2007 (2) TMI 245 - AT - Income Tax

Summary

Issues Involved:
1. Validity of reopening the assessment under section 147 read with section 150(1) of the Income-tax Act.
2. Validity of reassessment made under section 143(3) read with sections 147 and 150(1).
3. Applicability of section 150(2) to the notice issued under section 148.

Issue-wise Detailed Analysis:

1. Validity of reopening the assessment under section 147 read with section 150(1) of the Income-tax Act:
The assessee contended that the reopening of the assessment for the assessment year 1979-80 was invalid as it was hit by section 150(2) of the Income-tax Act. The original assessment for the assessment year 1979-80 was completed under section 143(3) on 30-1-1980. A controversy arose regarding power charges amounting to Rs. 5,58,598, which the assessee had included in its income for the assessment year 1979-80. However, the Assessing Officer included this amount in the assessment year 1977-78. The High Court later ruled that the amount could not be taxed in the assessment year 1977-78. Consequently, the Assessing Officer initiated proceedings under section 147 for the assessment year 1979-80, issuing a notice under section 148 on 24-7-1998. The assessee objected to this reopening, arguing that it was barred by the time-limit prescribed under section 149.

2. Validity of reassessment made under section 143(3) read with sections 147 and 150(1):
The assessee argued that the reassessment made under section 143(3) read with sections 147 and 150(1) was invalid. The CIT (Appeals) had upheld the reassessment, but the assessee contended that the notice under section 148 was hit by section 150(2) and that the time-limit for issuing such notice had expired. The assessee relied on several precedents, including Travancore Chemical & Mfg. Co. Ltd. v. CIT, K.M. Sharma v. ITO, and Palakkad Shadi Mahal Trust v. Asstt. CIT, to support their argument.

3. Applicability of section 150(2) to the notice issued under section 148:
The Departmental Representative argued that the High Court's judgment constituted a specific finding, allowing the Assessing Officer to issue a notice under section 148 without being constrained by the time-limit in section 149, due to the overriding provisions of section 150(1). However, the Tribunal noted that the High Court's judgment did not contain a specific finding that the amount was assessable in the assessment year 1979-80. The Tribunal emphasized that section 150(1) allows for the issuance of a notice under section 148 only when there is a specific finding or direction in an order passed by any authority or court. Since no such specific finding existed in the High Court's judgment, the notice issued under section 148 was deemed illegal.

Conclusion:
The Tribunal concluded that the notice issued under section 148 was illegal and without due authority of law, as there was no specific finding or direction from the High Court that the amount was assessable in the assessment year 1979-80. Consequently, the reassessment proceedings were canceled, and the order of the CIT (Appeals) was set aside. The assessee's appeal was allowed.