2016 (7) TMI 821 - AT - Income Tax

Validity of initiation of re-assessment proceedings - rectification of mistake - professional/technical charges - Held that - Proceedings u/s 154 were initiated by means of notice dated 23.2.2011. The assessee furnished reply to this notice. As against these proceedings u/s 154, taking place in the year 2011, the AO initiated the instant re-assessment proceedings in the year 2013. The ld. DR was required to intimate the status of section 154 proceedings on the earlier date of hearing and the case was accordingly adjourned. Today, the ld. DR submitted in the open court that he enquired from the concerned AO about the status of section 154 proceedings initiated in the year 2011, who, in turn, stated that neither any order has been passed u/s 154 nor such proceedings have been dropped. This shows that the AO initially initiated rectification proceedings in the year 2011 and without completing the same, started re-assessment proceedings in 2013 and, thereafter, completed the assessment by means of order u/s 143(3) read with section 147. This manifests that during the continuation of the proceedings u/s 154, the AO embarked upon the same issue by means of a separate re-assessment proceedings without concluding the earlier proceedings initiated u/s 154. It goes without saying that initiation of two parallel proceedings on a similar subject matter, cannot sustain. If first proceedings have been validly initiated, then such proceedings must come to an end for making a way for the initiation of another proceedings on the same subject matter. Unless the earlier proceedings are buried, either by way of an order on merits or by dropping the same, no fresh subsequent proceedings on the same subject matter can be initiated. Adverting to the facts of the instant case, it is noticed that the rectification proceedings u/s 154 were initiated in the year 2011 and these were still on in the year 2013, when the proceedings u/s 147 were initiated on the same subject matter. This manifests that the proceedings u/s 147 cannot stand during the continuation of proceedings u/s 154. Ex consequenti, the initiation of re-assessment by means of notice u/s 148 and the proceedings flowing therefrom are hereby set aside. The AO is fully empowered to give a logical conclusion to the proceedings u/s 154 as per law.

Summary

Issues:
1. Validity of initiation of re-assessment proceedings.

Analysis:
The first issue raised in this appeal pertains to the validity of the initiation of re-assessment proceedings by the Assessing Officer (AO). The case involves a Senior Advocate deriving income from profession and capital gains, who filed a return declaring total income for the assessment year 2006-07. The AO reopened the assessment upon discovering that the assessee claimed credit for TDS against income not offered for taxation. The AO issued a notice under section 154 in 2011 regarding the same issue of receipts totaling ?4,47,600. However, without concluding the section 154 proceedings, the AO initiated re-assessment proceedings in 2013. The Tribunal noted that initiating two parallel proceedings on the same subject matter is not permissible under the law. It was held that if the earlier proceedings are valid, they must be concluded before initiating fresh proceedings on the same subject matter. As the section 154 proceedings were still ongoing when the re-assessment proceedings were initiated, the Tribunal set aside the initiation of re-assessment proceedings under section 148, directing the AO to conclude the section 154 proceedings first.

The Tribunal found that the initiation of re-assessment proceedings while section 154 proceedings were ongoing was not permissible. As per legal principles, parallel proceedings on the same subject matter cannot be sustained. The Tribunal emphasized that the AO must conclude the earlier proceedings before initiating fresh ones on the same subject matter. Therefore, the initiation of re-assessment proceedings under section 148 was set aside, and the AO was directed to complete the section 154 proceedings first. Consequently, the appeal was allowed on this ground, and there was no need to address the merits of the case.

In conclusion, the Tribunal's decision focused on the procedural aspect of the case, specifically the validity of initiating re-assessment proceedings while section 154 proceedings were still pending. By setting aside the re-assessment proceedings and directing the AO to conclude the ongoing proceedings first, the Tribunal upheld the legal principle that parallel proceedings on the same subject matter cannot be sustained. The decision highlights the importance of following due process and concluding earlier proceedings before initiating fresh ones on the same issue.