2025 (1) TMI 1123 - AT - Income Tax

Reopening of assessment u/s 147 when proceedings u/s 154 were pending - As per the reasons recorded in the approval form the reasons recorded therein are exactly similar to the reasons recorded in the notice issued u/s 154 proceedings - HELD THAT - We are of the view that in the proceedings initiated u/s 154 the AO has not acted upon pending proceedings u/s 154 AO cannot initiate the proceedings u/s 148 which is beyond his jurisdiction. Two simultaneous proceedings cannot be initiated. Respectfully following the decision of S.M. Overseas Pvt. Ltd. 2022 (12) TMI 702 - SC ORDER we are inclined to quash 148 proceedings as bad in law. Accordingly ground is allowed.

2022 (12) TMI 702 - SCH

1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered in this judgment are:

Whether the reopening of the assessment under Section 148 of the Income Tax Act was justified in the absence of new material and while proceedings under Section 154 were pending.
Whether the simultaneous initiation of proceedings under Sections 154 and 148 is permissible under the Income Tax Act.
Whether the disallowance under Section 43(8) concerning unpaid sales tax liability, provident fund, and ESI was correctly applied.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Reopening of Assessment under Section 148

Relevant legal framework and precedents: Section 148 of the Income Tax Act allows for the reopening of an assessment if the Assessing Officer (AO) has reason to believe that income has escaped assessment. The case of SM Overseas Pvt. Ltd. vs. CIT is relevant, where the Supreme Court held that proceedings under Section 154 must be resolved before initiating proceedings under Section 148.
Court's interpretation and reasoning: The Tribunal noted that the reasons for reopening the assessment under Section 148 were identical to those for initiating proceedings under Section 154. The Tribunal found this problematic as it suggested a change of opinion rather than new material evidence.
Key evidence and findings: The Tribunal examined the approval form and noted that the reasons recorded for both Section 154 and Section 148 proceedings were identical, indicating no new material evidence was presented.
Application of law to facts: The Tribunal applied the precedent from SM Overseas Pvt. Ltd., determining that initiating Section 148 proceedings while Section 154 proceedings were pending was beyond the AO's jurisdiction.
Treatment of competing arguments: The Tribunal considered the Revenue's reliance on the orders of the authorities below but found the assessee's arguments, supported by the Supreme Court precedent, more compelling.
Conclusions: The Tribunal concluded that the reopening of the assessment under Section 148 was not justified, and the proceedings were quashed as bad in law.

Issue 2: Simultaneous Proceedings under Sections 154 and 148

Relevant legal framework and precedents: Section 154 allows for the rectification of mistakes apparent from the record. The Supreme Court in SM Overseas Pvt. Ltd. held that proceedings under Section 154 must be resolved before initiating proceedings under Section 148.
Court's interpretation and reasoning: The Tribunal emphasized that two simultaneous proceedings cannot be initiated, as it would lead to jurisdictional overreach by the AO.
Key evidence and findings: The Tribunal found that the notice under Section 154 was not disposed of, and the reasons for both proceedings were identical.
Application of law to facts: The Tribunal applied the Supreme Court's reasoning to conclude that the AO acted beyond his jurisdiction by initiating Section 148 proceedings while Section 154 proceedings were pending.
Treatment of competing arguments: The Tribunal dismissed the Revenue's arguments as the legal precedent clearly supported the assessee's position.
Conclusions: The Tribunal quashed the Section 148 proceedings, affirming that simultaneous proceedings are impermissible.

Issue 3: Disallowance under Section 43(8)

Relevant legal framework and precedents: Section 43(8) pertains to the disallowance of certain expenses if not paid within the prescribed time.
Court's interpretation and reasoning: The Tribunal did not adjudicate this issue, as the primary legal issue concerning the reopening of the assessment was resolved in favor of the assessee.
Key evidence and findings: The Tribunal did not make specific findings on this issue due to the resolution of the primary legal issue.
Application of law to facts: Not applicable, as the issue was not adjudicated.
Treatment of competing arguments: The Tribunal kept this issue open for future consideration.
Conclusions: The Tribunal did not make a final determination on this issue, leaving it open.

3. SIGNIFICANT HOLDINGS

Preserve verbatim quotes of crucial legal reasoning: "In that view of the matter, during the pendency of the proceedings under Section 154 of the Act, it was not permissible on the part of the Revenue to initiate the proceedings under Section 147/148 of the Act pending the proceedings under Section 154 of the Act."
Core principles established: The Tribunal reinforced the principle that simultaneous proceedings under Sections 154 and 148 are impermissible and that reopening assessments require new material evidence.
Final determinations on each issue: The Tribunal quashed the Section 148 proceedings, allowing the assessee's appeal in part, and left other issues open for future consideration.

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