2016 (3) TMI 1318 - AT - Income Tax

Reopening of assessment - period of limitation - Held that - As could be noticed from the observations made by the Tribunal, while disposing of the appeals for assessment years 2003-04 and 2004-05, a casual observation was made to deal with the issue before them as to whether the capital gains is attracted in assessment year 2003-04 and 2004-05; but there is no specific finding or direction that it is assessable to tax in assessment year 2001-02. Any assessment year wherein further proceedings are barred by limitation, the same cannot be reopened merely by virtue of an opinion expressed by any higher forum at a later date i.e. subsequent to the date of limitation period. In fact, the judgments of the Apex Court are also on the same lines. Thus the reopening of assessment is bad in law since the proceedings u/s 148 of the Act are sought to be initiated by issuing a notice after the period of limitation. Case will be placed before the Regular Bench for passing a concluding order in accordance with the majority view.

Summary

Issues Involved:
1. Whether the notice issued under Section 148 read with Section 150(1) of the Income Tax Act for the assessment year 2001-02 is based on any finding or direction issued by the ITAT.
2. Whether the notice issued under Section 148 of the Income Tax Act is barred by limitation.

Issue-wise Detailed Analysis:

1. Basis of Notice under Section 148 read with Section 150(1):
The primary issue was whether the notice issued under Section 148 read with Section 150(1) of the Income Tax Act for the assessment year 2001-02 was based on any finding or direction issued by the ITAT in its order for the assessment years 2003-04 and 2004-05. The Tribunal had observed that the transfer of the asset took place in the year 2000, and thus, capital gains could not be taxed in the assessment years 2003-04 and 2004-05. Based on this observation, the Assessing Officer issued a notice for the assessment year 2001-02. However, the learned Judicial Member argued that this observation was not a specific finding or direction to assess the income for the assessment year 2001-02. He emphasized that Section 150(1) is not applicable if the proceedings are already barred by limitation by the date the Tribunal passed the order. The learned Accountant Member, on the other hand, considered the Tribunal's observation as a finding or direction, justifying the reopening of the assessment. The Third Member concluded that the notice issued under Section 148 read with Section 150(1) could not be considered based on any finding or direction by the ITAT.

2. Limitation Period for Issuing Notice:
The second issue was whether the notice issued under Section 148 was barred by limitation. The learned Judicial Member highlighted that Section 149 provides a maximum period of six years from the end of the relevant assessment year for reopening an assessment if the income chargeable to tax exceeds Rs. 1 lakh. In this case, the limitation period expired on 31.3.2008, whereas the Tribunal passed the order on 31.5.2010. Therefore, the reopening of the assessment was beyond the period of limitation. He referred to the judgment of the Apex Court in K.M. Sharma vs. ITO and the judgment of the Hon'ble Madras High Court in M/s Goldmine Investments, which held that assessments barred by limitation cannot be reopened based on subsequent orders. The learned Accountant Member, however, opined that Section 150(1) overrides Section 149, allowing the Assessing Officer to issue a notice at any time. The Third Member sided with the Judicial Member, concluding that the reopening of the assessment was barred by limitation, as the proceedings were initiated after the expiry of the limitation period.

Conclusion:
The Third Member resolved the points of difference by concluding that the notice issued under Section 148 read with Section 150(1) was not based on any finding or direction by the ITAT and that the notice was barred by limitation. The case was to be placed before the Regular Bench for passing a concluding order in accordance with the majority view.