2021 (10) TMI 832 - HC - Income Tax

Reopening of assessment post annulling proceeding under Section 153C - time limit for completion of the assessment - finding of Tribunal that an AO could issue two notices - as per assessee tribunal failed to appreciate that until and unless one set of proceeding is disposed of, the Assessing Officer was precluded in law from initiating another proceeding under Section 148 of the Act and it ought to have been appreciated that the proceeding initiated pursuant to notice which was served on the assessee on 25.03.2011 continued - HELD THAT - Section 153(2) of the Act provides that no order of assessment, re-assessment or re-computation shall be made under Section 147 after expiry of nine months where the notice under Section 148 of the Act was served on the assessee on or after 1st day of April, 2005 but before 1st day of April, 2011. Admittedly the notice was served on the assessee on 25.03.2011 and therefore, the time for completion of assessment proceeding in respect of Assessment Year 2004-05 and 2005-06 is 31.12.2011 i.e., nine months from the date of financial year in which notice under Section 148 of the Act was served. However, the order of assessment has been passed beyond the aforesaid period i.e., on 28.03.2013. Therefore, the proceeding for re assessment were completed beyond the period of limitation as prescribed under Section 153(2) of the Act. Admittedly, the first notice which was served on the business premises of the assessee was existing and was not withdrawn. Therefore, the same continued to subsist and the finding of the tribunal that Assessing Officer could issue two notices is perverse. Decided in favour of the assessee

Summary

Issues:
1. Interpretation of time limit for completion of assessment under Section 153(2) of the Income Tax Act.
2. Validity of multiple notices issued in re-assessment proceedings.

Analysis:
1. The appeal involved the interpretation of the time limit for completing assessment under Section 153(2) of the Income Tax Act, pertaining to the Assessment Years 2004-05 and 2005-06. The appellant challenged the order of assessment passed by the Income Tax Appellate Tribunal on the grounds that the assessment was completed beyond the prescribed time limit. The appellant argued that the assessment should have been completed within nine months from the end of the financial year in which the notice under Section 148 of the Act was served. The tribunal's conclusion that the time limit should be reckoned from the date of service of notice at the residential premises of the assessee was contested by the appellant. The High Court examined the relevant provisions of the Act and found that the notice was indeed served on the assessee on 25.03.2011, as evidenced by the order of assessment and communication from the Assessing Officer. Consequently, the High Court held that the assessment completed on 28.03.2013 was beyond the statutory time limit, rendering it invalid.

2. Another issue addressed in the appeal was the validity of multiple notices issued in the re-assessment proceedings. The appellant argued that until one set of proceedings is disposed of, the Assessing Officer is legally precluded from initiating another proceeding under Section 148 of the Act. The appellant contended that the first notice served on the business premises of the assessee continued to subsist and, therefore, issuing a second notice was impermissible. The High Court agreed with the appellant's argument, noting that the first notice was not withdrawn and, therefore, continued to be in effect. The High Court deemed the tribunal's finding that the Assessing Officer could issue two notices as perverse. Citing relevant case law, the High Court concluded that the proceeding for reassessment was completed beyond the prescribed period of limitation, leading to the quashing of the tribunal's order.

In conclusion, the High Court allowed the appeal, quashed the tribunal's order, and ruled in favor of the appellant on both issues raised in the appeal.