2014 (10) TMI 665 - HC - Income Tax

Validity of reopening of notice u/s 148 Notice issued by AO to safeguard against a future contingency - Held that - The notices have been issued in respect of the amount as bogus sales resulting in disallowing deduction u/s 80IA of the Act for AY 1998-99 and 1999-2000 assessee contended that on the date when the notices were issued namely dated 28 March 2005 and 3 February 2006 the AO could not have had any reason to believe that income chargeable to tax has escaped assessment u/s 148 of the Act - This is for the reason that the block assessment order has been passed by the AO bringing to tax an amount of ₹ 11.04 crores and ₹ 15.10 crores on account of disallowance of deduction u/s 80 IA of the Act. There is statutory bar prohibiting the revenue from subjecting to tax income under regular assessment as the same has already been subjected to tax as block assessment under Chapter XVIB of the Act the notices are clearly without jurisdiction and bad in law relying upon CIT vs. H.N. Shindore 1976 (8) TMI 19 - BOMBAY High Court the notices were issued to the petitioner - the notices were more in the nature of protective assessments and would come to the aid of the revenue in case the block assessment orders are found not sustainable thus, the issue of notices u/s 148 of the Act to safeguard against a future contingency is not permissible Decided in favour of assessee.

Summary

Issues:
Challenge to notices issued under Section 148 of the Income Tax Act, 1961 for reopening assessments for AY 1998-99 and 1999-2000.

Analysis:
The petitions challenged notices dated 28 March 2005 and 3 February 2006 issued by the Assessing Officer under Section 148 of the Income Tax Act, seeking to reopen assessments for AY 1998-99 and 1999-2000. The litigative facts and issues in both petitions were deemed identical, and the facts in WP No.1227 of 2006 were referred to for both petitions' disposal.

The petitioner filed a revised Return of Income for AY 1998-99, declaring a loss of Rs. 16.82 lacs while claiming a deduction of Rs. 16.48 crores under Section 80IA of the Act. The Assessing Officer's order under Section 143(3) of the Act allowed a deduction of Rs. 15.45 crores under Section 80IA. A search action under Section 132 of the Act was conducted on the petitioner, resulting in a block assessment order disallowing the claimed deduction for AY 1998-99.

The impugned notices sought to reopen assessments based on alleged bogus sales leading to disallowed deductions under Section 80IA. The petitioner objected to the reasons for the notices, which were rejected by the Assessing Officer. The High Court found that the notices were issued after the block assessment order, making them without jurisdiction and bad in law.

Chapter XIV-B of the Act prohibits subjecting income to tax under regular assessment if it has already been included in a block assessment. The High Court concluded that the impugned notices were without jurisdiction and referenced a previous case to support their decision. The revenue's argument for issuing protective assessments was deemed impermissible, and the notices were set aside as lacking jurisdiction.

In light of the above reasons, the High Court held that the impugned notices dated 28 March 2005 and 3 February 2006 were without jurisdiction and set them aside. The rule was made absolute in both petitions with no order as to costs.