2017 (8) TMI 567 - HC - Income Tax

Reopening of assessment - time to issue notice under Section 143(2) to complete the regular assessment under Section 143(3) has not expired - Held that - Merely because no assessment has been made even after filing a return, it will not be open to suggest that no income chargeable to tax has escaped assessment. This covers issue where there is no possibility of making an assessment on the date when the notice under Section 147/148 of the Act is issued. So long as the time to issue notice under Section 143(2) of the Act is available, it cannot be said that no assessment has been made as the possibility of making an assessment is always available. The Assessing Officer is obliged to complete assessment under Section 143(3) of the Act by issuing a notice under Section 143(2) of the Act, if he is of the view that the assessee has understated his income or computed excessive loss or understated his tax to the prejudice of the Revenue. Therefore, we are clear that in view of the provisions of Section 143(1)(i) of the Act is in force at the relevant time, no notice under Section 148 of the Act can be issued, till the period to issue notice under Section 143(2) of the Act has expired. As in Commissioner of Income tax vs. Qatalys Software Technologies Ltd 2008 (7) TMI 240 - MADRAS HIGH COURT in identical fact situation dismissed the Revenue s appeal by holding that where the period of issuing notice under Section 143(2) of the Act has not expired, then reassessment notice under Section 147/148 of the Act was invalid. - Decided in favour of assessee.

Summary

Issues:
Challenge to order under Section 260A of the Income Tax Act, 1961 for assessment year 1999-2000.
Substantial question of law regarding Assessing Officer's power under Section 147 for reopening assessment.
Validity of reopening assessment under Section 148 of the Act.
Interpretation of Explanation 2(b) to Section 147 of the Act.
Comparison of powers under Section 143(3) and Section 147/148 of the Act.

Analysis:
The appeal challenges the order passed by the Income Tax Appellate Tribunal, Nagpur, related to the assessment year 1999-2000. The main issue revolves around the Assessing Officer's power to proceed with extraordinary power under Section 147 for reopening assessments when regular assessment procedures under Section 143(3) are available within the stipulated time frame. The appellant filed a return of income, which was processed under Section 143(1)(i) by the Revenue. Subsequently, the Assessing Officer issued a notice under Section 148 to reopen the assessment, leading to the determination of the total income. The Commissioner of Income Tax (Appeals) dismissed the appeal, and the Tribunal upheld the reopening of assessment under Section 147, citing Explanation 2(b) of the Act.

The appellant argued that the Assessing Officer's jurisdiction under Section 148 was illegal as the intimation under Section 143(1)(i) did not conclude the assessment process. The appellant contended that the Explanation 2(b) should only apply if the time to complete assessment had expired at the time of issuing the notice under Section 148. On the contrary, the Revenue supported the impugned order, citing the decision in Assistant Commissioner of Incometax vs. Rajesh Jhaveri Stock Brokers (P.) Ltd. to justify the Assessing Officer's power to issue reopening notices.

The court analyzed the provisions of Section 143(1)(i) and Section 147/148 of the Act. It clarified that the intimation under Section 143(1)(i) did not conclude the assessment process, and the Assessing Officer could only reopen assessments if the time to issue a notice under Section 143(2) had expired. The court emphasized that the power to reopen assessments under Section 147/148 should not be used to disrupt ongoing assessment proceedings under Section 143(3) of the Act.

The court delved into the Explanation 2(b) to Section 147, which deals with cases where income chargeable to tax has escaped assessment even if no assessment has been made. However, the court held that this provision should only be invoked when the time to issue a notice under Section 143(2) has lapsed. The court also referred to the decision in Rajesh Jhaveri Stock Brokers (P.) Ltd. to highlight that reassessment proceedings cannot be initiated while regular assessment proceedings are pending.

Additionally, the court cited a judgment by the Hon'ble Madras High Court to support the view that reassessment notices under Section 147/148 are invalid if the period to issue notice under Section 143(2) has not expired. Ultimately, the court answered the substantial question of law in favor of the appellant/assessee, allowing the appeal and not awarding costs.