2019 (4) TMI 1995 - HC - Income Tax

Assessment u/s 147 - assessment proceeding by the Sales Tax Department, which could not be finalized, the income tax assessment should not be finalized unless the sales tax issue is finally conclude - HELD THAT - Tribunal passed the order of remand on the ground that notice under Section 148 of the I.T. Act referred to some assessment by the Sales Tax Department which had not attained finality - since the very basis of the assessment proceeding under Section 148 was based on an assessment proceeding by the Sales Tax Department, which could not be finalized, the income tax assessment should not be finalized unless the sales tax issue is finally concluded - after the Tribunal's impugned order, the assessee has informed Income-tax Officer-1, Raigarh on 27/03/2018 that the Sales Tax issue has also attained finality as no proceeding either on behalf of the assessee or by the Sales Tax Department is pending before the High Court. As the stage of assessment undertaken by the Sales Tax Department, it is for the Tribunal to decide the matter on merits both on factual and legal score including the issue pertaining to the validity of notice un/s 148 of the I.T. Act. Accordingly, the appeal is allowed. The impugned order is set aside and the matter is remanded back to the Tribunal for deciding the assessee's appeal on merits in accordance with law. It is made clear that we have not expressed any opinion on merits of the issue which shall be dealt with by the Tribunal on the basis of the material available on record.

Summary

Issues:
1. Validity of assessment order for assessment year 2002-03 under Section 147 of the Income Tax Act, 1961.
2. Remand orders by the Tribunal based on the Sales Tax Department's assessment proceedings.
3. Finality of the Sales Tax issue and its impact on the income tax assessment.

Analysis:

Issue 1: Validity of assessment order under Section 147
The High Court entertained the appeal on a substantial question of law regarding the assessment order for the year 2002-03. The Tribunal had set aside the original assessment order based on consent from both parties. Subsequently, a fresh assessment order was passed by the Assessing Officer. However, the Tribunal again set aside this order, leading to the present impugned order. The Tribunal's decision was based on the fact that the notice under Section 148 of the Income Tax Act was linked to an assessment by the Sales Tax Department, which had not been finalized. The High Court emphasized that the Tribunal should decide the matter on merits, including the validity of the notice under Section 148 of the Income Tax Act.

Issue 2: Remand orders based on Sales Tax Department's proceedings
The Tribunal had remanded the matter back to the Assessing Officer on two occasions, citing the pending assessment proceedings by the Sales Tax Department as the basis for its decision. The High Court noted that the income tax assessment should not be concluded until the Sales Tax issue is finalized. However, the assessee later informed that the Sales Tax issue had reached finality as of a specific date, indicating that there were no pending proceedings related to it.

Issue 3: Finality of Sales Tax issue and impact on income tax assessment
The High Court allowed the appeal, setting aside the impugned order and remanding the matter back to the Tribunal for a decision on the assessee's appeal on merits. It clarified that no opinion on the merits of the issue was expressed and that the Tribunal should decide based on the available material. The Court also stated that the substantial question did not need to be decided at that stage and could be addressed later if necessary.

In conclusion, the High Court's judgment focused on the validity of the assessment order, the impact of the Sales Tax Department's proceedings on the income tax assessment, and the need for a decision on merits by the Tribunal based on the available evidence.