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2023 (3) TMI 924 - HC - Income TaxValidity of Reopening of assessment u/s 147 - 2nd respondent had reasons to believe that the income chargeable to tax has escaped assessment - correctness of the claim of deduction u/s 80JJAA - whether issue of the correctness / legality of the claim of deduction u/s 80JJAA was not dealt with nor can it be understood as expression of any opinion on the said issue while framing the assessment u/s 143(3)? - Single Judge has proceeded to dismiss the order of reassessment by relegating the appellant to participate in the reassessment proceedings while leaving it open to the assessing authority to drop the proceedings for reassessment, if the circumstances do not justify invocation of reassessment proceeding HELD THAT - We find that the order of the learned Single Judge suffers from the following infirmities and misconceptions a) The order of the learned Judge insofar as it proceeds to treat the notice u/s.148 as being independent and stand alone and unhindered/unfettered by the restrictions contained in Sec.147 is based on a misconception and may well distort the scheme of reassessment under the Income Tax Act. b) While the subtantive power of making a reassessment is traceable to Sec.147. The procedure for exercising the power of reassessment is set out under Sec.148 and Sec.149 prescribes the time limit within which the powers of reassessment ought to be exercised. c) Sections 147 to 153 of the Income Tax Act, 1961 must be understood as an integrated code which deals with various facets/aspects of reassessment and must be read harmoniously and in conjunction and not disjunctively as being independent of each other as interpreted and understood by the learned Judge. d) Judgment of the Supreme Court GKN Driveshafts (India) Ltd. 2002 (11) TMI 7 - SUPREME COURT which mandates furnishing of reasons for reassessment when sought for, with an opportunity to the assessee to question the assumption of jurisdiction and casting an obligation on the assessing authority to dispose of such objection was not meant to be an empty formality or ritual without a purpose, but, was directed to ensure that the assessees do not have to go through the rigmarole of the entire process of reassessment, if the very assumption of the jurisdiction is bad. e) Any proceeding which is lacking jurisdiction is a nullity and the discretion of judicial review would be exercised if it is shown that the proceedings are lacking jurisdiction. The learned Judge ought to have seen that the challenge to the proceedings dated 24.11.2017 was on the premise that the very assumption of jurisdiction was bad as it was on the basis of mere change of opinion which the Supreme Court has consistently held would not confer jurisdiction to exercise the powers of reassessment. f) The order of learned Judge suggesting that the question of whether there was true and full disclosure is still open, again appears to us to be misdirected / misplaced since while setting out the reasons for reassessment, the respondent has not even remotely suggested that there was no full and true disclosure on the part of the appellant. Thus it appears the order of the learned Single Judge is an improvement of the assessment proceeding which is quasijudicial in nature and thus impermissible. g) It is axiomatic that an authority cannot clutch at jurisdiction by assuming the existence of a non-existent jurisdictional fact or by deciding erroneously the existence of a jurisdictional fact. In the present case, if the case of the appellant that the reasons disclosed only indicated change of opinion is correct, then the very assumption of jurisdiction would be illegal and any orders passed would be bad for want of jurisdiction. The learned Judge has not examined or rendered any finding on the above aspect to the contrary directed the above question to be decided by the assessing authority in the course of exercise of power of reassessment. For all the above, we are of the considered opinion that the matter be remitted back to the learned Single Judge to examine as to whether the assumption to make reassessment of jurisdiction is bad for want of jurisdiction.
Issues Involved:
1. Jurisdictional validity of reassessment proceedings under Sections 147 and 148 of the Income Tax Act, 1961. 2. The distinction between reassessment and change of opinion. 3. Compliance with procedural requirements for reassessment. 4. Full and true disclosure by the appellant in the original assessment. Detailed Analysis: 1. Jurisdictional Validity of Reassessment Proceedings: The appellant challenged the reassessment proceedings initiated under Sections 147 and 148 of the Income Tax Act, 1961, arguing that the assumption of jurisdiction was invalid. The court noted that the power to reassess is under Section 147, while Section 148 prescribes the procedure for initiating reassessment. The learned Single Judge's interpretation that Section 148 operates independently of Section 147 was found to be a misconception. The judgment emphasized that Sections 147 to 153 must be read harmoniously as an integrated code, and any reassessment lacking jurisdiction is a nullity. 2. Distinction Between Reassessment and Change of Opinion: The appellant argued that the reassessment was based on a mere change of opinion, which is impermissible. The court highlighted that the Supreme Court has consistently held that reassessment cannot be based on a change of opinion, as it would render the exercise arbitrary and illegal. The learned Single Judge's failure to address whether the reassessment was based on a change of opinion was identified as a significant oversight. The court reiterated that reassessment on the basis of a change of opinion is not justified and constitutes an illegal exercise of power. 3. Compliance with Procedural Requirements for Reassessment: The appellant contended that the reasons for reopening the assessment were not provided within a reasonable time, referencing the Gujarat High Court judgment in Sahakari Khand Udyog Mandal Limited v. ACIT, which suggested a 30-day period as reasonable. The court observed that the Supreme Court's mandate for furnishing reasons for reassessment is not an empty formality but ensures that the assumption of jurisdiction is valid before proceeding with reassessment. The learned Single Judge's view that the issuance of a notice under Section 148 is standalone and not restricted by Section 147 was considered a distortion of the reassessment scheme. 4. Full and True Disclosure by the Appellant: The appellant argued that there was full and true disclosure in the original assessment, and the reassessment proceedings were unwarranted. The court noted that the respondent did not suggest any lack of full and true disclosure in the reasons for reassessment. The learned Single Judge's suggestion that the issue of full and true disclosure was still open was deemed misplaced. The court emphasized that the reasons for reassessment must indicate new or tangible material, not merely a change of opinion, to justify the assumption of jurisdiction. Conclusion: The court found that the learned Single Judge's order suffered from several infirmities and misconceptions, particularly in treating Section 148 as independent of Section 147 and failing to address the issue of change of opinion. The judgment concluded that the matter should be remitted back to the learned Single Judge to examine whether the assumption of jurisdiction for reassessment was valid. The writ appeal was disposed of, and no costs were awarded.
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