2009 (7) TMI 47 - HC - Income Tax

Re computation Re Assessment Change of Opinion Section 147 and Section 148 Held that - The assessment is related to the year 2001-2002 Reassessment should have been initiated on or before 31.03.2006, on which date the period of four years came to an end - the present action for re-assessment came to be initiated on 18.12.2006 - the proceedings for re-assessment having been hit by proviso to Section 147 of the Act, the whole of the proceedings have no legal support.

Summary

Issues:
1. Validity of re-assessment proceedings under Section 147 for deduction under Section 80HHC.
2. Bar on re-opening assessment due to limitation under Section 147 of the Income Tax Act.

Issue 1: Validity of re-assessment proceedings under Section 147 for deduction under Section 80HHC

The High Court addressed the substantial question of law raised by the appellant regarding the correctness of the Tribunal's decision on re-assessment proceedings under Section 147 for computing the deduction under Section 80HHC. The Court highlighted a fundamental impediment in entertaining the appeal, emphasizing that the re-opening of assessment under Section 147 was subject to a limitation period. Specifically, the proviso to Section 147 of the Income Tax Act stipulates that no action can be taken after four years from the end of the relevant assessment year unless certain conditions are met. In this case, the assessment pertained to the year 2001-2002, necessitating any re-assessment to be initiated on or before March 31, 2006, which marked the end of the four-year period. However, the re-assessment proceedings were initiated on December 18, 2006, well beyond the statutory limitation period. Consequently, the Court concluded that the initiation of the re-assessment proceedings was invalid due to the limitation prescribed under the proviso to Section 147, rendering the entire proceedings legally unsupported. As a result, the Court dismissed the appeal on this ground alone.

Issue 2: Bar on re-opening assessment due to limitation under Section 147 of the Income Tax Act

The Court delved into the provisions of the Income Tax Act, particularly Section 147 and its proviso, to analyze the bar on re-opening assessments beyond the prescribed limitation period. It noted that the statutory framework prohibits the initiation of re-assessment proceedings under Section 147 after the expiry of four years from the end of the relevant assessment year, except in specific circumstances outlined in the proviso. The Court emphasized that the appellant failed to demonstrate that any exceptions under the proviso applied to the present case. Given that the assessment year in question was 2001-2002, the Court underscored that any re-assessment should have been initiated by March 31, 2006. However, the actual commencement of the re-assessment proceedings on December 18, 2006, clearly exceeded the permissible timeframe, rendering the entire process legally untenable. Consequently, the Court concluded that the invocation of Section 147 for re-assessment in this case was barred by the limitation period, leading to the dismissal of the appeal based on this critical legal flaw.

This detailed analysis of the judgment from the Madras High Court underscores the significance of adhering to statutory limitations in re-assessment proceedings under Section 147 of the Income Tax Act, ultimately shaping the outcome of the legal dispute at hand.