2022 (11) TMI 1306 - SCH - Income Tax

Reopening of assessment u/s 147 - validity of second show cause notice - Section 129 as permits to continue with the earlier proceedings in case of change of the AO - Appellant feeling aggrieved and dissatisfied with the impugned judgment of High Court has not only quashed and set aside the reopening of the assessment but has also quashed and set aside the Assessment Order for the A.Y. 2008-09 - HELD THAT - Section 129 of the Act permits to continue with the earlier proceedings in case of change of the Assessing Officer from the stage at which the proceedings were before the earlier AO - In that view of the matter, as such, fresh show cause notice dated 18.01.2016 was not at all warranted and/or required to be issued by the subsequent Assessing Officer. Still, for whatever reason, the subsequent Assessing Officer issued the fresh notice on dated 18.01.2016 which, as observed hereinabove, was not warranted and/or required at all. Section 129 of the Act is very clear. The subsequent issuance of the notice cannot be said to be dropping the earlier show cause notice as observed and held by the High Court. The reasons to reopen the assessment for the A.Y. 2008-09 were already furnished after the first show cause notice which ought to have been considered by the High Court. However, the High Court has considered the reasons recorded after the second show cause notice which was not required to be considered at all. The finding recorded by the High Court that the subsequent notice dated 18.01.2016 can be said to be barred by limitation is unsustainable. It is required to be noted that the Assessment Order is passed on the basis of the first notice dated 23.03.2015 and not on the basis of the notice dated 18.01.2016. Under the circumstances and in view of the above factual aspect, the High Court has erred in quashing and setting aside the reopening of the assessment for the A.Y. 2008-09. The impugned judgment and order passed by the High Court holding so is unsustainable and the same deserves to be quashed and set aside. the impugned judgment and order passed by the High Court is set aside. - Decided in favor of Revenue

Summary

Issues involved:
1. Validity of reopening of assessment for A.Y. 2008-09.
2. Consideration of subsequent notice under Section 148 dated 18.01.2016.
3. Bar on subsequent issuance of notice.
4. Assessment Order based on the first notice dated 23.03.2015.
5. Challenge to the Assessment Order on merits.

Analysis:

1. Validity of reopening of assessment for A.Y. 2008-09:
The High Court quashed the reopening of the assessment for A.Y. 2008-09, citing reasons related to the subsequent notice dated 18.01.2016. However, the Supreme Court held that the subsequent notice was not required as per Section 129 of the Act, which allows continuation of proceedings despite a change in the Assessing Officer. The Court emphasized that the reasons for reopening were already furnished after the first notice dated 23.03.2015 and should have been considered. Therefore, the High Court's decision to quash the reopening was deemed unsustainable.

2. Consideration of subsequent notice under Section 148 dated 18.01.2016:
The High Court based its decision on the grounds that the subsequent notice dated 18.01.2016 was considered a fresh notice and was barred by limitation. However, the Supreme Court clarified that the subsequent notice did not nullify the earlier notice dated 23.03.2015, as the reasons for reopening were provided after the first notice. The Court deemed the High Court's finding on the subsequent notice being time-barred as unsustainable.

3. Bar on subsequent issuance of notice:
The Supreme Court highlighted that the subsequent notice dated 18.01.2016 was unnecessary and not warranted under Section 129 of the Act, as the reasons for reopening were already communicated. The Court emphasized that the High Court erred in quashing the reopening based on the subsequent notice, which was deemed unnecessary.

4. Assessment Order based on the first notice dated 23.03.2015:
The Court noted that the Assessment Order was passed based on the first notice dated 23.03.2015 and not the subsequent notice dated 18.01.2016. Therefore, the High Court's decision to set aside the Assessment Order was considered erroneous.

5. Challenge to the Assessment Order on merits:
While the High Court set aside the Assessment Order based on the legality of the reassessment initiation, the Supreme Court directed the assessee to file an Appeal before the CIT-A within four weeks to challenge the Assessment Order on its merits. The Court restricted the assessee from re-agitating the issue of the legality of reopening before the CIT-A.

In conclusion, the Supreme Court allowed the appeal, set aside the High Court's judgment, and granted the assessee the opportunity to challenge the Assessment Order on merits within the specified timeframe, subject to compliance with legal requirements.