2015 (9) TMI 390 - HC - Income Tax

Validity of reopening of assessment - ITAT nullifying the assessment orders on the ground that they were barred by limitation - Held that - In the present case, the time limit for completing the reassessment proceedings pursuant to the notice issued on 23rd September 2005 was 31st December 2006. As is evident from the narration hereinabove, the reassessment proceedings were in progress and were being adjourned from time to time. Without those proceedings having come to an end a fresh reassessment could not have been initiated by the AO by issuing a notice under Section 148 of the Act on 24th November 2006. The proceedings initiated by the notice dated 23rd September 2005 ought to have been completed within the time stipulated and till such time there was no occasion to initiate fresh reassessment proceedings by issuing notice under Section 148 of the Act. Consequently, the impugned order of the ITAT annulling the assessments for AY 2001-02 to 2004-05 cannot be said to be erroneous. - Decided in favour of assessee.

Summary

Issues:
Appeals by Revenue under Section 260A of the Income Tax Act against common order dated 28th January 2010 passed by ITAT for AY 2001-02 to 2004-05.

Analysis:

1. Substantial Questions of Law:
The High Court framed two substantial questions of law for determination, focusing on the nullification of assessment orders due to limitations and the alleged non-service of notice under Section 147/148 of the Income Tax Act.

2. Factual Background:
The Assessee, engaged in the commission agent business, filed regular income returns for AY 2000-01 to 2004-05. Re-assessment proceedings were initiated based on a survey under Section 133A, leading to the issuance of notices for AYs 2001-02 to 2004-05.

3. Legal Proceedings and Notices:
The Assessee's representative responded to the initial notice, requesting document copies. Several adjournments were sought for case preparation. Notices under various sections were issued, including 142(1) and 143(2), with contentions raised regarding the service and receipt of notices.

4. Invalidity of Fresh Notices:
The Assessee contended that fresh notices under Section 148 for AYs 2001-02 to 2004-05 were impermissible due to pending re-assessment proceedings. The ITAT accepted this argument, annulling assessments for those years as time-barred.

5. Precedent and Legal Position:
Citing legal precedents like S. B. Jain and Nilofer Hameed cases, the Court emphasized that fresh notices cannot be issued when assessment proceedings are pending. The judgment highlighted the importance of completing ongoing proceedings before initiating new reassessments.

6. Conclusion and Judgment:
The High Court upheld the ITAT's decision, ruling in favor of the Assessee and against the Revenue. The questions of law were answered affirmatively for the Assessee, leading to the dismissal of the appeals. The judgment emphasized the legal requirement to conclude ongoing assessments before initiating fresh reassessment proceedings.