2016 (1) TMI 1421 - HC - Income Tax

Reopening of assessment - notice for reopening on the ground that AO had relied on the show cause notice issued by the Excise department to form a reason to believe that income chargeable to tax had escaped assessment - HELD THAT - Tax Appeals are admitted for consideration of following substantial question of law 1 Whether the ITAT is justified in law as well as on facts in holding that reopening of the assessment under section 147 and 148 of the Act is bad in law and cannot be sustained and thereby further holding that the reassessment orders are required to be cancelled? 2. Whether the ITAT is justified in law as well as on facts in dismissing the appeal filed by the Department and quashed and set aside reassessment order passed by the Assessing Officer without considering the department appeal against order passed by the CIT(A) on merits?

Summary

Issues:
1. Validity of notice for reopening based on show cause notice from Excise department.
2. Justification of ITAT's decision in quashing reopening of assessment and cancelling reassessment orders.
3. Consideration of department's appeal against CIT(A) order.

Issue 1:
The High Court considered the validity of the notice for reopening the assessment, which was challenged on the grounds that the Assessing Officer relied on a show cause notice from the Excise department to form a reason to believe that income chargeable to tax had escaped assessment. The Tribunal had quashed the notice for reopening based on a previous Division Bench decision, stating that such reliance was not justified. However, the counsel for the Revenue argued that the High Court's previous judgment was in a different context and did not pertain to the legality of the notice for reopening.

Issue 2:
The Court examined whether the ITAT was justified in law and on facts in holding that the reopening of the assessment under sections 147 and 148 of the Act was bad in law and could not be sustained. The ITAT had further canceled the reassessment orders. The Court was tasked with determining the legality and justification of the ITAT's decision in dismissing the appeal filed by the Department and setting aside the reassessment order passed by the Assessing Officer without considering the department's appeal against the order passed by the CIT(A) on merits.

Issue 3:
The Court scheduled the tax appeals for consideration of the substantial questions of law, including the justification of the ITAT's decisions and the need to hear the appeals filed by the Department against the CIT(A) order on merits. The Court directed the entire group to be placed for final hearing and permitted direct service for further proceedings.

In conclusion, the judgment involved a detailed analysis of the validity of the notice for reopening assessments based on show cause notices from the Excise department, the ITAT's decisions in quashing reassessment orders, and the consideration of departmental appeals against CIT(A) orders. The Court's thorough examination of these issues highlighted the complexity and legal nuances involved in the case.