2007 (2) TMI 212 - HC - Income Tax

Reassessment notice u/s 148 - unless the return of income already filed is disposed of, notice for reassessment cannot be issued, i.e., no reassessment proceedings can be initiated so long as assessment proceedings pending on the basis of return already filed are not terminated - no substantial question of law that arises for our consideration revenue appeal dismissed reassessment notice is not valid

Summary

Issues:
Validity of reassessment notice under Section 147/148 of the Income Tax Act, 1961 based on excessive deduction claim under Section 80-O for Assessment Year 1994-1995.

Analysis:
The judgment concerns the appeal by the Revenue against an order passed by the Income Tax Appellate Tribunal related to the Assessment Year 1994-1995. The Assessing Officer recorded reasons for issuing a notice for reassessment to the Assessee on the grounds of wrongly claimed excessive deduction under Section 80-O and income escaping assessment, without processing the return initially. Subsequently, the return was processed under Section 143(1) of the Act, and a notice was issued under Section 148 for filing the return. The Court referred to the case law in Commissioner of Income Tax v. Kelvinator of India Ltd. and Trustees of H.E.H the Nizam's Supplemental Family Trust v. Commissioner of Income Tax to establish that reassessment proceedings cannot be initiated until the pending assessment proceedings are concluded.

The Court highlighted that the assessment proceedings under Section 143(1) were terminated only on the date the return was processed, and before that, the Assessing Officer could have processed the valid return pending before him. The Revenue argued that since the period for issuing a notice under Section 143(2) had lapsed, and income was believed to have escaped assessment, the Assessing Officer resorted to Explanation 2 to Section 147 for reassessment. However, the Court held that the Assessing Officer could not have concluded that income escaped assessment while a valid return was pending, and his attempt to indirectly initiate reassessment was incorrect.

Furthermore, the Court rejected the contention that a notice for reassessment could be issued even if no assessment order was made, emphasizing that without an assessment, there was no basis for assuming income had escaped assessment. Ultimately, the Court found no substantial question of law for consideration, upholding the Tribunal's decision and dismissing the appeal. The judgment underscores the importance of following due process and completing assessment proceedings before initiating reassessment based on claimed deductions or understated income.