2024 (12) TMI 322 - HC - Income Tax

Second notice u/s 148 issued after the filing of the earlier reassessment proceedings - re-assessment based on disclosure made before the Settlement Commission - HELD THAT - In our opinion, the language of Section 148 does not in any manner restrict the Assessing Officer to issue notice afresh, after filing of the earlier proceedings, provided the same is within the limitation period, if any. In the present case, the petitioner had filed a return earlier u/s 143 (1) after the notices were issued to her u/s 148, revised return was not filed showing undisclosed income and the petitioner on the other hand proceeded to move applications for settlement stating that the said amount was a loan, as already reflected in her earlier return. Since the Settlement Commission ultimately reached to the conclusion that there is non-disclosure and also not full and true disclosure of her income at the time of moving her application for settlement, we can safely presume that the Assessing Officer derive a new cause of action to initiate proceedings under Section 148 of the IT Act afresh based on the observations of the Settlement Commission of not providing full and true disclosure. Reasons which were provided by AO to initiate proceedings u/s 148 earlier, reflected about the receiving of drafts from Bank account of M/s AG Exports, whereas, the petitioner impugned the notice issued under Section 148 of the IT Act, by the Assessing Officer. However, on query being raised to the assessee, the Assessing Officer also demanded the assessee to provide details relating to the loan, stated to have been accepted from M/s Bee Bee International in the subsequent notice, which have been issued now under Section 148 respondents have provided reasonings for reopening of the assessment u/s 148 of the IT Act for A.Y. 2000-2001, with regard to the non-disclosure of income, which has been found to be by way of accommodation entries. Thus, we find that the objections raised with regard to the fresh re-assessment are without any basis and the action taken by the respondents cannot be said in any manner to be unjustified. We, therefore, recall our interim order and direct the respondents to continue and pass final assessment order on the basis of re-assessment proceedings initiated under the notice. In this regard, the provisions of the issuing of notice to the assessee for final assessment, would have to be issued in terms of the provisions of law, as they stood at the relevant time.

Summary

Issues:
1. Whether the assessing authority can issue notice for re-assessment based on disclosure made before the Settlement Commission without assigning reasons.
2. Whether a second notice under Section 148 of the IT Act could have been issued after the filing of earlier reassessment proceedings.

Analysis:
1. The petitioner disclosed receiving a loan from M/s Bee Bee International in her return for A.Y. 2000-2001 under Section 143(1) of the IT Act. Subsequently, she disclosed the same loan before the Settlement Commission. The Commission found the amount to be accommodation entries and rejected the settlement application for lack of full and true disclosure. The Assessing Officer then initiated re-assessment proceedings without specifying reasons, leading to a challenge on the validity of the second notice under Section 148 of the IT Act.

2. The High Court held that the language of Section 148 of the IT Act does not restrict the Assessing Officer from issuing a fresh notice for re-assessment after earlier proceedings, as long as it is within the limitation period. In this case, the petitioner did not revise her return to show undisclosed income after the initial notice under Section 148, instead opting for settlement stating the amount was a loan. The Court found that the Assessing Officer could initiate fresh proceedings based on the Settlement Commission's finding of non-disclosure.

3. The Court noted that the reasons provided by the Assessing Officer for the initial notice reflected a different transaction than the one impugned by the petitioner. The subsequent notice under Section 148 was based on non-disclosure of income found to be accommodation entries, justifying the re-assessment. The objections raised by the petitioner were deemed baseless, and the Court directed the Assessing Officer to continue with the re-assessment proceedings initiated under the second notice.

4. The Court dismissed the writ petition and directed the Assessing Officer to pass a final assessment order expeditiously, preferably within three months, considering the prolonged pendency of the matter since 2005. Any miscellaneous applications were also disposed of in the judgment.