2014 (6) TMI 289 - HC - Income Tax

Validity of notice u/s 148 of the Act - Reasons for reopening the assessment not considered Held that - The notice was issued on March 23, 2012 it was received by the assessee on March 26, 2012 - on the date of issuance of notice, no reasons for issuing such notice were recorded - Requirement of recording reasons flows from the statutory provisions of section 148(2) of the Act- Sub-section (1) of section 148 as is well known pertains to issuance of notice where income has escaped assessment - sub-section (1) of section 148 pertains to such a notice to be issued by the AO before making the assessment, reassessment or re-computation of income u/s 147 of the Act - Sub-section (2) of section 148 provides that the AO shall, before issuing any notice under the section, record his reasons for doing so - When such essential requirement of issuance of notice under sub-section (1) of section 148 was not fulfilled, the notice itself would be rendered ineffective - issuance of notice the Commissioner s approval was also obtained on March 19, 2012 - If the AO had not recorded reasons, the Commissioner cannot persuaded himself to authorize issuance of notice thus, the notice set aside Decided in favour of Assessee.

Summary

Issues:
1. Validity of notice dated March 23, 2012, issued by the Assessing Officer under section 148 of the Income-tax Act, 1961.
2. Requirement of recording reasons for reopening assessment under section 148(2) of the Act.
3. Effect of failure to record reasons on the validity of the notice.
4. Commissioner's approval for issuance of notice without recorded reasons.

---

Issue 1: Validity of Notice
The petitioner, a company registered under the Companies Act, challenged a notice dated March 23, 2012, issued by the Assessing Officer under section 148 of the Income-tax Act, 1961. The petitioner had filed its return of income for the assessment year 2007-08, which was processed, and an order of assessment under section 143(3) of the Act was passed. The impugned notice sought to reopen this assessment, prompting the petitioner's challenge.

Issue 2: Recording of Reasons for Reopening
The primary ground for disposal of the petition was the absence of recorded reasons for reopening the assessment at the time of issuing the notice. The petitioner contended that although the notice was dated March 23, 2012, the reasons were recorded by the Assessing Officer on March 30, 2012. The statutory requirement of recording reasons before issuing a notice under section 148(2) of the Act was emphasized, and the failure to fulfill this essential step rendered the notice ineffective.

Issue 3: Impact of Failure to Record Reasons
The failure to record reasons before issuing the notice was deemed crucial in determining the validity of the notice itself. The court highlighted that the Assessing Officer must record reasons as per the provisions of section 148(2) of the Act, failing which the notice would be considered ineffective. The court noted that even though the Commissioner's approval was obtained before the notice was issued, the absence of recorded reasons raised questions about the authorization process.

Issue 4: Commissioner's Approval
The judgment raised concerns about how the Commissioner granted approval for the notice without the Assessing Officer having recorded reasons for reopening the assessment. This discrepancy further underscored the procedural irregularity in the issuance of the notice. Ultimately, the court quashed the impugned notice dated March 23, 2012, and disposed of the petition accordingly, emphasizing the importance of complying with the statutory requirements for issuing such notices under the Income-tax Act, 1961.