2006 (7) TMI 139 - HC - Income Tax

Notice has been issued to the petitioner u/s 148 - petitioner, points out that when the proceedings filed by the Department are pending and when the order impugned in the appeal before the Tribunal is in favour of the assessee, surely, the notice under section 148 that the income has escaped and that further action will be taken, cannot be issued. petitioner contend that during the pendency of such proceedings the assessment could not be treated as final. - In the circumstances, we allow the petition and quash and set aside the impugned notice

Summary

Issues:
1. Validity of notice issued under section 148 of the Income-tax Act, 1961 during the pendency of appeal.
2. Interpretation of the decision of the Commissioner of Income-tax (Appeals) in favor of the assessee.
3. Applicability of previous court decisions on similar matters.

Issue 1: Validity of Notice under Section 148:
The petitioner's income was assessed for the assessment year 1999-2000, with an addition of Rs. 2,00,000 due to old stocks. The Commissioner of Income-tax (Appeals) allowed the appeal against this addition, and the Revenue appealed further to the Tribunal. During this pending appeal, a notice under section 148 was issued to the petitioner on February 13, 2006, claiming that income had escaped. The petitioner argued that issuing such a notice during the pendency of proceedings when the order is in favor of the assessee is unjustified. The court agreed with the petitioner, citing previous decisions that assessments cannot be considered final during appeal proceedings, and thus quashed the notice under section 148.

Issue 2: Interpretation of Commissioner's Decision:
The respondent's counsel argued that the Commissioner's decision was based on a procedural error regarding the issuance of a notice under section 143(2) within the limitation period, not on the facts of the case. However, the court noted that the Commissioner's interference with the Assessing Officer's decision is what currently stands. It was emphasized that during ongoing proceedings, such as an appeal, the issuance of an impugned notice, as in this case, should not have occurred.

Issue 3: Applicability of Previous Court Decisions:
The petitioner relied on a previous court decision in Ador Technopack Ltd. v. Dr. Zakir Hussein, Deputy CIT, which highlighted that assessments are not final during pending proceedings. This precedent was crucial in the court's decision to quash the notice issued under section 148. The court's ruling emphasized the importance of considering the status of ongoing appeals and the impact on further actions by the Revenue.

In conclusion, the High Court of BOMBAY quashed and set aside the notice dated February 13, 2006, issued under section 148 of the Income-tax Act, 1961, during the pendency of the appeal. The judgment highlighted the significance of ongoing appeal proceedings and the need to consider the status of previous decisions when taking further actions in income tax matters.