2019 (7) TMI 2036 - AT - Income Tax

Reopening of assessment - Validity of second notice of reassessment - scope of two parallel assessments - HELD THAT - As decided in Marwadi Shares Finance Ltd. 2018 (5) TMI 1547 - GUJARAT HIGH COURT second notice u/s. 148 was issued by the AO without withdrawing the first notice issued by the AO u/s. 148. This was held that the law does not recognize two parallel assessments. It was held that in the absence of withdrawal of the first notice of reassessment, the proceedings would survive making the subsequent notice of reopening invalid. In the present case, we have noted that second notice of reassessment was issued on 31.03.2015 whereas the assessment pursuant to first notice of reassessment u/s. 148 could have been made by the AO up to 31.03.2015 and therefore, it has to be accepted that second notice of re-opening u/s. 148 was issued during the pendency of first notice issued by the AO u/s. 148 and therefore, this judgment of Hon ble Gujarat High Court is squarely applicable - we hold that the second notice of reassessment u/s. 148 issued by the AO on 31.03.2015 is invalid and therefore, the assessment framed by the AO pursuant to this notice of reassessment u/s. 148 is void-ab-initio. Assessee appeal allowed.

Summary

Issues Involved:
1. Validity of the second notice under section 148 dated 31.03.2015.
2. Reassessment proceedings initiated as per the directions of the CIT (Exemptions).
3. Change of opinion.
4. Reassessment based on audit objection.
5. Reassessment after the expiry of four years from the end of the assessment year.
6. Reasons recorded for the issue of notice under section 148.
7. Issue of notice under section 148 after the limitation period.
8. Exemption claimed under section 11/10(23C).
9. Levy of interest under section 234B.

Detailed Analysis:

1. Validity of the Second Notice under Section 148 Dated 31.03.2015
The assessee argued that the second notice under section 148 dated 31.03.2015 was invalid as the proceedings initiated by the first notice under section 148 dated 18.04.2013 were still pending. The Tribunal noted that both notices were issued for the same reason, i.e., the assessee's ineligibility for exemptions under sections 11 and 10(23C)(vi). The Tribunal cited the judgment of the Hon'ble Gujarat High Court in Marwadi Shares & Finance Ltd. Vs. DCIT, which held that the law does not recognize two parallel assessments and that the subsequent notice of reopening is invalid if the first notice is not withdrawn. Consequently, the Tribunal found the second notice under section 148 dated 31.03.2015 invalid and the reassessment order dated 29.03.2016 void-ab-initio.

2. Reassessment Proceedings Initiated as per the Directions of the CIT (Exemptions)
The assessee contended that the reassessment proceedings initiated under the directions of the CIT (Exemptions) were against the provisions of section 147 and therefore bad in law. The Tribunal, having already declared the second notice under section 148 invalid, found this ground to be infructuous and did not require further adjudication.

3. Change of Opinion
The assessee argued that the second notice was issued due to a mere change of opinion resulting from the directions of a higher authority. The Tribunal, having invalidated the second notice, did not need to address this issue separately.

4. Reassessment Based on Audit Objection
The assessee claimed that the second notice was issued based on an objection raised by the revenue audit party. This ground also became infructuous due to the Tribunal's decision on the invalidity of the second notice.

5. Reassessment After the Expiry of Four Years from the End of the Assessment Year
The assessee argued that the second notice was issued after the expiry of four years from the end of the assessment year, contrary to the first proviso to section 147. The Tribunal did not need to adjudicate this issue separately as the second notice was already declared invalid.

6. Reasons Recorded for the Issue of Notice under Section 148
The assessee contended that the reassessment order was bad in law as the reasons recorded did not state a failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment. This ground became moot due to the Tribunal's decision on the invalidity of the second notice.

7. Issue of Notice under Section 148 After the Limitation Period
The assessee argued that the second notice was issued after the limitation period. This ground also became moot due to the Tribunal's decision on the invalidity of the second notice.

8. Exemption Claimed under Section 11/10(23C)
The assessee contended that the AO and CIT (A) erred in disallowing the exemption claimed under section 11 and, alternatively, under sections 10(23C)(iiiad) or 10(23C)(vi). The Tribunal did not need to adjudicate this issue separately as the reassessment order was declared void-ab-initio.

9. Levy of Interest under Section 234B
The assessee argued against the levy of interest under section 234B amounting to Rs. 1,28,98,609. This ground also became moot due to the Tribunal's decision on the invalidity of the reassessment order.

Conclusion
The Tribunal allowed the appeal filed by the assessee, declaring the second notice under section 148 dated 31.03.2015 invalid and the reassessment order dated 29.03.2016 void-ab-initio. Consequently, all other grounds raised by the assessee became infructuous and did not require further adjudication.