2007 (9) TMI 299 - AT - Income Tax

Summary

Issues Involved:
1. Validity of initiation of reassessment proceedings u/s 147.
2. Compliance with statutory conditions prescribed u/s 147 to 151.
3. Validity of reassessment order based on a second notice u/s 148.
4. Justification of reassessment beyond four years from the end of the relevant assessment year.

Summary:

1. Validity of initiation of reassessment proceedings u/s 147:
The assessee challenged the validity of reassessment proceedings initiated u/s 147 via notice dated 31st March 2003. The original assessment was completed u/s 143(3) on 18th March 1999. A notice u/s 148 was issued on 28th March 2001, and another notice u/s 148 was issued on 31st March 2003. The CIT(A) upheld the reassessment proceedings, stating that the notice u/s 148 was issued within the stipulated period.

2. Compliance with statutory conditions prescribed u/s 147 to 151:
The assessee argued that the reassessment proceedings were initiated based on a mere change of opinion on the same set of facts and that statutory conditions u/s 147 to 151 were not complied with. The CIT(A) rejected this ground, observing that the notice u/s 148 was issued within the stipulated period and that no such contention was raised before the AO during the assessment proceedings.

3. Validity of reassessment order based on a second notice u/s 148:
The assessee contended that the second notice u/s 148 issued on 31st March 2003 was invalid as the proceedings initiated by the first notice u/s 148 dated 28th March 2001 were still pending. The Tribunal referred to the decision in CIT vs. Ram Kishan Leela (2007) 207 CTR (Raj) 463, where it was held that a second notice issued during the pendency of proceedings cannot be legally justified. The Tribunal accepted the assessee's argument and quashed the reassessment based on the second notice.

4. Justification of reassessment beyond four years from the end of the relevant assessment year:
The assessee argued that the second notice u/s 148 issued on 31st March 2003 was beyond the four-year period from the end of the relevant assessment year, and thus, the reassessment could only be justified if there was a failure on the part of the assessee to disclose fully and truly all material facts. The Tribunal noted that the assessee had disclosed all material facts during the original assessment. The Tribunal referred to the decision in CIT vs. Kelvinator of India Ltd. (2002) 256 ITR 1 (Del)(FB) and other authorities, concluding that the reassessment was based on a change of opinion and was therefore not legally justified. The Tribunal quashed the reassessment order on this ground as well.

Conclusion:
The Tribunal set aside the order of the CIT(A) and quashed the reassessment, allowing the assessee's appeal. The reassessment proceedings were found to be null and void due to the invalidity of the second notice u/s 148 and the reassessment being based on a change of opinion beyond the four-year period without any failure on the part of the assessee to disclose material facts.