2012 (3) TMI 290 - HC - Income Tax

Writ petition for quashing of notice under Section 148 of the Income Tax Act - the petitioner had filed its return of income with provisional tax audit report - the petitioner filed audited accounts with the tax audit report in lieu of notice under Section 139(9) - return filed by the assessee was not taken up for scrutiny and no notice under Section 143(2) was issued - the impugned notice under Section 148 was issued - petitioner informed that the return filed may be treated as return filed in response to notice - the petitioner asked for furnishing of reasons to believe recorded in writing before issue of notice under Section 148 of the Act - contention of the petitioner is that there was delay and failure to supply the exact reasons recorded by the Assessing Officer - reasons recorded by the AO for reopening was that the assessee is not offering its income earned on infrastructure utilization Fund (IUF) and interest earned thereon in its income chargeable to tax - The contention of the petitioner is that the amount deposited in the aforesaid fund is not income of the assessee and reasons to believe are a mere reason to suspect or surmise and do not disclose or state that there has been under assessment of income - Held that - there were no original assessment proceedings and no notice under section 143(2) was issued. The time for issue notice under Section 143(2) had lapsed. The AO, therefore, could have only examined the question/aspect after issue of notice under Sections 147/148 of the Act. Whether or not notice can be issued in such cases is no longer res integra Assistant Commissioner of Income Tax v. Rajesh Jhaveri Stock Brokers Private Limited, (2008) 14 SCC 208 - writ petition is dismissed

Summary

Issues:
1. Quashing of notice under Section 148 of the Income Tax Act, 1961.
2. Quashing of notice dated under Section 142(1) of the Act.
3. Delay in supplying reasons for notice under Section 148.
4. Objections to reopening and rejection.
5. Taxability of Transport Infrastructure Utilisation Fund (TIUF).
6. Previous judgments on TIUF taxability.
7. Legality of reopening without original assessment proceedings.
8. Application of Supreme Court ruling on reassessment proceedings.

Analysis:

1. The petitioner sought to quash the notice under Section 148 of the Income Tax Act, 1961, dated 16th April, 2003, along with the notice dated 17th February, 2005, under Section 142(1) of the Act. The petitioner contended that there was a delay in providing the "reasons to believe" recorded by the Assessing Officer, which hindered their ability to challenge the notice effectively.

2. Despite objections raised by the petitioner against the reopening of the assessment, the objections were rejected by the respondent. The petitioner highlighted alleged factual errors in the order rejecting their objections, leading to the filing of the present writ petition challenging the reopening of the assessment.

3. The core issue revolved around the taxability of the Transport Infrastructure Utilisation Fund (TIUF) and interest earned thereon. The Assessing Officer's reasons for reopening the assessment cited significant amounts that allegedly escaped assessment, primarily related to the TIUF and other claimed deductions. The petitioner argued that the TIUF and its interest should not be considered as income, emphasizing previous favorable judgments on the same issue.

4. Previous judgments by the High Court on the taxability of TIUF were cited, reinforcing the petitioner's stance that the fund and related income should not be included in the assessable income. The court upheld earlier tribunal decisions regarding the nature of the fund and the treatment of related expenses, further supporting the petitioner's position.

5. The legality of reopening the assessment without prior original assessment proceedings and the absence of a notice under Section 143(2) were key points of contention. The court referred to a Supreme Court ruling emphasizing that the Assessing Officer retains the authority to initiate reassessment proceedings under Section 147, even in the absence of steps under Section 143(3).

6. Ultimately, the court dismissed the writ petition, clarifying that no opinion on the merits was expressed in the order. The petitioner was granted the opportunity to demonstrate why previous court decisions regarding the taxability of the TIUF should not apply to the assessment year in question due to changed circumstances. No costs were awarded in this case.