DIRECTION OF APPELLATE AUTHORITY CAN BE NO GROUND FOR REASSESSMENT.

[Mr. M. GOVINDARAJAN]

                        In ‘M.B. Traders V. Assistant Commissioner of Income Tax’ – (2011) 9 ITR (Trib) 453 (Nagpur) search was taken place in the business and residential premises of the firm and partners of the appellant on 17.03.1993.   The appellant filed a return of income showing an income of Rs.39,720/- on 25.10.1993.  An assessment was made determining by including Rs.15,08,439/- totaling to Rs.15,55,539/- on 29.03.1996.  The Commissioner of Income Tax (Appeals) cancelled the assessment on the ground that no notice was served on the assessee under Sec. 143(2) before October 31.1994.  However he directed the Assessing Officer to take remedial action under Sec. 147 or any other provisions of the Act to tax the escaped income.   That order was accepted by the Commissioner of Income Tax and no appeal was filed.   It became final and conclusive. 

                        A notice under Section 148 was issued on 03.08.1999.  A fresh assessment was made determining the income at Rs.15,55,080 same as in the case of Section 143(3) assessment on 29.03.1996.   An appeal was filed against the order before the Commissioner of Income Tax (Appeals).   The Commissioner of Income Tax (Appeals) cancelled the assessment order of 18.03.2002 holding that the initiation of assessment proceedings under Section 147 was bad in law.   All other grounds were not decided. 

                         On 07.12.2005 the Tribunal passed an order on the appeal filed by the Assessing Officer against the order of the Commissioner of Income Tax (Appeals).   The assessee raised a jurisdictional point that Section 143(2) was not served within one year of filing the return in response to the notice under Section 148.   The Tribunal restored the matter to the Assessing Officer to verify the facts and adjudicate the same and also whether the Commissioner of Income tax (Appeals) could direct the Assessing Officer to issue notice under Section 147. 

                         The Assessing Officer again passed an order determining the total at Rs.17,64,580 adding another amount of Rs.2,09,000.  He held that the notice issued under Section 143(2) was valid as there was an amendment subsequently to section 148 validating all notices issued under section 143(2) in respect of return filed up to September 30,2005.   He also held that the Commissioner of Income Tax (Appeals) had power to direct the Assessing Officer to take remedial action under Section 147.  The Commissioner of Income Tax (Appeals) upheld the order of the lower authority. 

                        The present appeal is against the order of Commissioner of Income Tax (Appeals) on the following grounds: 

• The notice issued under Section 147 is without jurisdiction;
• The Commissioner of Income Tax (Appeals) erred in holding the provision of Section 147 are applicable;
• The Commissioner of Income Tax (Appeals) erred in holding that the Commissioner of Income Tax (Appeals) had power to direct his Assessing Officer to issue notice under Section 147;
• Notice issued under Section 143(2) was barred by time. 

The revenue opposed the contentions of the assessee.   The Tribunal after hearing both sides held as follows- 

• Section 149 deals with the time limit for notice and Section 150 deals with regard to provision for cases where assessment is in pursuance of an order on appeal.  There is no bar for issuing notice under Section 148 by the Assessing Officer on the direction of the first appellate authority;
• At the same time, reassessment proceedings must be based on the belief of the Assessing Officer and not of the Commissioner or Appellate Authority or that of the Tribunal as had been meant and interpreted from a perusal of Section 147 of the Income Tax Act;
• The direction of the higher authority should not be interpreted as a blanket direction by the Assessing Officer and it should be accompanied by a direct satisfaction of the Assessing Officer with regard to the escapement of income;
• The appellate authorities or higher authorities cannot interfere in this power of the Assessing Officer that means the direction of the higher authorities and that of the appellate authorities must be acted upon by the Assessing Officer with utter satisfaction;
• Taking initiation of reassessment proceeding without satisfaction of the Assessing Officer, simply on the basis of the blanket direction, will not justify the action of initiation of re-opening proceedings;
• In this case the Assessing Officer has simply acted upon i.e., initiated reopening proceedings on the direction of the Commissioner of Income Tax (Appeals) and has totally ignored his part of the job i.e., his satisfaction;
• The direction of the higher authority including that of the Commissioner of Income Tax (Appeals) will not confer power to assume jurisdiction to the Assessing Officer to initiate reassessment proceeding;
• The notice issued under Section 143(2) was also barred by time in this case. 

The Tribunal allowed the appeal of the assessee.