2016 (2) TMI 462 - AT - Income Tax

Reopening of assessment beyond the time allowed - period of limitation - whether the date on which the block assessment was framed the AO could have taken action by issue of notice u/s.149(1)(b)(iii) - addition u/s.43B - Held that - When by an order of the Tribunal the income is excluded from the total income of the assessee for the block assessment then the assessment of such income for the assessment year 1998-99 shall be deemed to be one made in consequence of or to give effect to any finding or direction in that order (in appeal) for the purpose of lifting the ban of limitation under Explanation 2 to sec.153(3). In view of the above in our opinion the provisions of sec.150(1) are applicable. Thus ground of the assessee in its appeal is dismissed. AR as per the return of income 13, 29, 74, 324/- was disallowed u/s.43B which includes a sum of 7, 02, 87, 355/- and the same was disallowed in re-assessment and there cannot be any further disallowance in the reopened assessment. In our opinion this argument of the ld. AR is having no merit. The assessment was not completed as per return of income filed by the assessee whereas it is completed on the income admitted by the assessee on its own admission as the assessee has made various claim u/s.10B 80IA etc. which appears to be merely to offset the excess income booked in the window dressed profit 3 lakhs. Being so the assessment was reopened to consider the disallowance of 7, 02, 87, 355/- u/s.43B of the Act. In our opinion the provisions of sec.43B are applicable on this amount and there is no dispute and the same to be added in the reassessment order which is confirmed - Decided against assessee

Issues Involved:
1. Validity of reopening the assessment under Section 147 beyond the prescribed time limit.
2. Legitimacy of the reassessment order concerning disallowance under Section 43B.
3. Applicability of Section 150 in extending the jurisdiction for reassessment.
4. Confirmation of disallowance of Rs. 7,02,87,355 under Section 43B.
5. Dismissal of rectification application by the Assessing Officer.

Issue-wise Detailed Analysis:

1. Validity of Reopening the Assessment under Section 147 Beyond the Prescribed Time Limit:
The appellant argued that the reopening of the assessment under Section 147 was time-barred and without jurisdiction, as the notice under Section 148 was issued on 31.03.2011, beyond the permissible time limit. The Tribunal examined the provisions of Section 149 and Section 150 of the Income Tax Act. Section 149 prescribes time limits for issuing notices under Section 148, while Section 150 provides exceptions to these limits in cases where reassessment is necessary to give effect to any finding or direction contained in an appellate order. The Tribunal concluded that the reopening of the assessment was valid as it was done to give effect to the Tribunal's order in the block assessment, which is permissible under Section 150.

2. Legitimacy of the Reassessment Order Concerning Disallowance under Section 43B:
The appellant contended that the reassessment was invalid since the issue of disallowance under Section 43B had already been considered in the original assessment completed on 12.11.2001. The Tribunal noted that the original assessment had disallowed Rs. 13,29,74,324 under Section 43B based on the Special Audit Report. However, the reassessment was initiated following the Tribunal's order in the block assessment, which observed that such disallowances should be considered in regular assessments. The Tribunal upheld the reassessment as it was in line with the directions from the higher judicial authority.

3. Applicability of Section 150 in Extending the Jurisdiction for Reassessment:
The appellant argued that the reopening of the assessment was barred by limitation under Section 149. The Tribunal clarified that Section 150(1) allows reopening of assessments at any time to give effect to an appellate order. However, Section 150(2) restricts this if the reassessment would have been time-barred at the time the original order was passed. The Tribunal found that the reassessment notice issued on 31.03.2011 was within the permissible time limit as per the provisions of Section 149(1)(b)(iii) as they stood on 30.05.2001, the date of the block assessment order. Thus, the reopening was justified under Section 150(1), and the provisions of Section 150(2) did not apply.

4. Confirmation of Disallowance of Rs. 7,02,87,355 under Section 43B:
The appellant contended that the disallowance of Rs. 7,02,87,355 under Section 43B was already considered in the original assessment, and hence, there was no escapement of income. The Tribunal noted that the assessment was not completed as per the return of income but based on the assessee's own admission of Rs. 3 lakhs. The Tribunal held that the provisions of Section 43B were applicable to the amount of Rs. 7,02,87,355, and the disallowance was correctly made in the reassessment order. Thus, the ground of appeal regarding the disallowance was dismissed.

5. Dismissal of Rectification Application by the Assessing Officer:
The appellant's rectification application under Section 154 was dismissed by the Assessing Officer, which was also upheld by the CIT(A). The Tribunal observed that since the reassessment proceedings were validly initiated and the addition under Section 43B was correctly made, the dismissal of the rectification application was justified. The Tribunal did not find any merit in the appellant's contention regarding the rectification application.

Conclusion:
The Tribunal dismissed the appeal of the assessee, upholding the validity of the reassessment proceedings and the disallowance of Rs. 7,02,87,355 under Section 43B. The reopening of the assessment was found to be within the permissible time limits as per the provisions of the Income Tax Act, and the rectification application was rightly dismissed. The order was pronounced on 20th January 2016 at Chennai.

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