal found that the Inspector's report on the annual rental value of the accommodation provided to the assessee was not a relevant material for forming the opinion that income had escaped assessment. The Tribunal held that there must be material other than the report of subordinate officers for forming such an opinion. The Tribunal concluded that the reassessment proceedings were not justified as the Inspector's report did not constitute valid information for reassessment.

Issue 2:
The second issue questions the justification of reopening the assessment under Section 147 (b) based on the Inspector's report. The Assessing Officer initiated reassessment proceedings based on the Inspector's report regarding the annual rental value of the accommodation, which was deemed irrelevant for forming the opinion that income had escaped assessment. The Tribunal held that the report of the Income-tax Inspector did not qualify as valid information for reassessment. Consequently, the Tribunal set aside the reassessment order, indicating that the proceedings for reassessment were not justified.

Issue 3:
The final issue concerns the legality of reopening the assessment under Section 147 (b) after the completion of the assessment under Section 143 (3) (b). The Tribunal found that the original assessment under Section 143 (3) (b) had become time-barred, and therefore, the Assessing Officer could not reopen the assessment under Section 147 (b). However, the High Court disagreed with the Tribunal's interpretation. Citing legal precedents, the High Court held that the Assessing Officer was authorized to initiate reassessment under Section 147, even if the earlier assessment proceedings had failed to result in a valid assessment due to reasons beyond the assessing authorities' control. The High Court answered this issue in favor of the Revenue and against the assessee.

In conclusion, the High Court upheld the Tribunal's decision on the first and second issues, ruling in favor of the assessee against the Revenue. However, on the third issue, the High Court sided with the Revenue, allowing the reassessment under Section 147 (b) to proceed despite the completion of the assessment under Section 143 (3) (b). Consequently, the High Court found no grounds to interfere with the Tribunal's order dated 24.01.1981.

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