2017 (4) TMI 1033 - HC - Income Tax

Validity of reopening of assessment - proceedings initiated beyond the period of limitation - Held that - Section 148(1) provides for service of notice as a condition precedent to making order of assessment. It is held that service under the new Act is not a condition precedent to conferment of jurisdiction on the Income Tax officer to deal with the matter. But it is a condition precedent to the making of the order of assessment. It is further held that as Income Tax Officer had issued notice within limitation, the officer can proceed to complete the assessment after complying with the requirement. Apparently in these cases, though a notice was generated on 30/3/2015, it is not stated that they have issued the said notice. According to them, enquiry revealed that the assessee s address was at Chennai and therefore notice was sent in the said address which was returned without being served. Thereafter gathering one more address of the assessee, the letter was finally served on 13/4/2015. It would therefore be seen that all attempts had been made by the officer to serve the notice on the petitioners by generating the notice on 30/3/2015 and sending the same by registered post on 31/3/2015. Of course, no notice was sent or issued in the address shown in the return. But there is an explanation for the same. Whenever notices are sent, it is being received by unauthorized persons and therefore they have found out the address of the assessee from the registered document and notice was sent by registered post on 31/3/2015. As held by the Apex Court, once the notice is issued, thereafter, assessment can be taken only after service of notice. There is proof to show that notice has been issued and therefore, it is of the view that the authorities have complied with the requirements of the statute in accordance with law. As already found that the notice had been issued within the period of limitation, it would suffice as far as the proceedings are concerned. There is no merit in the contention urged on behalf of the petitioners - assessee.

Issues:
1. Reopening of assessment beyond the period of limitation under the Income Tax Act, 1961.
2. Validity of notice issued under Section 148 and service of notice for reassessment.
3. Applicability of statutory provisions Section 147, 148, and 149 in the assessment process.
4. Distinction between "issue of notice" and "service of notice" under the IT Act.
5. Maintainability of writ petition when an alternate remedy is available.

Issue 1: Reopening of assessment beyond the period of limitation:
The case involved two writ petitions concerning common questions related to the reopening of assessments for the assessment year 2008-09. The petitioners challenged the assessment orders mainly on the ground that the notices under Section 148 were issued beyond the period of limitation as provided by the statute. The contention was that the notices should have been served within four or six years from the end of the relevant assessment year, as per Sections 148 and 149. The respondents argued that the notice was issued within the period of limitation, and any delay in service was attributable to the petitioners. The court analyzed the timeline of notice issuance and service, ultimately concluding that the authorities had complied with the statutory requirements within the prescribed period.

Issue 2: Validity of notice issued under Section 148 and service of notice for reassessment:
The respondents contended that notice under Section 148 was issued within the period of limitation, even though there was a delay in service. The petitioners argued that the notice was served beyond the limitation period, questioning the requirement of service versus issuance of notice. The court referred to the distinction between "issue of notice" and "service of notice" under the IT Act, emphasizing that once the notice is issued within the limitation period, the jurisdiction vests in the Income Tax officer to proceed with the assessment. The court found that the authorities had issued the notice within the limitation period, and the subsequent service of notice was in compliance with the statutory provisions.

Issue 3: Applicability of statutory provisions in the assessment process:
The court examined Sections 147, 148, and 149 of the Income Tax Act to determine the validity of the reassessment proceedings. It noted that the assessing officer must have a reason to believe that income has escaped assessment before initiating reassessment. The petitioners argued that the notices were not served within the prescribed timeframe, while the respondents justified the delay in service and upheld the validity of the assessment process based on the statutory provisions.

Issue 4: Distinction between "issue of notice" and "service of notice" under the IT Act:
The court referred to legal precedents to establish the distinction between "issue of notice" and "service of notice" under the IT Act. It highlighted that while service of notice is a condition precedent to making the assessment order, the jurisdiction to deal with the matter arises once the notice is issued within the limitation period. The court emphasized that the authorities had complied with the statutory requirements by issuing the notice within the prescribed period, even though there was a delay in service.

Issue 5: Maintainability of writ petition when an alternate remedy is available:
The respondents argued that the writ petitions were not maintainable as the petitioners had an alternate remedy to prefer an appeal against the assessment orders. However, the court held that when a question of law, especially regarding limitation, is clearly evident from the records, the court can entertain the writ petition. The court rejected the writ petitions but allowed the petitioners to prefer appeals before the competent appellate authority, with the period during which the writ petitions were pending being excluded from the timeline.

This detailed analysis covers the key issues addressed in the judgment regarding the reopening of assessments, validity of notices, statutory provisions, distinction between issue and service of notice, and the maintainability of writ petitions in the context of the Income Tax Act, 1961.

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