2017 (1) TMI 1101 - HC - Income Tax

Validity of reopening of assessment - period of limitation - Held that - So far as the petitioner s claim with respect to the notice being time barred are concerned, there is really no answer. The notice was indefensible when looked at from any angle. The notice was indefensible when looked at from any angle. The period of limitation prescribed by Section 147 (1) in respect of the time within which notice can be issued is absolute and does not call for any exception. Having regard to this incurable nature of the provision, the notice for assessment years 1994-95 and 1995-96 both dated 27.11.2002 have to be quashed. So far as the other two years are concerned, it is a fact that the assessment was completed in respect of assessment years 1996-97 on 24.03.1999, i.e., before the block assessment was completed. For the other years, i.e., assessment years 1997-98 it was completed on 22.03.2000 which is after the completion of the block assessment. However, in both cases, the regular assessments were completed after the search and seizure proceedings took place on 07.08.1997. If in fact the search and seizure proceedings alerted the Revenue as to the possibility of the assessee having practiced deceit as is being alleged now, there was nothing which prevented it from carrying out proper investigation and enquiry during the regular assessments which were completed but after the search. Having failed to do so, it cannot now merely at the instance of the ITAT through stray and casual observations seek to revisit the same issues as it were. There is no dispute that apart from the ITAT s observations there was in fact no tangible or objective material within the meaning as understood for the purposes of Section 147/148 of the Act which could have validly triggered the reassessment notices for these years. Consequently, the reassessment notices for assessment years 1996-97 and 1997-98 too are invalid. - Decided in favour of assessee

Summary

Issues:
Challenge to reassessment notices for assessment years 1994-95, 1995-96, and 1996-97 based on search and seizure proceedings.

Analysis:
The judgment involves a challenge to reassessment notices dated 27.11.2002 for assessment years 1994-95 and 1995-96, and 15.01.2003 for assessment year 1996-97. The search conducted in the assessee's premises on 07.08.1997 led to regular assessments for the years 1996-97 and 1997-98, completed on 24.03.1999 and 22.03.2000, respectively. The block assessments for the four years were completed on 31.08.1999. The CIT (A) confirmed the block assessments with some relief, but the ITAT set aside the block assessment as it found no fresh material warranting it. The ITAT suggested that if a fresh look was needed, the Revenue could seek other provisions of the law, including reassessment.

The petitioner challenged the reassessment notices, arguing that they were outside the permissible time period under Section 147/148 of the Income Tax Act, 1961. For the years 1994-95 and 1995-96, the notices were issued well beyond the six-year limitation, rendering them illegal. The petitioner contended that the Revenue could not reopen assessments based on failed block assessments without valid grounds. The Revenue, on the other hand, relied on Section 158B (b) inserted by the Finance Act, 2002, to justify the reassessment notices.

The Court held that the reassessment notices for the years 1994-95 and 1995-96 were time-barred and indefensible, quashing them. Regarding the assessment years 1996-97 and 1997-98, the Court found that the regular assessments were completed after the search and seizure proceedings, indicating that the Revenue had the opportunity to investigate during those assessments. As there was no tangible material triggering the reassessment notices, the Court deemed them invalid. Consequently, all impugned reassessment notices and proceedings were quashed, and the writ petitions were allowed.

This judgment emphasizes the importance of adhering to statutory limitations for issuing reassessment notices and the need for valid grounds supported by tangible material to justify reopening assessments based on search and seizure proceedings.