2020 (7) TMI 301 - AT - Income Tax

Reopening of assessment u/s 147 - validity of the second notice issued by AO under section 148 - HELD THAT - We note that section 148 of the Act does not authorize the AO to issue fresh notice when proceedings on a previous notice u/s. 148 of the Act are still pending and have not been finally disposed of. Similar view was taken in Commercial Art Press Vs. CIT 1978 (8) TMI 76 - ALLAHABAD HIGH COURT wherein it was held that when reassessment proceedings commence following the issue of a notice under section 148 and the same are pending, no fresh notice can be issued under the same provision. The Hon ble Madras High Court while disposing of the order in A.S.S.P. Co. 1986 (6) TMI 1 - MADRAS HIGH COURT observed that there could also be no dispute that after the reassessment order is made in pursuance of the first notice issued under section 148, if the ITO has any reason to believe that there is any escapement of the income which will be covered under section 147 of the Act, he can issue fresh proceedings with reference to the assessment order already made in pursuance of the notice under section 148 and in that way he can make any number of times revised order but that cannot affect the position that when a return has been made in pursuance of the notice under section 148, till that return is disposed of by any assessment order or reassessment order, no further notice can be issued under section 148 of the Act. We find force in the contention of assessee that the second notice u/s. 148 without disposing of the return filed pursuant to the first reopening notice dated 19.10.2011 is invalid and, therefore, all the consequential action which has culminated in the assessment order dated 29.03.2014 is null in the eyes of law and resultantly void, therefore, is quashed. Since the legal issue has been decided in favour of the assessee.

Summary

Issues involved:
Validity of the second notice u/s. 148 of the Income-tax Act, 1961 when the first notice was issued but reassessment not completed.

Analysis:

Issue 1: Validity of the second notice u/s. 148
The appeal and Cross Objection were filed against the order of Ld. CIT(A) for AY 2008-09. The legal issue raised was regarding the validity of the second notice u/s. 148 of the Act issued by the AO after the first notice, without completing reassessment. The AO issued the first notice on 19.10.2011, and the second notice on 19.03.2013, leading to the second reassessment order on 29.03.2014. The assessee contended that the second notice was invalid as the reassessment from the first notice was pending when the second notice was issued.

Issue 2: Legal arguments
The assessee argued that the second notice u/s. 148 was invalid as the AO did not pass any reassessment order after the first notice, making the second notice premature. Legal precedents were cited, such as the decision of the Hon'ble Madras High Court and Calcutta High Court, emphasizing that no fresh notice can be issued under section 148 while proceedings on a previous notice are pending. The contention was that the second notice and subsequent reassessment order were without jurisdiction and should be quashed.

Issue 3: Judicial decisions
The Tribunal noted that the AO's action of issuing the second notice u/s. 148 without disposing of the return filed after the first notice was against legal principles. Citing decisions of various High Courts and the Supreme Court, it was established that until the return filed in response to the first notice is disposed of, no further notice can be issued under section 148. The Tribunal found merit in the assessee's argument and held that the second notice and the subsequent reassessment order were invalid and void in the eyes of the law.

Conclusion:
The Tribunal concluded that the second notice u/s. 148 was premature and without jurisdiction, leading to the quashing of the reassessment order. As the legal issue was decided in favor of the assessee, the revenue's appeal was dismissed, and the cross objection of the assessee was allowed. The judgment highlighted the importance of following due process in issuing notices under section 148 and emphasized the need for completing reassessment proceedings before initiating further actions.