2014 (4) TMI 852 - HC - Income Tax

Validity of order u/s 147 of the Act - reassessment Held that - The Explanation-3 to Section 147 of the Income Tax Act does not apply - Explanation-3 will be applicable in case where live issue, which was subsisting at the time of original assessment and if such issue has escaped the determination of the AO0, can be a ground for reopening - any new issue that has cropped up subsequently on new set of facts, the Explanation has no application - the Explanation-3 has not really diluted cardinal object of Section 147 of the Income Tax Act for reopening - The Explanation-3 has been given a retrospective effect with an idea there are so many assessment orders, which were passed earlier without deciding the issue subsisting at the time of original assessment Decided against Revenue.

Summary

Issues:
1. Validity of the assessment order passed under Section 143 read with Section 147 of the Income Tax Act 1961.

Analysis:
The High Court of Andhra Pradesh heard an appeal against the judgment and order of the Tribunal related to the assessment year 2005-06. The main question of law was whether the Tribunal was correct in annulling the assessment order passed under Section 143 read with Section 147 of the Income Tax Act. The Tribunal found that the reasons for reopening the assessment did not align with the income ultimately assessed under Section 147. The appellant argued that Explanation-3 to Section 147, which has retrospective effect, should have been considered by the Tribunal. However, the Court held that Explanation-3 does not apply in this case. The Court referred to decisions by various High Courts, including Bombay, Delhi, Chhattisgarh, and Gujarat, to support its stance. The Court emphasized that Explanation-3 applies only to issues that were live and subsisting at the time of the original assessment, not to new issues arising subsequently. The Court concluded that the Tribunal's decision was in line with the consistent view of other High Courts and upheld the dismissal of the appeal.

In summary, the High Court dismissed the appeal against the Tribunal's decision regarding the validity of the assessment order under Section 143 read with Section 147 of the Income Tax Act for the assessment year 2005-06. The Court found that the reasons for reopening the assessment did not correspond with the income ultimately assessed. The Court determined that Explanation-3 to Section 147, with retrospective effect, was not applicable in this case. Citing decisions by various High Courts, the Court clarified that Explanation-3 only applies to issues existing at the time of the original assessment, not to new issues arising later. The Court upheld the Tribunal's decision based on the consistent view of other High Courts and dismissed the appeal.