2016 (6) TMI 836 - AT - Income Tax

Reopening of assessment - competent authority to issue notice - the assessment year involved is 2006-07 and the original assessment u/s 143(3) was completed on 31.12.2008. i.e. notice u/s 148 is dated 17.9.2012 which is beyond the period of 4 years from the end of the relevant assessment year - Held that - The instant fact-situation is covered by sub-section (1) of section 151 of the Act read with the proviso, which prescribes that where assessment has been made u/s 143(3) of the Act and the notice u/s 148 is to be issued after the expiry of 4 years from the end of the relevant assessment year, no such notice shall be issued unless the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner is satisfied, on the reasons recorded by the Assessing Officer, that it is a fit case for issue of such notice. Ostensibly, in the present case the notice issued u/s 148 of the Act, reveals that the approval has been accorded by the Additional Commissioner of Income-tax, who is not competent authority referred to in the first proviso to Sec. 151(1) of the Act. At the time of hearing, even the records produced by the Department reveal that the Form for recording the reasons for initiating proceeding u/s 148 of the Act depicts the satisfaction of the Additional Commissioner of Income-tax and not by any of the authorities specified in the proviso to Sec. 151(1) of the Act which is squarely attracted in the present case. Therefore, the initiation of proceeding by issuance of such notice u/s 148 of the Act suffers from an illegal infirmity, and is liable to be set-aside, and we do so. As a consequence, the subsequent assessment order passed by the Assessing Officer dated 31.12.2013 is bad in the eyes of law and is hereby quashed. - Decided in favour of assessee

Summary

Issues:
1. Validity of initiation of assessment proceedings under section 147/148 of the Income Tax Act.
2. Eligibility of the assessee for claim of deduction under section 80IB(10) of the Act.

Issue 1: Validity of initiation of assessment proceedings under section 147/148 of the Income Tax Act:
The appeal raised concerns regarding the initiation of assessment proceedings by the Assessing Officer through notice u/s 148 of the Income Tax Act. The additional grounds of appeal challenged the validity of this initiation, questioning its legality. The appellant contended that the notice was issued beyond the prescribed time limit and by an authority not competent as per the provisions of the Act. The notice was dated 17.9.2012, exceeding the four-year period from the relevant assessment year of 2006-07. The prescribed authorities for approving such notices were specified in section 151(1) of the Act, which the Additional Commissioner of Income-tax, who approved the notice, did not fall under. The Tribunal found this procedural flaw to render the initiation of proceedings illegal, leading to the subsequent assessment order being deemed invalid and quashed. The decision was in line with the statutory requirements and the Supreme Court's precedent, thereby upholding the appeal on this issue.

Issue 2: Eligibility of the assessee for claim of deduction under section 80IB(10) of the Act:
The appellant, a partnership firm engaged in the business of Developers & Builders, had claimed a deduction under section 80IB(10) of the Act in its return of income for the Assessment Year 2006-07. The Assessing Officer reopened the assessment through notice u/s 148, challenging the allowance of this deduction. The subsequent assessment order dated 31.12.2013 disallowed the deduction and assessed the total income accordingly. The appellant contested this decision before the CIT(A) on both factual and legal grounds. However, due to the procedural flaw in the initiation of the assessment proceedings, the Tribunal did not delve into the merits of the deduction claim, rendering those grounds academic and unnecessary to adjudicate. Consequently, the appeal was allowed on the basis of the first issue, and the decision on the eligibility for the deduction was not addressed explicitly.

In conclusion, the Tribunal's judgment primarily focused on the procedural irregularity in the initiation of assessment proceedings under section 147/148 of the Income Tax Act, leading to the subsequent assessment order being declared invalid and quashed. The appeal succeeded on this ground, while the issue of the eligibility of the assessee for the deduction under section 80IB(10) remained unaddressed due to the procedural infirmity.