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2015 (1) TMI 569 - AT - Income TaxValidity of reassessment u/s 147 Income escapement Notice u/s 148 issued Held that - A valid return of income submitted by assessee u/s. 139(4) of the Act was pending assessment - AO is empowered to issue notice u/s. 143(2) of the Act as the time limit has not expired - The AO cannot ignore a valid return filed under various provisions of section 139 of the Act and any notice issued u/s. 148 of the Act read with section 147 of the Act, ignoring such return, is invalid relying upon Smt. Sova Sarkar Vs. 1977 (6) TMI 1 - CALCUTTA High Court - There can be no doubt that when there is no question as to the validity of a return filed by an assessee, the ITO has to complete the assessment in accordance with s. 143 of the Act and before such completion he would not have any jurisdiction to ignore the return and to issue a notice u/s 148 u/s 147(a) of the Act one of the grounds which enables the ITO to assess or reassess the income of an assessee by issuing a notice u/s 148 is that the ITO has reason to believe that, by reason of the omission or failure on the part of the assessee to make a return under s. 139 of the Act for any assessment year, income chargeable to tax has escaped assessment for that year - The assessee filed returns, but they did not include certain particulars regarding the profits and gains of his business. It were signed and verified by the assessee - when a return has been filed by an assessee, it cannot be ignored by the ITO and he will have no jurisdiction to issue a notice u/s 148 without completing the assessment on the return filed by the assessee - Even though a return is invalid in the sense that it is not correct and complete within the meaning of s. 139 of the I.T. Act, 1961, the ITO cannot ignore or disregard the same for the purpose of issuing a notice under s. 148 of the Act, unless the return can be regarded as not a return in the eye of law - the ITO acted on the returns filed by the appellant, issued notices u/s 143(2) and heard the appellant u/s 143(3), but without completing the assessments he took recourse to reopen the assessments u/s 147 by issuing the notices u/s 148 of the Act - the notice issued u/s. 148 of the Act for initiation of reassessment proceedings u/s. 147 of the Act for escapement of income is bad in law ans is set aside Decided in favour of assessee.
Issues Involved:
1. Validity of reassessment proceedings initiated under Section 147 of the Income-tax Act, 1961. 2. Validity of notice issued under Section 148 of the Income-tax Act, 1961. 3. Validity of notice issued under Section 143(2) of the Income-tax Act, 1961. Issue-wise Detailed Analysis: 1. Validity of reassessment proceedings initiated under Section 147 of the Income-tax Act, 1961: The core issue in this appeal is whether reassessment under Section 147 of the Act for the escapement of income can be initiated by issuing a notice under Section 148 of the Act despite the existence of a valid return filed under Section 139(4) of the Act. The appellant argued that since a valid return was pending, the Assessing Officer (AO) should have proceeded with the assessment under Section 143(2) of the Act. The Income Tax Appellate Tribunal (ITAT) referenced the decision of the Hon'ble Calcutta High Court in Smt. Sova Sarkar vs. ITO, which held that the AO cannot ignore a valid return filed under Section 139 of the Act and issue a notice under Section 148 without completing the assessment on the pending return. Therefore, the ITAT concluded that the reassessment proceedings initiated under Section 147 were invalid. 2. Validity of notice issued under Section 148 of the Income-tax Act, 1961: The appellant challenged the issuance of the notice under Section 148 on the grounds that it was issued while a valid return under Section 139(4) was pending. The CIT(A) upheld the AO's action, citing various judicial precedents that supported the issuance of a notice under Section 148 even when the time for issuing a notice under Section 143(2) was available. However, the ITAT found that during the pendency of a valid return, there is no question of escapement of income as envisaged under Section 147. The ITAT held that the notice issued under Section 148 was invalid, as it disregarded the pending return filed by the assessee. 3. Validity of notice issued under Section 143(2) of the Income-tax Act, 1961: The appellant also contended that the notice issued under Section 143(2) was barred by limitation. The CIT(A) considered the notice under Section 143(2) as valid, pursuant to the reassessment notice under Section 148. However, the ITAT emphasized that the AO is empowered to issue a notice under Section 143(2) on a valid return filed within the period fixed under Section 139(4). Since the reassessment proceedings initiated under Section 147 were deemed invalid, the subsequent notice under Section 143(2) was also rendered invalid. Conclusion: The ITAT concluded that the issuance of the notice under Section 148 for the initiation of reassessment proceedings under Section 147 was bad in law, as it ignored the valid return pending assessment. Consequently, the appeal of the assessee was allowed, and the reassessment proceedings were quashed. Order: The appeal of the assessee is allowed for statistical purposes, and the order was pronounced in open court on 05.09.2014.
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