2023 (6) TMI 76 - AT - Income Tax

Reopening of assessment u/s 147 - AO jurisdiction to re-open the assessment when normal procedure of assessment of income u/s. 143(3) was available which are otherwise within time - whether the assessment could be reopened by the issuance of notice u/s. 148 of the Act prior to the expiry of time limit for issuance of notice u/s. 143(2)? - HELD THAT - This issue is no longer res integra in view of the decision of the Hon ble Jurisdictional High Court in the case of Smt Suman 2017 (8) TMI 567 - BOMBAY HIGH COURT time to issue notice under Section 143(3) of the Act had expired, it is only thereafter that the AO could have reason to believe that the income chargeable to tax has escaped assessment. It is in such cases that the Assessing Officer would not be prohibited under Section 147/148 of the Act from seeking to recover tax on income which has escaped assessment. It is clear that no reassessment proceedings can be initiated so long assessment proceedings on the basis of return of income filed by the assessee is pending. The assessment proceedings would cease to be pending either by passing of an order under Section 143(3) of the Act or by expiry of time to issue a notice under Section 143(2) of the Act, to complete an assessment under Section 143(3) of the Act. So long as the above event has not passed, the Assessing Officer cannot render the provision of Section 143(2) of the Act redundant/otiose by issuing a notice for reopening an assessment under Section 147/148 - Decided in favour of assessee.

Issues Involved:
1. Jurisdiction of the Assessing Officer (AO) to reopen the assessment under Section 147 when the normal procedure under Section 143(3) was available and within time.
2. Validity of the approval granted by higher authorities for reopening the assessment under the provisions of the Income Tax Act.
3. Deductibility of education cess on tax payable while computing the income of the appellant.

Issue-wise Detailed Analysis:

1. Jurisdiction of the AO to Reopen the Assessment:

The primary issue addressed was whether the AO had jurisdiction to issue a notice under Section 148 of the Income Tax Act before the expiry of the time limit for issuing a notice under Section 143(2). The Tribunal admitted the additional ground raised by the assessee, citing the Supreme Court decision in NTPC Ltd (229 ITR 383), which allows legal issues to be raised without requiring verification of facts.

The Tribunal noted that the return of income for A.Y. 2016-17 was filed on 17/10/2016, and the time limit for issuing a notice under Section 143(2) expired on 30/09/2017. However, the AO issued a notice under Section 148 on 27/02/2017, before the expiry of the time limit for Section 143(2).

The Tribunal referred to the Jurisdictional High Court's decision in Smt Suman vs. ITO (84 taxmann.com 267), which held that the AO could not use the extraordinary power under Section 147 when the normal procedure under Section 143(3) was still available and within time. The High Court emphasized that the issuance of an intimation under Section 143(1) does not conclude the assessment proceedings, which only end when the time to issue a notice under Section 143(2) expires.

The Tribunal also considered the Supreme Court's decision in Rajesh Jhaveri Stock Brokers (P.) Ltd. (291 ITR 500), which allowed reassessment under Section 147 even if the original assessment was under Section 143(1). However, the Tribunal distinguished this case, noting that the Supreme Court decision did not address scenarios where the notice under Section 148 was issued before the expiry of the time limit for Section 143(2). The Tribunal concluded that the reassessment in the instant case was invalid and quashed it.

2. Validity of Approval for Reopening the Assessment:

Given the Tribunal's decision on the first issue, it did not provide an opinion on the second issue regarding the validity of the approval granted by higher authorities for reopening the assessment. This issue was left open for future consideration if necessary.

3. Deductibility of Education Cess:

Similarly, the Tribunal did not address the third issue concerning the deductibility of education cess on tax payable while computing the income of the appellant. This issue was also left open due to the resolution of the first issue.

Conclusion:

The Tribunal allowed the appeal of the assessee, quashing the reassessment framed by the AO. The decision was pronounced on 16/11/2022 and properly mentioned in the notice board. The Tribunal's ruling focused on the procedural impropriety of issuing a notice under Section 148 before the expiry of the time limit for Section 143(2), rendering the reassessment invalid.

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