2017 (1) TMI 1689 - HC - Income Tax

Reopening of assessment - Reason to believe that income chargeable to tax has escaped Assessment on the basis of the Assessment Order relating to Assessment Year 2005-06, when he issued the re-opening notice dated 9th March, 2009 - HELD THAT - In this case, the reasons as recorded for reasonable belief, is only the Assessment Order for Assessment Year 2005-06 and this order had on the issues of re-opening of notice been set aside by the CIT (A) on the date of the issue of the re-opening notice. This order of the CIT (A) not having been stayed by the Tribunal, the Assessing Officer could not rely upon an Assessment Order for Assessment Year 2005-06 which on the issues involved is admittedly set aside. We find that the issue arising for our consideration as raised by the Revenue stands concluded against the Revenue by the decision of this Court in German Remedies Ltd. v. Dy. CIT 2005 (10) TMI 65 - BOMBAY HIGH COURT wherein AO had issued a notice dated 18th February, 2005, seeking to re-open the Assessment for Assessment Year 1999-2000. This re-opening notice was based upon the Assessment Order for Assessment Year 1996-97 with regard to processing charges. Tribunal had by order dated 1st September, 2004 had set aside the issue of processing charges as reflected in the order for Assessment Year 1996-97. This order of the Tribunal was brought to the notice of the Assessing Officer on 31st January, 2005. Nevertheless, the Assessing Officer on 18th February, 2005 issued the re-opening notice on the basis of the Assessment Order passed for Assessment Year 1996-97. This Court held that Assessing Officer was bound to follow binding decision of the Appellate Authority and if not doing so, the re-opening notice becomes unsustainable. In the present facts also as pointed out above, the Assessing Officer was aware of the order dated 13th January, 2009 of the CIT (A) as he gave effect for Assessment Year 2005-06 to the same by his order dated 5th March, 2009. Therefore, the Assessing Officer could not have reason to believe that income chargeable to tax has escaped Assessment on the basis of the Assessment Order relating to Assessment Year 2005-06, when he issued the re-opening notice dated 9th March, 2009.

Summary

Issues:
Challenge to order under Section 260-A of the Income-tax Act, 1961 for Assessment Year 2006-07 based on quashing of proceedings u/s. 148 due to binding effect of earlier year's CIT (A) order.

Analysis:
The case involved an appeal challenging the Income Tax Appellate Tribunal's order dated 4th December, 2013 for Assessment Year 2006-07. The main issue raised by the Revenue was whether the Tribunal erred in quashing the proceedings under Section 148 based on the binding effect of the earlier year's CIT (A) order. The Respondent-Assessee had filed a return of income in 2007, which was processed under Section 143(1) of the Act. Subsequently, a notice under Section 148 was issued in 2009 to re-open the assessment for the year 2006-07. The reasons for re-opening were based on the assessment order for the previous year, which had been set aside by the CIT (A) in an appeal. The Assessing Officer issued the re-opening notice despite being aware of the CIT (A) order, which was given effect before the re-opening notice was issued.

The Tribunal noted that the Assessing Officer, at the time of issuing the re-opening notice, was aware of the CIT (A) order, and therefore, could not have had a valid reason to believe that income had escaped assessment based on the previous year's assessment order. The Revenue argued that the CIT (A) order was subject to further appellate remedies, but the Court found that since the CIT (A) order was not stayed by the Tribunal, the Assessing Officer could not rely on the set-aside assessment order for the re-opening. The Court referred to a previous decision where it was held that the Assessing Officer is bound to follow the binding decision of the Appellate Authority, and failure to do so renders the re-opening notice unsustainable.

Based on the precedent set in a previous case, the Court concluded that the issue raised by the Revenue was already settled against it. The Court dismissed the appeal, stating that the question raised did not give rise to any substantial legal issues. Therefore, the appeal was dismissed with no order as to costs.