2008 (1) TMI 207 - HC - Income Tax

Validity of reassessment u/s 147 assessee got opportunity to file reply & detailed reply was in fact filed & reassessment notice & final order were also issued within the time limit prescribed However assessee has written that notice u/s 143(2) wasn t issued normally a detailed reply in this nature is furnished only after issuing a notice u/s 143(2) assessment can t be challenged on the ground that written notice was not issued to the assessee before completion of assessment u/s 143(2)

Summary

Issues:
1. Disallowance of interest in the computation of income from a theatre.
2. Validity of reassessment completed under section 147 of the Income-tax Act.

Analysis:

Issue 1: Disallowance of Interest
The appellant contested the disallowance of interest in the computation of income from a theatre named "Pandyan Theatre," where they were a partner. The disallowance was based on an earlier order of the Tribunal, which the appellant argued was due to the theatre being under construction in the previous year. However, the appellant claimed that the construction was completed, and income was earned during the relevant assessment years. The interest paid exceeded the income returned, resulting in a loss. The court noted that the appellant failed to provide the computation statement of income and did not present relevant facts before the Tribunal. The court allowed the appellant to file a rectification application before the Tribunal within a specified timeframe, considering the factual basis for disallowance needed clarification.

Issue 2: Validity of Reassessment
In another appeal, the validity of reassessment completed under section 147 of the Income-tax Act was challenged due to the absence of a notice under section 143(2) of the Act. The appellant argued that despite receiving a notice under section 148, the absence of a notice under section 143(2) rendered the reassessment invalid. The respondent contended that a notice under section 143(2) was indeed issued, and the appellant had replied to it, providing detailed answers to the queries raised during reassessment. The court observed that the appellant's detailed reply indicated that proper opportunity was given, and no further notice under section 143(2) was necessary. As the reassessment notice and final order were issued within the prescribed time limit, the court upheld the Tribunal's decision and dismissed the appeal challenging the reassessment's validity.

In conclusion, the court dismissed both appeals, allowing the appellant to file a rectification application regarding the disallowance of interest. Additionally, the court upheld the validity of the reassessment completed under section 147 of the Income-tax Act, emphasizing that the appellant had been given a fair opportunity to respond to the queries raised during the reassessment process.