2015 (10) TMI 254 - HC - Income Tax

Re-assessment proceedings - ITAT quashed re-assessment order - Held that - Very initiation of proceedings under Section 147 was bad due to non service of notice. - Decided against revenue.

Summary

Issues:
1. Validity of quashing the re-assessment order for the assessment year 1990-91 under the Income Tax Act, 1961.

Analysis:
The High Court of Madras dealt with an appeal under Section 260A of the Income Tax Act, 1961, regarding the quashing of a re-assessment order for the assessment year 1990-91. The primary question of law was whether the Income Tax Tribunal was correct in law in setting aside the re-assessment order. The respondent assessee initially declared a loss in the return of income filed in December 1990, which was processed under Section 143(1)(a). Subsequently, the assessment was completed under Section 143(3), assessing the book profits of the assessee under Section 115J. The Assessing Officer then issued a notice under Section 148 for reopening the assessment based on certain details related to lease agreements. The assessee objected to the reopening, but the Deputy Commissioner of Income Tax overruled the objections, leading to a series of appeals and orders.

The First Appellate Authority dismissed the appeal filed by the assessee, who then filed a statutory appeal. The High Court noted that the assessee had given up the first ground of attack related to the reopening of assessment under Section 147. Subsequently, the assessee filed an application under Section 154, which was rejected. Further appeals were filed by the assessee before the Tribunal against the orders passed by the First Appellate Authority and the Commissioner of Income Tax (Appeals). The Tribunal considered both appeals together and first addressed the appeal questioning the reopening of the assessment under Section 147.

The Tribunal found that the initiation of proceedings under Section 147 was flawed due to non-service of notice and allowed the appeal related to the reopening of assessment. Consequently, the Tribunal closed the other appeal without delving into the issues raised therein. The High Court highlighted that the Revenue had not challenged the order concerning the reopening of assessment, but only challenged the consequential order. The Court emphasized that as long as the order related to the reopening of assessment was not challenged, the subsequent order could not be contested. Therefore, the High Court dismissed the tax case appeal, ruling against the appellant - Revenue, and no costs were awarded in the matter.