2013 (1) TMI 188 - HC - Income Tax

Reopening of assessment - ITAT declared the reassessment as invalid as notice was issued beyond a period of four years - Held that - As original assessment was accepted u/s 143(1) without any scrutiny. That being the position, the requirement of proviso to section 147 that in order to reopen the assessment beyond period of four years from the end of relevant assessment year, the condition of income having escaped assessment due to the failure on part of the assessee to disclose truly and fully all material facts, was not required to be established. Revenue even beyond four years could have reopened the assessment without satisfying such a requirement when the original assessment was not made after scrutiny. So much is plainly clear from statutory provisions Tribunal therefore, committed an error in striking down the reassessment merely on this ground. Notice u/s 148 was issued without issuing notice u/s 143(2) - Held that - The return filed by the petitioner was not taken in scrutiny. No assessment, thus, took place. The Assessing Officer without any assessment, merely issued an intimation under section 143(1) of the Act accepting such return. In that view of the matter, it cannot be stated that the Assessing Officer formed any opinion with respect to any of the aspects arising in such return. In such a case, scope for reopening such assessment under section 147 of the Act as compared to an assessment which was previously framed under section 143(3) of the Act, whether beyond or within four years from the end of the relevant assessment year, is substantially wider. As decided in ACIT Versus Rajesh Jhaveri Stock Brokers P. Limited 2007 (5) TMI 197 - SUPREME COURT so long as the ingredients of section 147 are fulfilled, the Assessing Officer is free to initiate proceeding under section 147 and failure to take steps under section 143(3) will not render the Assessing Officer powerless to initiate reassessment proceedings even when intimation under section 143(1)- Thus Tribunal committed a legal error on both the counts - in favour of revenue.

Summary

Issues: Validity of reassessment of assessment under section 147 of the Income Tax Act based on the grounds of notice issued beyond the statutory period and without issuing notice under section 143(2) of the Act.

Analysis:
1. The appeals involved the same assessee and arose from a common impugned judgment of the Income Tax Appellate Tribunal (Tribunal) dated 17.6.2011. The substantial question of law raised was whether the Tribunal was justified in declaring the reassessment of assessment invalid.

2. The respondent assessee filed a return of income for the assessment year 1999-2000, which was subsequently revised. The Assessing Officer issued a notice under section 148 of the Act for reopening the assessment. The Tribunal held the reopening invalid on two grounds: first, the notice was issued beyond the statutory period, and second, the notice under section 148 was issued without a prior notice under section 143(2) of the Act.

3. The Tribunal's decision was based on a case law from the Nagpur Bench, which held that without issuing a notice under section 143(2) of the Act, the Assessing Officer would lose jurisdiction to make reassessment. However, the High Court found both grounds cited by the Tribunal to be unsustainable.

4. The High Court observed that the Tribunal misapplied statutory provisions in striking down the reassessment based on the first ground. The requirement of establishing income escapement due to the assessee's failure to disclose all material facts was not necessary when the original assessment was not made after scrutiny.

5. Regarding the second ground, the High Court disagreed with the Tribunal's conclusion that issuing a notice under section 148 without a prior notice under section 143(2) would render reopening impermissible. The Court cited a previous decision and highlighted that the power to reopen assessment under section 147 is available regardless of whether the return was accepted under section 143(1) or scrutinized under section 143(3).

6. Consequently, the High Court held that the Tribunal committed a legal error on both counts and disposed of the appeals by striking down the Tribunal's judgment. The question was answered in favor of the Revenue, and the appeals were restored before the Tribunal for fresh consideration on merits.

7. The High Court's decision clarified the legal requirements for reassessment under section 147 of the Income Tax Act and emphasized that the Assessing Officer's belief that income has escaped assessment is the key factor, irrespective of whether the return was accepted under section 143(1) or scrutinized under section 143(3).