2007 (6) TMI 267 - AT - Income Tax

Issues Involved:
1. Validity of reassessment proceedings u/s 147.
2. Allowance of claims under s. 40A(7) and s. 80HHC.
3. Jurisdiction to reopen assessments when regular assessment proceedings were pending.
4. Whether a return filed pursuant to the notice under s. 148 can be revised.
5. Whether the issuance of notice under s. 148 restricts the time limit provided in s. 139(5) to file a revised return.

Summary:

1. Validity of Reassessment Proceedings u/s 147:
The assessee challenged the reassessment proceedings on the ground that the AO had no jurisdiction to reopen the assessments when regular assessment proceedings were pending. The CIT(A) upheld the reassessment proceedings, noting that the time available for scrutiny assessment was up to 31st March 2002, and the assessment was completed on 26th March 2002. The Tribunal, following the jurisdictional High Court's judgment in Sri Krishna Mahal vs. Asstt. CIT, held the reassessment proceedings to be valid.

2. Allowance of Claims under s. 40A(7) and s. 80HHC:
For asst. yr. 1999-2000, the CIT(A) allowed the assessee's claim to restrict the disallowance under s. 40A(7) and the amount paid to LIC Employees Group Gratuity Scheme, noting that the revised return was filed before the return in response to the notice under s. 148. The Tribunal upheld this decision. For asst. yr. 2000-01, the CIT(A) allowed the claim under s. 80HHC, but the Tribunal reversed this decision, stating that the revised return filed after the return under s. 148 cannot claim deductions not claimed in the original return.

3. Jurisdiction to Reopen Assessments:
The assessee argued that the AO had no jurisdiction to reopen assessments when regular assessment proceedings were pending. The Tribunal, following the jurisdictional High Court's judgment, held that a notice under s. 148 can be issued even if an assessment has been made under s. 143(3), and thus upheld the reassessment proceedings.

4. Whether a Return Filed Pursuant to the Notice under s. 148 Can Be Revised:
The Tribunal held that a return filed under s. 148 can be revised, but only for the benefit of the Revenue and not for the assessee. This conclusion was drawn from the Supreme Court's judgment in R. Dalmia & Anr. vs. CIT and Sun Engineering Works (P) Ltd., which emphasized that the provisions of s. 147 are meant for the benefit of the Revenue.

5. Whether the Issuance of Notice under s. 148 Restricts the Time Limit Provided in s. 139(5) to File a Revised Return:
The Tribunal clarified that the issuance of a notice under s. 148 does not restrict the time limit prescribed in s. 139(5) to revise the original return, provided the revised return is filed before filing the return under s. 148. If the revised return is filed after the return under s. 148, it will be deemed to revise the return filed under s. 148 and not the original return.

Conclusion:
The appeal of the Department for asst. yr. 1999-2000 is dismissed, the appeal for asst. yr. 2000-01 is partly allowed, and the cross-objections of the assessee for both years are dismissed.

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