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2013 (3) TMI 331 - HC - Income TaxValidity of Reopening of assessment - Tribunal quashed the reassessment proceeding u/s 148 on the ground that the notice issued u/s 147 was invalid as the time available for issuing notice u/s 143(2) had not expired - Held that - As decided in ACIT Versus Rajesh Jhaveri Stock Brokers P. Limited 2007 (5) TMI 197 - SUPREME COURT 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) had been issued. Thus the order of the Tribunal holding that the notice under Section 147 of the Act dated 4th July, 2006 is invalid is legally not correct as on a query put by the Court, the assessee accepts if the recourse to Section 143(3) would have been barred by time, there would have been no restriction to initiate the reassessment proceeding under Section 147. There is nothing on the plain language of Section 143 which may suggest that the recourse to Section 147 can be had only when the period of limitation to complete assessment proceeding has expired or the Assessing Authority should wait for the expiry of the said period. The said argument is ridiculous and not acceptable. The ambit and scope of reassessment proceeding is limited and restricted and if the Assessing Authority in its wisdom proceeds to assess the income with the help of limited power, it does not lie in the mouth of the assessee to say that the Assessing Authority should have exercised wider jurisdiction i.e. the regular assessment proceeding instead - matter remanded back to the Tribunal to rehear and re-decide the appeals on merits on other issues.
Issues Involved:
1. Validity of reassessment proceedings initiated under Section 147 of the Income Tax Act, 1961. 2. Validity of the notice issued under Section 148 of the Income Tax Act, 1961. Detailed Analysis: 1. Validity of Reassessment Proceedings Initiated under Section 147 of the Income Tax Act, 1961: The core issue in the appeal was whether the initiation of reassessment proceedings under Section 147 was valid. The return of income was originally filed on 31st October 2005, processed under Section 143(1), and later, on 4th July 2006, a notice under Section 148 was issued. The assessee contended that the proper course for the Assessing Officer was to issue a notice under Section 143(3) for regular assessment instead of resorting to Section 147 and 148, as the time for issuing a notice under Section 143(2) had not expired. The Tribunal quashed the reassessment proceedings, deeming the notice under Section 148 invalid. However, the court noted that the return was processed under Section 143(1), and upon further examination, it was found that the assessee had understated income, thus justifying the initiation of reassessment under Section 147. The court referred to the amended Section 147, effective from 1st April 1989, which allows reassessment if the Assessing Officer notices that the assessee has understated income or claimed excessive deductions, even if no assessment was made initially. The court emphasized that the power to reassess under Section 147 is not barred by the failure to take steps under Section 143(2). This was supported by the precedent set in Pradeep Kumar Har Saran Lal vs. Assessing Officer (1998) 229 ITR 46, which concluded that the Assessing Officer could initiate reassessment proceedings as long as the conditions of Section 147 are met, regardless of whether the assessment was completed under Section 143(1). 2. Validity of the Notice Issued under Section 148 of the Income Tax Act, 1961: The Tribunal had found the notice issued under Section 148 invalid, but the court disagreed, referencing the Supreme Court's judgment in Assistant Commissioner of Income Tax vs. Rajesh Jhaveri Stock Brokers P. Ltd. (2007) 291 ITR 500 (SC). This judgment clarified that the scope and effect of Section 147, as amended from April 1, 1989, permit reassessment if the Assessing Officer has reason to believe that income has escaped assessment, irrespective of the steps taken under Section 143(3). The court concluded that the Tribunal's decision to invalidate the notice under Section 148 was legally incorrect. The court found that the reassessment proceedings were valid and within the jurisdiction of the Assessing Officer, given the statutory provisions and judicial precedents. Conclusion: The court allowed the appeal, setting aside the Tribunal's order that quashed the reassessment proceedings and the notice under Section 148. The matter was remanded back to the Tribunal to rehear and decide the appeals on merits regarding other issues, with no order as to costs.
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