2012 (8) TMI 1176 - HC - Income Tax

Summary

Issues involved:
The appeal concerns the validity of a reassessment proceeding u/s 147 of the Income Tax Act, 1961, specifically regarding the timing of supplying reasons for reopening assessment within the six-year limit.

Summary:

Issue 1: Validity of Reassessment Proceeding
The revenue appealed against the Tribunal's order allowing the assessee's appeal without examining the merits, based on the ground that reasons for reopening were not supplied within six years from the end of the relevant assessment year. The AO observed bogus transactions by the assessee based on accommodation entries, leading to an addition of Rs. 38,99,527. The CIT (A) rejected the appeal on merits and dismissed the contention that reassessment was invalid due to being initiated after the limitation period. The Tribunal, following a previous decision, quashed the reassessment due to reasons not being supplied within the six-year period.

Issue 2: Legal Interpretation
The revenue argued that there is no legal requirement to serve reasons for reopening assessment along with the notice u/s 148. They cited legal precedents to support their contention. The assessee defended the Tribunal's decision, emphasizing that the notice was served after the six-year limit, depriving the AO of jurisdiction to reopen assessment.

Court's Decision
The Court analyzed the legal provisions and cited relevant case laws. It clarified that serving the notice is a pre-condition for making the assessment order u/s 148, not the service on the assessee. As the notice was issued within the six-year limit, the AO had jurisdiction despite late service. The Court rejected the assessee's argument that reasons must be furnished along with the notice, citing a previous Division Bench decision. It highlighted that the assessee had ample time to respond to the reasons recorded for reopening, ensuring a fair opportunity as mandated by law. Consequently, the Court set aside the Tribunal's order and remanded the matter for consideration on its merits.

In conclusion, the Court upheld the legality of the reassessment proceeding, emphasizing compliance with statutory provisions and established legal principles.