2008 (12) TMI 40 - HC - Income Tax

Reassessment sole and entire basis of re-opening the assessment is the additions made in A.Y. 1998-99 and 2001-02, no other reason given by AO - Since the tribunal has already deleted the additions in respect of the A.Y. 1998-99 and 2001-02, the very basis for continuing any further with the re-assessment proceedings does not survive any more - no specific allegation with regard to the A.Y 1999-2000 regarding suppression of sale figures proceedings u/s 147 and notice u/s 148 are quashed

Summary

Issues:
Initiation of re-assessment proceedings under Section 147 of the Income-tax Act, 1961 based on alleged suppression of sales in previous assessment years.

Analysis:
The petitioner filed a return of income for the assessment year 1999-2000, declaring a total loss, which was processed under Section 143(1). Subsequently, re-assessment proceedings were initiated under Section 147 by a notice dated 01.03.2006, alleging suppression of sales based on the assessments for the years 1998-99 and 2001-02. The reasons for re-opening the assessment highlighted that the sales figures were recomputed due to the alleged suppression of sales, which were confirmed by the Commissioner of Income-tax (Appeals) for those years. However, the tribunal had deleted the additions made by the Assessing Officer for the previous years. The petitioner objected to the re-assessment, pointing out the tribunal's decision to delete the additions. Despite this, the Assessing Officer rejected the objections, leading to the petitioner approaching the High Court for relief.

Upon hearing the parties, the High Court observed that the reasons recorded for re-opening the assessment did not specifically allege any escapement of assessment for the year 1999-2000. The basis for the re-assessment was solely the additions made in the previous assessment years, which had been subsequently deleted by the tribunal. As there was no specific allegation regarding the suppression of sales figures for the year in question, the Court concluded that the grounds for continuing with the re-assessment proceedings were no longer valid. Consequently, the Court set aside the order rejecting the petitioner's objections and quashed further proceedings related to the re-assessment notice issued in 2006.

In conclusion, the High Court disposed of the writ petition, directing each party to bear their own costs.

This judgment emphasizes the importance of specific allegations and valid grounds for initiating re-assessment proceedings under Section 147 of the Income-tax Act, ensuring that the reasons recorded are directly linked to the assessment year in question and not solely based on actions in previous years.