2009 (11) TMI 47 - HC - Income Tax

Reassessment issuance of notice u/s 148 - change of opinion there was no employer employee relationship between Shri Sanjeev Suri and the petitioner firm. The CWP No. 17246 of 2009 alleged allegation in the notice as well as in the reasons sheet is that the claim made in respect of Keyman Insurance Policy on the life of Shri Sanjeev Suri was not allowable deduction as Shri Sanjeev Suri was partner of the firm. On account of the mistake committed in status of the aforesaid Shri Sanjeev Suri, the assessment is sought to be re-opened held that - argument that the show cause notice and proceedings thereafter are without jurisdiction, is wholly without merit. It is not a case where the department is proceeding on the basis of change of opinion. The department appears to be well within its right to re-open the assessment as there is error apparent on the face of record. The case set up by the department would not fall within the prohibition contemplated for re-opening of assessment proceedings on account of escapement of income issue of notice u/s 148 upheld

Summary

Issues:
Challenge to notice under Section 148 of the Income Tax Act, 1961 for re-opening assessment based on error in status determination and deduction claim for Keyman Insurance Policy.

Analysis:
The petitioner sought to quash a notice issued under Section 148 of the Income Tax Act, 1961, by the Assessing Officer, Jalandhar, dated 5.3.2009. The reasons for the notice were recorded in the order dated 5.3.2009. Objections were raised against the notice, requesting to drop the proceedings, but these objections were rejected by the Assessing Authority on 15.6.2009. The main reason for re-opening the assessment was the status of Shri Sanjeev Suri, where it was found that there was no employer-employee relationship between Shri Sanjeev Suri and the petitioner firm. The allegation was that the deduction claimed for the Keyman Insurance Policy on Shri Sanjeev Suri's life was not allowable as he was a partner in the firm. The court noted that the writ petition challenging the notice was misconceived, and the argument that the proceedings were without jurisdiction was without merit. The department was deemed to be within its right to re-open the assessment due to an error apparent on the face of the record. The court refrained from making any observations on the merit of the case, directing the petitioner to seek remedy before the departmental authorities. The order clarified that any observations made should not be considered as an expression of opinion on the case's merit.

The judgment emphasized that the department's actions did not amount to proceeding on the basis of a change of opinion, and the case did not fall within the prohibition for re-opening assessment proceedings due to income escapement. The court highlighted that all issues raised by the petitioner could be addressed before the competent authorities, and the petitioner was directed to pursue remedies within the department. The writ petition was disposed of accordingly, with the judges refraining from commenting on the case's merit and clarifying that their observations should not be construed as an opinion on the case's substance.

In conclusion, the judgment upheld the department's right to re-open the assessment based on an error apparent on the face of the record, dismissing the petitioner's challenge to the notice under Section 148 of the Income Tax Act, 1961. The court directed the petitioner to address their concerns before the appropriate departmental authorities, emphasizing that the court's remarks should not be interpreted as an opinion on the case's merit.