2010 (6) TMI 282 - HC - Income Tax

Reassessment- in consequence of or to give effect to any finding or direction contained in an order passed by any authority in any proceeding under the Income-tax Act by way of appeal, reference or revision, the time limits prescribed in section 149 shall not apply- Assessee s income for the A.Y 1983-84 escaped assessment. The A.O issued notice u/s 148 wrongly assessing that income for the A.Y 1984-85. Commissioner (Appeals) allowed the appeal holding that the long- term capital gain arising on the sale was liable to be taxed in the assess- ment year 1983-84 and not 1984-85 and accordingly deleted the addition. Now the AO issued order u/s 148 for the A.Y 1983-84. The assessee contended that now the order was time barred. Held - the case at hand clearly falls within the ambit of the pro- visions of section 150 as well as section 153(3)(ii) read with Explanation 2 to section 153 of the Act and as such there is no infirmity in the action of the respondent in initiating the reassessment proceedings.

Issues Involved:
1. Legality of the notice issued under section 148 of the Income-tax Act.
2. Applicability of the time limit for issuing reassessment notice under section 148.
3. Interpretation of sections 147 to 153, particularly sections 150 and 153(3) of the Income-tax Act.
4. Whether the findings of the Commissioner (Appeals) constitute a direction for reassessment under section 153(3).

Detailed Analysis:

1. Legality of the notice issued under section 148 of the Income-tax Act:
The petitioner challenged the legality of the notice dated August 7, 1996, issued under section 148 for reopening the assessment for the assessment year 1983-84. The petitioner argued that the notice was barred by limitation and void ab initio. The court examined the statutory provisions and the facts of the case to determine the validity of the notice. The petitioner contended that the reassessment proceedings initiated were contrary to the statutory provisions contained in sections 147 to 153.

2. Applicability of the time limit for issuing reassessment notice under section 148:
The petitioner argued that the notice was barred by limitation as per section 149. However, the respondent contended that section 150(1) overrides the time limit prescribed under section 149, allowing the issuance of notice at any time to give effect to any finding or direction contained in an appellate order. The court noted that section 150(2) restricts the applicability of section 150(1) where the period of limitation for reassessment had expired at the time of the original order. The court held that the notice was issued within the jurisdictional limits and was not barred by limitation due to the provisions of section 150 read with section 153(3).

3. Interpretation of sections 147 to 153, particularly sections 150 and 153(3) of the Income-tax Act:
The court analyzed the provisions of sections 147 to 153, focusing on sections 150 and 153(3). Section 150(1) allows for the issuance of a notice under section 148 at any time to give effect to any finding or direction in an appellate order. Section 153(3) exempts certain assessments from the time limits prescribed in sections 153(1) and 153(2). Explanation 2 to section 153(3) clarifies that if income is excluded from the total income for an assessment year by an appellate order, the assessment of such income for another year is deemed to be made in consequence of or to give effect to a finding or direction in the appellate order. The court concluded that the provisions of section 150(1) and section 153(3) were applicable in this case, allowing the reassessment proceedings.

4. Whether the findings of the Commissioner (Appeals) constitute a direction for reassessment under section 153(3):
The petitioner argued that the Commissioner (Appeals) did not provide a direction for reassessment under section 153(3). The court examined the order of the Commissioner (Appeals), which stated that the long-term capital gain was liable to be taxed in the assessment year 1983-84. The court held that this constituted a specific finding, and the liberty reserved for the Assessing Officer to bring the capital gain to tax in the assessment year 1983-84 was sufficient to attract the provisions of section 153(3). The court also noted that Explanation 2 to section 153 deems the assessment of income for another year as being made in consequence of or to give effect to a finding or direction in an appellate order.

Conclusion:
The court found no infirmity in the action of the Assessing Officer in issuing the notice under section 148 for the assessment year 1983-84. The reassessment proceedings were held to be in consonance with the provisions of law and within the prescribed time limit. The petition was rejected, and the interim relief was vacated.

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