2006 (11) TMI 115 - HC - Income Tax

Assessment reopened beyond periods of limitation of 6 yrs no material or record to sustain additions in block assessment so comm.(A) not directed to initiate reassessment proceedings after extended period of limitation Hence notices issued of reassessment is not valid

Issues Involved:
1. Validity of notices issued under Section 148 of the Income Tax Act, 1961.
2. Limitation period for issuing notices under Section 148.
3. Applicability of Section 150(1) and Section 150(2) of the Income Tax Act.
4. Requirement of approval under Section 151 of the Income Tax Act.
5. Double assessment of income.

Detailed Analysis:

1. Validity of Notices Issued Under Section 148:
The primary issue is the challenge to the notices issued under Section 148 of the Income Tax Act, 1961, for reopening assessments from AY 1989-1990 to AY 1999-2000. The revenue contended that these notices were issued based on directions from the CIT (Appeals) to disallow bank interest and depreciation. The court needed to determine if the CIT (Appeals) had indeed issued such directions and whether they were valid.

2. Limitation Period for Issuing Notices Under Section 148:
The court examined whether the notices were issued within the prescribed limitation period. Section 149 of the Act stipulates that no notice under Section 148 shall be issued after six years from the end of the relevant assessment year if the escaped income amounts to Rs.1 lakh or more. The court found that, except for AY 1999-2000, the notices were issued beyond the six-year limitation period and were thus time-barred.

3. Applicability of Section 150(1) and Section 150(2) of the Income Tax Act:
The revenue argued that the limitation under Section 149 did not apply because the notices were issued to give effect to the CIT (Appeals)'s directions, invoking Section 150. However, the court held that the CIT (Appeals) had not given any finding or direction to reopen the assessments. The observations made by the CIT (Appeals) were seen as suggestions rather than directions. The court cited the Apex Court's interpretation of "finding" and "direction" in similar contexts, concluding that the CIT (Appeals) had not provided a basis for reopening the assessments under Section 150.

Additionally, Section 150(2) prohibits directions for reassessment if the reassessment would be time-barred on the date of the original order. Since the block assessment order was passed on 29th September 2000, and the reassessment period for most years had already lapsed, any direction given by the CIT (Appeals) would be invalid under Section 150(2).

4. Requirement of Approval Under Section 151:
The court noted that for AY 1999-2000, although the notice was within the six-year period, the Assessing Officer had not obtained the required approval from the Chief Commissioner or Commissioner as mandated by Section 151. Consequently, the notice for AY 1999-2000 was also deemed invalid.

5. Double Assessment of Income:
The court addressed the issue of whether the same income could be assessed twice-once in the block assessment and again in the regular assessment. The CIT (Appeals) had set aside the block assessment order, and the revenue had filed an appeal against this decision, which was pending. The court emphasized that it is not permissible for the same income to be assessed twice.

Conclusion:
The court quashed the reopening of assessments for AY 1989-1990 to AY 1999-2000, declaring the notices time-barred and without jurisdiction. The court clarified that its observations would not affect the pending appeal before the ITAT against the CIT (Appeals)'s order. The request for a stay of the judgment was rejected.

← Previous Next →