2013 (7) TMI 545 - HC - Income Tax

Reassessment - Limitation period of reassessment order - Whether the appellate authorities were right in holding that issuance of notice under section 148 was clearly barred by limitation, as the same is beyond the period of four years instead of taking the extended period of six years as per section 149(1)(b) Held that - The reassessment proceedings were initiated clearly beyond the four years period. Therefore, the lower appellate authority as well the Tribunal were justified in passing the orders - the case does not fall under Part II of the proviso in order to escape from the limitation. If the conditions stipulated in Part II of the proviso do not exist, then, when an assessment order is passed under sub-section (3) of section 143, no action can be taken under section 147 of the Act after the expiry of four years from the end of the relevant assessment year - The end of the relevant assessment year and four years therefrom expires - When the reassessment order was barred by the law of limitation, the order passed by the authorities are in accordance with law. - Decided against the revenue.

Summary

Issues:
1. Validity of reassessment order based on limitation period.
2. Disallowance of long-term capital loss claimed by the assessee.

Analysis:
1. The appeal was filed by the Revenue against the Tribunal's order upholding the first appellate authority's decision to set aside the reassessment order due to the limitation issue. The original assessment was completed in 1997 based on the return filed in 1996, declaring a long-term capital loss. The Revenue later found this claim incorrect as there was no transfer of a capital asset as defined under the Income-tax Act. A notice under section 148 was issued in 2002, beyond the four-year limitation period. The assessing authority disallowed the long-term capital loss, leading to appeals and subsequent decisions by the appellate authority and the Tribunal. The court held that since the reassessment proceedings were initiated beyond the four-year limit, they were barred by law, and the lower authorities' decisions were justified.

2. The second issue revolved around the disallowance of the long-term capital loss claimed by the assessee. The Revenue argued that the amount claimed as a long-term capital loss was for the purchase of shares, not a capital asset, and thus should not be considered a long-term capital loss. The assessee contended that there was no failure on their part to disclose material facts during the original assessment, falling under the proviso to section 147 of the Act. The court noted that before passing the original assessment order, the assessing authority had called for explanations from the assessee regarding the claim, which were provided and accepted. As there was no failure to disclose material facts, the reassessment beyond the four-year limit was not permissible. Therefore, the court ruled in favor of the assessee, stating that the substantial questions of law were answered in their favor and against the Revenue.

In conclusion, the court dismissed the appeal, emphasizing that the reassessment order was barred by the law of limitation, and the decisions made by the lower authorities were in accordance with the law.