2015 (5) TMI 88 - HC - Income Tax

Reopening of assessment - long term capital gain was to be added to the income of the said assessee firm or not? - reopening of the assessment for AY 2005-06 seems to be on the basis of the directions issued by the learned CIT (Appeals) in the case of one M/s Devrekha Engineers another assessee - Held that - The basis on which the reassessment proceedings were sought to be initiated to reopen the assessment for AY 2005-06 itself has been set aside by the learned Tribunal and further confirmed by this Court. It is true that the assessment proceedings can be reopened even after a period of six years as per section 150 of the Act to give effect to any finding or direction contained in order passed by any authority and in any proceedings under the Income Tax Act by way of appeal, reference or revision in any proceedings under any other law. Therefore, at the time when the reassessment proceedings for AY 2005-06 by impugned notice dated 30.7.2013 was initiated, it can be said that it can be argued that to give effect to direction issued by the learned CIT (Appeals) in the order dated 25.6.2013 in the case of M/s Devrekha Engineers considering section 150 of the Act, assessment/reassessment might be permissible. However, when the direction of which the effect was to be given while initiating assessment/ reassessment proceedings for AY 2005-06 itself has been set aside, there was no question of giving any effect to the said direction which has been set aside by the learned Tribunal. Under the circumstances, on the aforesaid ground alone, the impugned reassessment proceedings/notice under section 148 to reopen the assessment proceedings for AY 2005-06 deserves to be quashed and set aside. - Decided in favour of assessee.

Summary

Issues Involved:
1. Validity of reopening assessment after six years under Section 148 of the Income Tax Act.
2. Invocation of Section 150 of the Income Tax Act based on directions from CIT (Appeals).
3. Legitimacy of reassessment proceedings based on prior appellate orders.

Detailed Analysis:

1. Validity of Reopening Assessment After Six Years:
The petitioner challenged the reopening of the assessment for AY 2005-06 through a notice issued on 30.7.2013 under Section 148 of the Income Tax Act, arguing that it was beyond the permissible six-year period. The court noted that the assessment was initially completed under Section 143(1) on 30.11.2007, and a subsequent notice under Section 148 was issued on 29.3.2011, leading to an order under Section 143(3) read with Section 147 on 25.11.2011. The reopening was based on the CIT (Appeals) direction dated 25.6.2013 in another case (M/s Devrekha Engineers Pvt. Ltd.), which extended the limitation period under Section 150 of the Act.

2. Invocation of Section 150 of the Income Tax Act:
The CIT (Appeals) had directed the issuance of a notice under Section 148 for AY 2005-06 in the case of the petitioner, invoking Section 150 of the Act. This direction was based on the belief that the income of Rs. 1,46,00,000/- should be taxed as long-term capital gain in the hands of the petitioner. The court observed that the reassessment proceedings for M/s Devrekha Engineers were declared invalid by the Income Tax Appellate Tribunal (ITAT) and confirmed by the High Court, thus nullifying the basis for invoking Section 150.

3. Legitimacy of Reassessment Proceedings Based on Prior Appellate Orders:
The court examined the reasons for reopening communicated to the petitioner, which were primarily based on the CIT (Appeals) order in the case of M/s Devrekha Engineers. The ITAT had set aside this order, stating that the CIT (Appeals) could not direct reassessment by stepping into the shoes of the Assessing Officer. The High Court upheld this decision, confirming that the reassessment proceedings in the petitioner's case were invalid as they were based on an order that had been nullified.

Conclusion:
The court concluded that since the direction to reopen the assessment for AY 2005-06 was set aside by the ITAT and confirmed by the High Court, there was no valid basis for invoking Section 150 of the Act. Consequently, the reassessment proceedings initiated by the notice dated 30.7.2013 were quashed and set aside. The petition was allowed, and the rule was made absolute with no costs.