2016 (5) TMI 113 - HC - Income Tax

Reopening of assessment - officer who issued the notice and recorded the reasons for re-opening the assessment, i.e. the ITO Ward 39(2) was not the AO of the Assessee - Held that - The reasons given by the Department in its counter affidavit do not in any way explain the patent illegality in invoking the powers under Section 148 of the Act for reopening the assessment of the Assessee for AY 2007-08. The mere fact that the definition of an AO in terms of Section 2(7-A) of the Act al includes a DCIT and other superior officers or an ITO of some other ward who may be vested with the relevant jurisdiction by virtue of orders issued under Section 120 (1) or Section 120 (2) of the Act will not make a difference to the above legal position. The reason is not far to seek. It is only the AO who has issued the original assessment order dated 13th April 2009 for AY 2007-08 under Section 143 (3) of the Act who is empowered to exercise powers under Section 147/148 to re-open the assessment. This is because he alone would be in a position to form reasons to believe that some income of that particular AY has escaped assessment. This again cannot be based on a mere change of opinion. Further, in terms of Section 151 of the Act such a move will have to have the prior approval of the CIT. Under the scheme of the Act, if a superior officer forms an opinion that the original assessment order is prejudicial to the interests of the Revenue, recourse can be had to Section 263 of the Act. In any event the question of an ITO who is not the AO who passed the original assessment order under Section 143 (3) of the Act for particular AY, exercising the powers under Sections 147/148 of the Act to re-open that assessment does not arise. - Decided in favour of assessee

Summary

Issues involved:
1. Validity of notices issued under Section 148 of the Income Tax Act, 1961 for reopening assessment for Assessment Year (AY) 2007-08.
2. Jurisdictional concerns regarding the Assessing Officer (AO) issuing the notices.
3. Compliance with statutory timelines for issuing notices under Section 148.
4. Objections raised by the Assessee against the reopening of assessment.
5. Legal validity of the reasons for reopening assessment and subsequent actions taken by the Income Tax Department.

Analysis:

1. Validity of Notices under Section 148:
The High Court considered the writ petition challenging the validity of notices dated 14th March, 2014, and 23rd June, 2014, issued by the Income Tax Officer (ITO) and Assistant Commissioner of Income Tax (ACIT) respectively, under Section 148 of the Income Tax Act, seeking to reopen the assessment for AY 2007-08.

2. Jurisdictional Concerns:
The Assessee contended that the notices were issued by officers who did not have jurisdiction over the case. The ITO Ward 39(2) issued the first notice, while the ACIT Circle 39(1) issued the second notice. The High Court noted that the ITO was not the AO for the AY in question, and the subsequent notice by the ACIT was issued beyond the statutory limitation period.

3. Compliance with Timelines:
The limitation for reopening the assessment expired on 31st March, 2012, and the extended period under Section 149(1)(b) expired on 31st March, 2014. The notices were issued after these deadlines, raising concerns about compliance with statutory timelines.

4. Objections Raised by Assessee:
The Assessee raised objections to the reopening of the assessment, highlighting jurisdictional issues and non-compliance with statutory provisions. The Assessee pointed out that the notices were invalid and void due to being issued beyond the prescribed limitation periods.

5. Legal Validity of Reasons and Departmental Actions:
The Court analyzed the reasons provided for reopening the assessment and subsequent actions taken by the Income Tax Department. The Respondent's counter affidavit attempted to justify the notices, but the Court found that the officer who issued the first notice did not have the authority to do so. The Court emphasized that only the AO who passed the original assessment order had the power to reopen the assessment under Section 147/148, with prior approval of the Commissioner of Income Tax (CIT).

6. Court's Decision:
Ultimately, the High Court quashed the notices dated 14th March 2014 and 23rd June 2014, along with the order dated 28th January, 2015, which rejected the Assessee's objections. The Court ruled in favor of the Assessee, highlighting the legal flaws in the process of reopening the assessment for AY 2007-08. The writ petition was allowed, with no costs imposed on either party.

This detailed analysis of the judgment addresses the issues raised in the case comprehensively, focusing on the legal aspects and procedural irregularities in the Income Tax Department's actions regarding the reopening of the assessment for the specified Assessment Year.