2022 (3) TMI 178 - HC - Income Tax

Reopening of assessment u/s 147 - Income Tax Officer/respondent No.2 jurisdiction to issue notice - investments held by the petitioner are to be treated as stock-in-trade and not as capital assets and that the petitioner should have computed the income tax liability under the head profits and gains from business or profession and not under the head capital gains - HELD THAT - As brought to our notice that in response to impugned notice dated 30.03.2021, petitioner has filed its reply on 28.04.2021 inter alia stating therein that the Income Tax Officer/respondent No.2 does not have the jurisdiction to initiate the re-assessment proceedings against the petitioner in light of 3rd proviso to Section 147. This fact has not been denied by learned Senior Counsel for the respondents-department. In light of the submissions made by learned counsel for the parties, we dispose of the instant writ petition by directing that the jurisdictional/preliminary issue raised by the petitioner in its reply filed to the impugned notices, shall be decided first by respondent No. 2/Income Tax Officer. In case of decision going against the petitioner, it shall be granted 15 days time to avail appropriate remedy in accordance with law for redressal of its grievances in accordance with law.

Summary

Issues:
1. Jurisdiction of notices issued under Section 148 and Section 142(1) of the Income Tax Act 1961 for the assessment year 2017-18.

Analysis:
The petitioner challenged the jurisdiction of the notices dated 30.03.2021 and 04.01.2022 issued under Section 148 and Section 142(1) of the Income Tax Act 1961, contending that they were without jurisdiction. The notices were related to the assessment year 2017-18, with the department asserting that the petitioner's income chargeable to tax had escaped assessment under Section 147 of the Act. The petitioner argued that the jurisdictional assessing officer had already made an addition to the total income on the grounds related to the treatment of investments as stock-in-trade instead of capital assets. The petitioner had filed an appeal against the said order, pending before the Commissioner of Income Tax (Appeals). The petitioner relied on the 3rd proviso to Section 147, which limits the Assessing Officer's power to assess or reassess income not involving matters subject to appeal, reference, or revision.

The High Court considered the arguments presented by both parties and noted that the petitioner had raised the issue of jurisdiction in its reply to the impugned notice dated 30.03.2021. The court observed that the Income Tax Officer did not deny the petitioner's claim regarding jurisdiction under the 3rd proviso to Section 147. Consequently, the court disposed of the writ petition by directing that the jurisdictional issue raised by the petitioner should be decided first by the Income Tax Officer. If the decision goes against the petitioner, they were granted 15 days to seek appropriate legal remedies in accordance with the law for the redressal of their grievances. The court also disposed of any pending applications in the matter.