2012 (11) TMI 474 - HC - Income Tax

Reassessment proceedings - block assessment under section 158BC - unaccounted gold ornaments - Held that - On plain reading of the reasons recorded, the stock of gold ornaments valued at Rs.29,77,726/- was subject matter of block assessment under section 158BC. AO after considering the material on record in fact made an addition of Rs.29,77,726/- as undisclosed income of the petitioner. Such addition was set aside by the Commissioner (Appeals). The order of Commissioner (Appeals) deleting such addition was upheld by the Tribunal. Thus, when the undisclosed income determined by the AO included Rs.29,77,726/- being the value of gold ornaments which the assessee claimed to be belonging to its customers was subject matter of block assessment, the same cannot be made the subject matter of regular assessment under Chapter XIV of the Act. Under the circumstances, the reopening of assessment in relation to a matter which was subject matter of block assessment is evidently without jurisdiction. When the Commissioner (Appeals) as well as the Tribunal have examined the issue on merits and have held in favour of the petitioner, the AO can have no reason to believe that income chargeable to tax has escaped assessment. For this reason also, the reopening of assessment under section 147 is without jurisdiction - in favour of assessee.

Summary

Issues Involved:
1. Validity of the notice issued under section 148 of the Income Tax Act, 1961 for reopening the assessment for the assessment year 1999-2000.
2. Examination of the block assessment under section 158BC of the Income Tax Act, 1961.
3. Authority of the Assessing Officer to reopen assessment on issues decided by appellate authorities.
4. Jurisdictional validity of reopening assessments on matters already scrutinized in block assessments.

Issue-wise Detailed Analysis:

1. Validity of the Notice Issued Under Section 148:
The petitioner challenged the notice dated 22nd January 2002, issued by the respondent under section 148 of the Income Tax Act, 1961, seeking to reopen its assessment for the assessment year 1999-2000. The petitioner argued that the reopening of the assessment was based on issues already decided by the Commissioner (Appeals) and the Tribunal in favor of the petitioner. The court found that the reopening of the assessment was contrary to the scheme of the Act, as matters detected during the course of search should be subject to block assessment and not regular assessment. Consequently, the reopening of the assessment was deemed without jurisdiction and the notice was quashed.

2. Examination of the Block Assessment Under Section 158BC:
Search proceedings were conducted under section 132 of the Act, and certain ornaments and registers were seized. The petitioner filed its return disclosing 'nil' income and provided evidence to support the genuineness of the transactions. The Assessing Officer initially did not propose any addition, but upon review by the Joint Commissioner, an addition of Rs. 48,49,902/- was made as undisclosed income. The Commissioner (Appeals) allowed the appeal on most points, and the Tribunal upheld the deletion of the addition of Rs. 29,77,726/-. The court emphasized that the issue of gold ornaments valued at Rs. 29,77,726/- was subject to block assessment and could not be reassessed in regular assessment.

3. Authority of the Assessing Officer to Reopen Assessment:
The petitioner argued that the reopening of the assessment was on issues already decided by the Commissioner (Appeals) and the Tribunal. The court noted that the Assessing Officer was aware that the Commissioner (Appeals) had deleted the addition of Rs. 29,77,726/- on merits. The court found that the Assessing Officer had no reason to believe that income chargeable to tax had escaped assessment, as the issue had been thoroughly examined and decided by the appellate authorities. Therefore, the reopening of the assessment was without authority of law.

4. Jurisdictional Validity of Reopening Assessments:
The court referred to leading decisions that highlighted the distinction between block assessments and regular assessments. It was noted that once an assessment is framed under section 158BA for undisclosed income, there is no question of reopening such assessment under section 148. The court held that the reopening of the assessment for the same item that was subject to block assessment was without jurisdiction. The court emphasized that the issue had been examined on merits by the Commissioner (Appeals) and the Tribunal, and the Assessing Officer could not reopen the assessment on the same grounds.

Conclusion:
The court concluded that the reopening of the assessment under section 147 of the Act was without jurisdiction and quashed the notice issued under section 148. The petition was allowed, and the rule was made absolute with no order as to costs.