2019 (3) TMI 1123 - HC - Income Tax

Reopening of assessment u/s 147 - repeat (2nd) Notice under Section 148 - period of limitation - any fresh material in possession of the AO suggesting escapement of the income at the time of issuance of fresh notice - reasons for issuing fresh or subsequent reassessment Notice - sale of land claimed by to be agricultural land located at Muthukadu Village which is beyond 8 km from city limits - HELD THAT - The reassessment notice said to have been issued on 16.08.2002 for the Assessment Years 1997-98 and 1998-1999 and the alleged reason given by the successor-in-office viz., K.Rajaram is said to be that the brochure of M/s.Shoreline (P) Ltd., came on the record of the Assessing Authority only on 19.03.2001 when the Assessee appeared pursuant to the first notice under Section 147 of the Act which is said to be issued on 25.01.2001. But, since the earlier recorded reasons referred to such Brochure it was a defective notice and which defect could be cured according to the subsequent authority and there was thus a need to issue a fresh notice under Section 147 of the Act. Second reason recorded in the computer sheet was recorded after the issuance of the notice itself, though the Assessee had already filed its return in the same Circle on 28.11.1997 and assessment under Section 143 of the Act was completed on 29.01.1998 and therefore the said second reason was recorded after issuing notice under Section 148 of the Act which was not valid. Having regard to the submission of Revenue, we are rather dismayed with the manner in which the two authorities, of the Department have acted while invoking their substantive powers of re-assessment under Sections 147/148 of the Act. The said powers under the said Act are invoked only subject to the legal restrictions and limitations prescribed in those provisions and at the core of such power of reassessment lies the reason to believe that the income has escaped assessment in the hands of the Assessee for the assessment year in question. These two alleged lacunae or irregularities could not be held to be a sufficient reason for issuing a repeat Notice under Section 148 of the Act. Such repeat and subsequent Notice indicates that either the previous officer Mr. S.Ganapathy did not even actually record any reason prior to or on 25.01.2001 or the Successor-in-office Mr.Rajaram was only trying to cover up the so called lacunae or defects. Both are impermissible situations in law, for invoking powers under Sections 147 and 148 of the Act. We are constrained to observe that the reassessment powers were invoked by assessing officers very casually and lightly not adhereing to the legal restrictions for exercise of such powers under Section 147/148 of the Act. The Assessee, in these circumstances, when served with the repeat or second notice for the same Assessment years, was compelled to approach the Court of law and seek protection against the the second reassessment Notice for the very same Assessment Year 1997- 1998. The learned single Judge in our opinion was absolutely justified in quashing the notice under Section 147 and 148 of the Act for Assessment Year 1997-1998.- Decided in favour of assessee.

Summary

Issues Involved:
1. Validity of the notice issued under Section 148 of the Income Tax Act, 1961.
2. Jurisdiction and procedural compliance in issuing the notice.
3. The existence of fresh material for reopening the assessment.
4. Alleged technical defects in the initial notice and the subsequent actions taken by the successor-in-office.

Issue-wise Detailed Analysis:

1. Validity of the notice issued under Section 148 of the Income Tax Act, 1961:
The Revenue challenged the order dated 31.07.2017, which quashed the notice issued under Section 148 for the Assessment Year 1997-1998. The learned Single Judge quashed the notice on the grounds that there was no fresh material in possession of the Assessing Officer suggesting escapement of income at the time of issuance of the notice dated 25.01.2001. The notice was deemed to be a mere change of opinion rather than based on new evidence.

2. Jurisdiction and procedural compliance in issuing the notice:
The learned Single Judge found that the reasons for reopening the assessment were identical to those in the previously issued notice dated 25.01.2001. The petitioner was not informed about the closure of the proceedings on technical grounds by 31.03.2002, making the subsequent notice without jurisdiction.

3. The existence of fresh material for reopening the assessment:
The Court noted that the Assessing Officer did not possess any new material suggesting income escapement at the time of issuing the notice. The reasons recorded by the predecessor-in-office were undated and served on the Assessee only on 19.03.2001. The reasons cited included the sale of land claimed to be agricultural, the lack of agricultural operations on the land, and the land's development for non-agricultural purposes. These reasons were deemed insufficient for reopening the assessment.

4. Alleged technical defects in the initial notice and the subsequent actions taken by the successor-in-office:
The successor-in-office, Mr. K. Rajaram, issued a subsequent notice citing technical defects in the initial notice. These defects included the timing of recording reasons and the non-availability of a brochure at the time of the first notice. The Court found that these alleged defects did not justify issuing a repeat notice under Section 148. The reassessment powers were invoked casually, without adhering to legal restrictions.

Conclusion:
The High Court dismissed the Revenue's appeal, emphasizing that the reassessment powers under Sections 147/148 were not exercised in accordance with the legal requirements. The Court upheld the learned Single Judge's decision to quash the notice for the Assessment Year 1997-1998, citing the lack of fresh material and procedural irregularities. The appeal was dismissed with no order as to costs.