2008 (3) TMI 356 - AT - Income Tax

Summary

Issues Involved:
1. Validity of notice issued u/s 148.
2. Applicability of s. 150(2) regarding time-barred reassessment.
3. Assessment of enhanced compensation under s. 45(5).

Summary:

1. Validity of notice issued u/s 148:
The Tribunal held that the notice issued u/s 148 on 28th March 2003 was valid. The assessee contended that the notice was barred by time, but the Tribunal allowed the plea under r. 27 of the ITAT Rules, recognizing that service of a valid notice u/s 148 is mandatory for reassessment. The Tribunal cited the Supreme Court's position in Y. Narayana Chetty & Anr. vs. ITO, emphasizing that an invalid notice renders reassessment proceedings void.

2. Applicability of s. 150(2) regarding time-barred reassessment:
The Tribunal examined whether the reassessment notice was time-barred under s. 150(2). It was determined that on 22nd March 1990, the AO could have validly issued a notice u/s 148 for the asst. yr. 1980-81, as the time-limit under s. 149(1)(b)(iii) had not yet elapsed. The Tribunal rejected the assessee's contention that the law as of 28th March 2003 should govern the notice issuance. The Tribunal also discussed conflicting judgments from various High Courts but ultimately followed the Andhra Pradesh and Calcutta High Courts' view that the notice was valid.

3. Assessment of enhanced compensation under s. 45(5):
The Tribunal addressed the issue of assessing enhanced compensation received by the assessee. The CIT(A) had held that the enhanced compensation received in November 1985 should be assessed in the asst. yr. 1986-87 under s. 45(5). However, the Tribunal noted that s. 45(5) came into effect only from 1st April 1988 and was not applicable to the asst. yr. 1980-81. The Tribunal clarified that the enhanced compensation should be assessed under the law prevailing in the asst. yr. 1980-81. The matter was remanded to the AO to ascertain whether the enhanced compensation was received as income and the nature of the amounts received in November 1985.

Conclusion:
The appeal of the Department was partly allowed. The Tribunal upheld the validity of the notice issued u/s 148 and remanded the issue of assessing enhanced compensation to the AO for further examination.