2017 (9) TMI 809 - AT - Income Tax

Reopening of assessment - Inquiry before assessment initiated - assessment proceedings were initiated by issue of notice u/s 142(1) and before concluding the assessment proceedings, the assessing officer has issued notice u/s 148 for reassessment - Held that - In this case, the assessing officer has issued notice u/s 142(1) within time limit allowed for filing return of income under section 139 of I.T. Act. Since the assessee failed to respond to the notice u/s 142(1), the assessing officer should invoke the provisions of section 144 and complete the assessment as per section 144 on or before 31.03.2011. Since the assessment is already initiated, during pendency of assessment proceedings, there is no case for invoking the provisions of reassessment u/s 148 of I.T. Act and reopening of the assessment. Since the notice u/s 148 is issued without concluding the assessment proceedings, the notice issued u/s 148 is bad in law and cannot be sustained. The assessing officer is not permitted to carry on the assessment proceedings and reassessment proceedings simultaneously. - Decided in favour of assessee.

Summary

Issues Involved:
1. Validity of the assessment order passed under section 143(3) of the Income Tax Act.
2. Legality of issuing notice under section 148 during the pendency of assessment proceedings initiated under section 142(1).

Issue-wise Detailed Analysis:

1. Validity of the assessment order passed under section 143(3):

The assessee did not file a return of income, prompting the assessing officer to issue a notice under section 142(1) on 29.01.2010, which was served on 15.02.2010. The assessee failed to respond, leading the assessing officer to issue a notice under section 148 on 16.11.2010. The assessee eventually filed a return on 09.03.2011 declaring nil income and agricultural income of ?40,000/-. The assessing officer then issued a notice under section 143(2) and concluded the assessment with a total income of ?51,01,400/- under section 143(3). The Commissioner of Income Tax (Appeals) [CIT (A)] upheld this assessment.

The tribunal examined the legal provisions and found that the assessment should have been completed under section 144 (Best Judgment Assessment) by 31.03.2011, as the assessee did not respond to the notice under section 142(1). The tribunal concluded that the assessment order passed under section 143(3) on 29.12.2011 was barred by limitation and thus invalid.

2. Legality of issuing notice under section 148 during the pendency of assessment proceedings initiated under section 142(1):

The tribunal noted that the assessing officer initiated assessment proceedings by issuing a notice under section 142(1). According to the Income Tax Act, if the assessee fails to respond to such a notice, the assessing officer should complete the assessment under section 144 by issuing a show-cause notice. The tribunal emphasized that the assessing officer cannot initiate reassessment proceedings under section 148 while the assessment proceedings under section 142(1) are still pending.

The tribunal referenced legal precedents, including the Hon'ble ITAT Delhi Bench in the case of Sushil Kumar Jain v. Asstt. CIT and the Hon'ble Delhi High Court in the case of Mastech Technologies Ltd. v. Dy. CIT, which support the principle that parallel proceedings on the same subject matter cannot be sustained. Therefore, the tribunal held that the notice issued under section 148 during the pendency of the assessment proceedings was invalid and quashed it.

Conclusion:

The tribunal annulled the assessment order passed under section 143(3) on the grounds that it was barred by limitation. Additionally, the tribunal quashed the notice issued under section 148, declaring it invalid due to the ongoing assessment proceedings initiated under section 142(1). Consequently, the appeal of the assessee was allowed.