2013 (7) TMI 480 - HC - Income Tax

Reopening of assessment - whether the Department by taking recourse to the proceedings u/s 147/148 can reopen an assessment which was done pursuant to the directions issued by the AC u/s 144A Held that - Assessing Officer is trying to reopen and reappraise the assessment on the same set of facts it is a mere change of opinion the order passed u/s 144A which has a binding effect on the AO became final and cannot be reopened by issuing the notice u/s 148 - Court relied upon CIT v. Rao Thakur Narayan Singh (1964 (10) TMI 17 - SUPREME Court) - the Department did not take steps to revise the order passed u/s 144A by invoking the provisions of section 263, the notice u/s 148 issued cannot be sustained thus set aside and quashed petition allowed in favour of assessee.

Summary

Issues:
Challenge to reassessment notice under section 148 of the Income-tax Act, 1961 for the assessment year 2001-02 and all proceedings relating thereto.

Analysis:
The petitioner, a company under the Companies Act, 1956, challenged the reassessment notice dated March 31, 2006, issued by the Assistant Commissioner of Income-tax, Circle-5, Kolkata, under section 148 of the Income-tax Act, 1961. The petitioner suffered losses in share dealing and speculation business but earned capital gains and dividend income during the relevant assessment year. The Assessing Officer proposed to apply the provisions contained in the Explanation to section 73 of the Act to the share dealing business loss. The petitioner objected and invoked section 144A, resulting in the Additional Commissioner directing not to treat the share trading loss as deemed speculation loss. The assessment was completed under section 143(3)/144A. However, the petitioner received an impugned notice under section 148 for the same assessment year. The petitioner contended that the reopening was violative of the directions under section 144A, which are binding. The Department argued that the notice under section 148 was justified despite the directions under section 144A.

The key question was whether the Department could reopen an assessment done pursuant to directions under section 144A by issuing a notice under section 147/148. Section 144A grants the Joint Commissioner the discretion to issue binding directions to guide the Assessing Officer in completing the assessment. The court noted that the Assessing Officer was trying to reopen the assessment on the same ground as before the order under section 144A. It was deemed a mere change of opinion, and if the Department considered the order prejudicial, it could have invoked section 263. Since it did not, the order under section 144A became final and could not be reopened. Referring to case law, the court emphasized the binding effect of directions under section 144A on the Assessing Officer. Consequently, the impugned notice under section 148 was set aside and quashed, along with all consequential proceedings. The writ petition was allowed with no order as to costs.