2014 (8) TMI 171 - HC - Income Tax

Notice for reopening of assessment u/s 148 Proper sanction from appropriate authority not taken - Held that - After hearing the parties and the issues raised with regard to jurisdiction, i.e. of not obtaining sanction from the appropriate authority as well as there being a change of opinion appear to be substantial - It would be appropriate for the AO considers the assessee s further communication and also objections made earlier including the issue of sanction by the appropriate authority to issue the notice at the earliest assessees undertake to file a consolidated objection within a period for two weeks from today before the AO the order is set aside and the matter is remitted back to the AO for adjudication Decided in favour of Assessee.

Summary

Issues:
Challenge to notice under section 148 of the Income Tax Act, 1961 seeking to reopen assessment for A.Y.2008-09.

Analysis:
The petition challenges a notice dated 31.7.2012 issued by the Assessing Officer under section 148 of the Income Tax Act, 1961, seeking to reopen the assessment for A.Y.2008-09. The reasons for reopening the assessment include the fact that the assessee company had not started its business operations during the relevant year and had only acquired assets, leading to the escapement of income chargeable to tax. The Assessing Officer believed that expenses related to acquiring assets should have been capitalized instead of being treated as revenue expenses, resulting in the under-assessment of income. The petitioners objected to the notice on various grounds, including the lack of proper sanction from the appropriate authority and the applicability of special provisions for shipping companies regarding exchange rate fluctuations gains.

The Assessing Officer initially accepted the petitioner's objections regarding certain expenses but disagreed regarding exchange rate fluctuations gains. It was noted that necessary sanction had been obtained from the Commissioner of Income Tax for issuing the notice. Subsequently, the petitioner further objected to the notice, arguing that it was without jurisdiction and based on a change of opinion. The Assessing Officer did not consider these additional objections, prompting the petition challenging the decision.

The High Court, after considering the arguments, decided to set aside the order disposing of objections and directed the Assessing Officer to reconsider the objections raised by the petitioner. The court emphasized the importance of addressing issues related to jurisdiction and obtaining proper sanction. The Assessing Officer was instructed to review the objections and communicate the decision promptly. The court also stayed the impugned notices for a specified period to allow for the computation of the limitation period for passing an assessment order. The petition was ultimately disposed of with no order as to costs.