2005 (6) TMI 262 - AT - Income Tax

Summary

Issues Involved:
1. Validity of the reassessment proceedings under Sections 147 and 148.
2. Validity of the notice issued under Section 148 without the approval of the Joint Commissioner under Section 151(1).
3. Disallowance of expenses claimed from incentive bonus and depreciation on car.
4. Charging of interest under Sections 234A, 234B, and 234D.

Detailed Analysis:

1. Validity of the Reassessment Proceedings under Sections 147 and 148:
The primary issue was whether the reassessment proceedings initiated by the Assessing Officer (AO) under Sections 147 and 148 were valid. The assessee contended that the second reopening under Section 148 was invalid as it was based on the same reasons as the first reopening, which was annulled by the CIT(A). The CIT(A) had previously annulled the first reassessment on the grounds of improper timing of the notice under Section 148, not on the basis of the reasons recorded. The Tribunal observed that no new information had come into the possession of the AO to justify the second notice under Section 148. It was held that the second notice was issued merely to circumvent the appellate order, which is not permissible under the law. The Tribunal cited the case of Anand Samrat & Co. vs. ITO, which supports the principle that reassessment proceedings cannot be initiated on the same set of facts twice over.

2. Validity of the Notice Issued under Section 148 without the Approval of the Joint Commissioner under Section 151(1):
The assessee argued that the fresh notice under Section 148 was issued without obtaining the necessary approval from the Joint Commissioner as required under Section 151(1). The Tribunal agreed with the assessee, stating that it is mandatory for the AO to obtain such approval. The Tribunal rejected the CIT(A)'s reasoning that the annulment of the original assessment under Section 143(3) meant that the approval of the Joint Commissioner was not necessary. Consequently, the second notice issued on 31st Oct. 2002 under Section 148 was held to be invalid due to the lack of approval from the Joint Commissioner.

3. Disallowance of Expenses Claimed from Incentive Bonus and Depreciation on Car:
The assessee claimed expenses of Rs. 1,46,638 from the incentive bonus and depreciation on the car amounting to Rs. 23,675. The AO disallowed these expenses, which was upheld by the CIT(A). The Tribunal noted that the AO had based the disallowance on a misinterpretation of the Supreme Court's decision in the case of Shivraj Bhatia and B. Chinniah. The Tribunal found that the Supreme Court had not adjudicated on the matter of deduction from incentive bonus and had left it open for consideration in appropriate cases. The Tribunal held that the AO's action was based on a mere change of opinion, which does not justify reassessment under Section 147.

4. Charging of Interest under Sections 234A, 234B, and 234D:
The CIT(A) had directed the AO to charge interest under Sections 234A, 234B, and 234D. However, since the Tribunal quashed the reassessment proceedings, it did not find it necessary to adjudicate on this issue.

Conclusion:
The Tribunal quashed the reassessment proceedings initiated by the AO, holding that the second notice under Section 148 was invalid as it was issued without the necessary approval from the Joint Commissioner and was based on a mere change of opinion. Consequently, the Tribunal allowed the appeal of the assessee, rendering the other grounds of appeal on merits unnecessary to adjudicate.