2019 (10) TMI 1080 - HC - Income Tax

Reassessment u/s 147 r.w.s 143(3) - continuance of assessment proceedings during stay period - period of limitation - issuing another notice after issuing notice u/s 143(2) within prescribed period of limitation - exclusion of certain period u/s 153 while passing order - HELD THAT - The return in the present case was filed on 12.09.2018. Accordingly the six months envisaged under the proviso to Section 143 (2) of the Act would expire on 30.09.2019 and thus the notice was necessarily required to be issued under the said provision prior to the said date. In the present case a notice under Section 143 (2) had already been issued prior to the filing of the present petition and if another notice has been issued we do not see any reason to stay the same. No law has been shown which restricts the issuance of more than one notice. The issuance of the notice under Section 143 (2) is essential for the Assessing Officer to embark upon scrutiny assessment however it does not mean that once a notice has been issued another notice could not be issued thereafter. Certainly after 30.09.2019 the Respondents cannot issue a fresh notice. The limitation provided under Section 153 (2) of the Act pertains to the issuance of the order of assessment reassessment or recomputation. The Explanation 1 (ii) of Section 153 provides that the period during which the assessment proceedings is stayed by an order or injunction of any court shall be excluded for the purpose of computing the period of limitation. Further Section 153 (2) read with First proviso to Explanation 1 provides that immediately after the exclusion of the aforesaid period where the period of limitation available to the assessing officer for making an order of assessment reassessment or recomputation is less than sixty days then such remaining period shall be extended to sixty days and the period of limitation shall be deemed to be extended accordingly. In the present case the reassessment proceedings had to be concluded before 31.12.2018. However before the expiry of the said period on 12.12.2018 the Court had restrained the Respondents from passing the final order. Thus in case the Petitioner was not to succeed in the present case the Respondents would then have to complete the reassessment proceedings in terms of Section 153(2) read with First proviso to Explanation 1 within a period of sixty days from the date of the final decision of the writ petition assuming the same is against the Petitioner. However this does not mean that the Respondents are granting themselves endless time for completion of reassessment proceedings. The stay is operating against passing of the final assessment order. That does not mean that the continuation of the reassessment proceedings in the mean time would be contrary to the statute. Needless to say if the Petitioner were to succeed such proceedings would be infructuous and the same are being conducted at the risk and peril of the Respondents. Accordingly we also do not see any prejudice being caused to the Petitioner in any manner. Decided against the assessee.

Issues Involved:

1. Clarification of the order dated 12.12.2018.
2. Stay of all reassessment proceedings pursuant to the issuance of notice under Section 148 and Section 143(2) of the Income Tax Act.
3. Interpretation of the stay order by the Assessing Officer.
4. Legality of the continuation of reassessment proceedings.
5. Limitation period for issuance of notice under Section 143(2) and completion of reassessment proceedings.

Issue-wise Detailed Analysis:

1. Clarification of the Order Dated 12.12.2018:

The petitioner sought clarification of the interim order dated 12.12.2018, which restrained the respondents from passing the final orders in the reassessment proceedings. The court noted that the petitioner was dissatisfied with the interpretation of the order by the Assessing Officer, who continued the reassessment proceedings based on the belief that only the final assessment order was stayed.

2. Stay of All Reassessment Proceedings:

The petitioner argued that the stay granted by the court encompassed all reassessment proceedings, not just the final order. The petitioner contended that the continuation of reassessment proceedings would grant the revenue endless time, which is contrary to the statute. The court, however, found that the order dated 12.12.2018 only restrained the passing of the final orders and did not stay the reassessment proceedings as a whole.

3. Interpretation of the Stay Order by the Assessing Officer:

The Assessing Officer issued a notice under Section 143(2) on 27.09.2019, interpreting the court's order as only restraining the final assessment order. The court agreed with the Assessing Officer's interpretation, stating that the order was clear and unambiguous, and did not stay the reassessment proceedings.

4. Legality of the Continuation of Reassessment Proceedings:

The court found that the continuation of reassessment proceedings was not contrary to the statute. It referenced the judgment in Rajan Gupta v. Commissioner of Income Tax, which clarified the limitation periods for issuing notices under Section 143(2) and completing assessments under Section 153. The court concluded that the limitation for issuing the notice under Section 143(2) was separate from the limitation for completing the assessment.

5. Limitation Period for Issuance of Notice Under Section 143(2) and Completion of Reassessment Proceedings:

The court noted that the notice under Section 143(2) was issued within the statutory timeline, and the continuation of reassessment proceedings was within the legal framework. It emphasized that the stay order only prevented the final assessment order, not the reassessment process itself. The court also highlighted that if the petitioner succeeded in the writ petition, the reassessment proceedings would become infructuous, and if not, the respondents would have to complete the reassessment within the statutory period extended by the court's order.

Conclusion:

The court dismissed the petitioner's application for clarification, upholding the interpretation that the stay order only restrained the final assessment order and did not halt the reassessment proceedings. The court found no merit in the petitioner's arguments and ruled that the continuation of reassessment proceedings was lawful and did not prejudice the petitioner.

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