2013 (11) TMI 812 - AT - Income Tax

Limitation u/s 149 Violation of section 150(1) of the Income tax act Re-opening of assessment u/s147 of the Income tax act after the period of 6 years - Notice for re-opening issued u/s 148 of the Income tax Act - The facts are that the original assessment for the assessment year under consideration was made under section 143(3) of the Act. Further, the assessment was made under section 143(3) of the Act for assessment year 2005-06 making addition of Rs.80,84,380/- on the ground that sundry creditors amounting to Rs.80,84,380/- were bogus Held that - There is no such direction given by the ld. CIT(A) vide order dated 28.08.09 while deciding the appeal for assessment year 2005-06 for reopening the assessment. For the purpose of sec. l50, so as to enable the AO to issue the notice u/s 148 at any time without being curtailed by the time limit prescribed u/s 149, there must be satisfaction of either of the two ingredients under sub-section (1) of sec. 150. The first ingredient is that the reopening must have been done for the purpose of giving effect to any finding contained in any order passed by any authority in any proceedings under the Act by way of appeal, reference or revision or by a Court in any proceeding under any other law. The second ingredient is that the reopening must have been done for the purpose of giving effect to any direction contained in the order passed by any authority. Assessment was reopened u/s 147 on 6/11/2009, while as per the provisions of sec. 149, no notice u/s 148 could have been issued to the assessee beyond 31/03/2008. A cursory look at the order of the Ld. CIT(A) for the A. Y. 2005-06 would reveal that no such finding or direction was contained therein which would justify raising the bar of limitation of making the assessment u/s 147 - No proceedings u/s 147 could have been initiated by the AO u/s 147 to give effect to a finding contained in the appellate order of CIT(A) for the A.Y. 2005-06. Ld. CIT(A) has not given any directions to make the assessment of the purchases or sundry creditors in question as income in the A.Y. 2001-02 - He has merely stated that the AO was free to examine the purchases, albeit within the four corners of law. The four corners of law prohibits the Assessing Officer from conducting any enquiries in respect of time-barred matters. Notice u/s 148 could not have been issued for making an assessment or reassessment or recomputation in consequence of or to give effect to any finding or direction contained in the order passed by the Ld. CIT(A) for the A.Y. 2005-06 since there was no such finding or direction as contemplated in sec.150(1). As per the provisions of sec. 149(1), no assessment can be reopened beyond a period of 6 years from the end of the relevant assessment year. In the present case the notice u/s 148 was issued beyond the period of 6 years from the end of the relevant assessment year. Hence, the said notice was barred by limitation and was without jurisdiction. Therefore, the reassessment completed by the Assessing Officer was without jurisdiction. For reaching this conclusion, reliance is also placed on the decisions of the Hon ble Bombay High Court in the cases of Lotus Investments Ltd. 2006 (11) TMI 115 - BOMBAY HIGH COURT and Rakesh N. Dutt 2007 (10) TMI 285 - BOMBAY HIGH COURT Decided in favor of Assessee.

Summary

Issues Involved:

1. Jurisdiction of re-assessment proceedings.
2. Interpretation of Section 150(1) and 150(2) of the Income Tax Act, 1961.
3. Validity of notice under Section 148 beyond the period of six years.
4. Examination of findings and directions in appellate orders.

Detailed Analysis:

1. Jurisdiction of Re-assessment Proceedings:

The primary issue was whether the re-assessment proceedings initiated by the Assessing Officer (AO) for the assessment year 2001-02 were within jurisdiction. The AO initiated re-assessment based on the order passed by the Commissioner of Income Tax (Appeals) [CIT(A)] for the assessment year 2005-06, alleging that the CIT(A) directed the AO to re-open the assessment for 2001-02.

2. Interpretation of Section 150(1) and 150(2) of the Income Tax Act, 1961:

The CIT(A) held that there was no direction under Section 150(1) of the Act to initiate re-assessment proceedings for the year 2001-02. The AO relied on Section 150(1) and/or 150(2) to justify the re-assessment. However, the CIT(A) found that the original assessment was completed under Section 143(3) and the re-assessment was initiated beyond the permissible period of six years, making it time-barred.

3. Validity of Notice under Section 148 Beyond the Period of Six Years:

The notice under Section 148 was issued on 06.11.09, beyond the six-year limit from the end of the relevant assessment year, which ended on 31.03.08. The CIT(A) concluded that the re-assessment proceedings were not justified and were without jurisdiction as they were initiated beyond the statutory period, and there was no valid direction or finding in the CIT(A)'s order for the assessment year 2005-06 to reopen the assessment for 2001-02.

4. Examination of Findings and Directions in Appellate Orders:

The CIT(A) for the assessment year 2005-06 observed that the sundry creditors were old and the relevant purchases were made in earlier years, not in 2005-06. The CIT(A) did not direct the AO to reopen the assessment for 2001-02 but only mentioned that the AO could examine the purchases in the respective years if warranted by facts and circumstances, strictly within the law. The Tribunal agreed with the CIT(A) that these observations did not constitute a direction to reopen the assessment for 2001-02.

Conclusion:

The Tribunal upheld the CIT(A)'s order, stating that the AO's action to issue notice under Section 148 was barred by limitation and not saved by Section 150(1) or 150(2). The Tribunal found that there was no direction or finding in the CIT(A)'s order for the assessment year 2005-06 to justify reopening the assessment for 2001-02. Therefore, the re-assessment proceedings were held to be without jurisdiction, and the appeal by the department was dismissed. The order was pronounced in the open court on 06.11.2013.