2010 (6) TMI 168 - HC - Income Tax

Reassessment- writ petition - The assessee carried on the business of operating a television network. For the assessment year 2003-04 the assessment was completed under section 143(3) of the Act. In respect of the assessment year 2004-05, an intimation under section 143(1) of the Act was sent accepting the return. The petitioner received notice under section 148 of the act for the assessment years 2003-04 and 2004-05 on the ground that expenditure on the purchase of copyright was capital in nature and was to be disallowed. The assessee filed writ petitions which were disposed of directing the petitioner to file detailed objections before the Assessing Officer who was to pass appropriate order. The assessee filed objections to the reasons recorded by the assessing authority but the assessing authority rejected them and passed orders of reassessment. Held that- the orders showed that there was factual suppression which could not be pure question of law so as to deprive the assessing authority of his right to initiate proceedings under sections 147 and 148 of the Act. Further held that the final order of assessment were appealable to the Commissioner (Appeals) under section 146 of the Act and further before the Income Tax Appellate Tribunal under section 252 of the Act. The final order of assessment dealt in detail with the capital assets and stock in trade and in appeal, it was open to the assessee to raise all objections including the objections including the objections relating to procedural defects raised regarding issuance of notice under section 147 and 148 of the Act.

Summary

Issues:
Appeal against order of Tribunal allowing Department's appeal exparte, jurisdiction of first appellate authority, maintainability of appeal before first appellate authority, open remand order under section 263, correctness of findings in original assessment, duty of Tribunal to consider order of Commissioner of Income-tax (Appeals) on merits.

Analysis:
The High Court heard an appeal filed by the assessee against the Tribunal's order, which allowed the Department's appeal exparte, thereby reversing the order of the Commissioner of Income-tax (Appeals) for the assessment year 2004-05. The original assessment was revised by the Commissioner under section 263 of the Income-tax Act, leading to a challenge by the assessee before the first appellate authority, who substantially allowed the appeal. However, the Department filed an appeal before the Tribunal. The Tribunal, citing a judgment of the Madhya Pradesh High Court, set aside the order of the Commissioner of Income-tax (Appeals) as being issued without jurisdiction, stating that when assessment is revised under section 263, appeal before the first appellate authority is not maintainable.

The counsel for the appellant argued that the order under section 263 by the Commissioner is an open remand, expressing doubt about the original assessment findings and ordering a reexamination of the issues by the Assessing Officer. It was highlighted that an appeal against the revised assessment under section 263 is limited to additions made based on the Commissioner's findings. In this case, the Commissioner did not independently decide on any addition or disallowance but remanded the case for detailed reexamination. The High Court emphasized that in an open remand, the Assessing Officer can conduct a thorough enquiry, potentially restoring the original assessment partly or fully. If the revised order is prejudicial to the Revenue, it can be revised under section 263. The Court found that the Tribunal erred in holding that the appeal before the first appellate authority was not maintainable, especially since the Department contested the appellate authority's findings on merits. The Court set aside the Tribunal's order and remanded the case back for a decision on the merits, directing the assessee to appear before the Tribunal if they wish to be heard.

In conclusion, the High Court allowed the appeal, directing the Tribunal to issue notices to both the assessee and the Department for a fresh hearing and disposal of the appeal within four months. The judgment emphasized the importance of considering the order of the Commissioner of Income-tax (Appeals) on its merits and highlighted the rights of the assessee to appeal against a revised assessment order if needed.