2009 (7) TMI 711 - HC - Income Tax

Reassessment- Limitation- Whether the assessment proceedings are ab initio void being barred by the limitation prescribed under the Income-tax Act and the said proceedings having been commenced after the limitation period are non-est and ab initio void ? Whether the provisions of section 184(5) of the Income-tax Act, 1961 could be invoked by the Assessing Officer in the absence of proceeding under section 144 being initiated by the authorities ? Held that- (i) the income escaping assessment was calculated at Rs. 1,61,144 i.e. in excess of Rs. 50,000. The time limit therefore was ten years as per sub-clause (iii) of section 149(b)then in force. The notice of reassessment was not barred by limitation. (ii) the total income declared in the return was Rs. 4,060 but it was by ignoring the provisions of section 184. The allowance was corrected and then the interest had been calculated and charged in the assessment order. Therefore, there was no error in the levy as it was previous notice to the assessee.

Summary

Issues:
1. Validity of assessment proceedings under the Income-tax Act
2. Invocation of section 184(5) by the Assessing Officer

Issue 1: Validity of assessment proceedings under the Income-tax Act
The case involved a challenge to the assessment proceedings under the Income-tax Act for the assessment year 1994-95. The appellant did not file a return by the due date but voluntarily filed it later. The Assessing Officer initiated proceedings under section 147, resulting in a total income determination and tax liability calculation. The appellant challenged the validity of the proceedings, citing limitations under the Act. The appellant contended that the reassessment was void ab initio due to exceeding the time limit prescribed under sections 147 and 149. The appellant also argued that being treated as an association of persons affected the deductions claimed under section 184. The court analyzed the timeline of events, including the issuance of notices and the appellant's responses, and concluded that the reassessment was within the prescribed time limits, thus dismissing the challenge to the validity of the proceedings.

Issue 2: Invocation of section 184(5) by the Assessing Officer
The appellant contested the disallowance of deductions claimed under section 184 due to the reassessment. The appellant argued that if the reassessment was time-barred, the disallowance should be set aside. The Assessing Officer invoked section 184(5) due to the failure of the appellant to file a return as required. The court examined the applicability of section 184(5) and upheld its usage in the assessment process. The court found that the disallowance of deductions and the subsequent calculation of interest under sections 234A and 234B were done in accordance with the law, with proper notice to the appellant. The court dismissed the appellant's contentions regarding the disallowance and interest levy, stating that there was no merit in the substantial questions of law raised.

In conclusion, the High Court of Bombay upheld the validity of the assessment proceedings and the invocation of section 184(5) by the Assessing Officer. The court dismissed the appeal, ruling against the appellant on all grounds raised.