2018 (3) TMI 153 - HC - Income Tax

Reopening of assessment - reason recorded for reopening the assessment under section 147 itself does not survive - Held that - It is not in dispute that the issue involved in this case is squarely covered by the jurisdictional High Court judgment in Govindaraju 2015 (8) TMI 271 - KARNATAKA HIGH COURT as held if notice has no sufficient reason or is invalid, no proceedings can be initiated. But the same can be checked at the initial stage by challenging the notice. If the notice is challenged and found to be valid, or where the notice is not at all challenged, then in either case it cannot be said that notice is invalid. As such, if the notice is valid, then the foundation remains and the proceedings on the basis of such notice can go on. We may only reiterate here that once the proceedings have been initiated on a valid notice, it becomes the duty of the Assessing Officer to levy tax on the entire income (including any other income ) which may have escaped assessment and comes to his notice during the course of the proceedings initiated under section 147 of the Act - Decided in favour of revenue

Summary

Issues:
Challenging order of Income Tax Appellate Tribunal on assessment years 2005-06 and 2007-08.

Analysis:
The appeals were filed by the Revenue challenging the order of the Income Tax Appellate Tribunal related to the assessment years 2005-06 and 2007-08. The respondent, a firm involved in developing and constructing properties, had a survey conducted in 2010, leading to a notice for reopening the assessment due to certain findings. The reassessment was completed with additions to the income for various reasons. The assessee's appeal before the Commissioner of Income Tax (Appeals) was dismissed. Upon further appeal to the Tribunal, the reassessment proceedings were quashed, not considering the additions made. The revenue appealed, questioning the Tribunal's decision on whether the additions were part of the alleged escapement of income for reopening under Section 147 of the Income Tax Act.

The counsel for the revenue argued that the issue was covered by a previous judgment and should be decided in favor of the revenue. On the other hand, the senior counsel for the assessee acknowledged the previous judgment but emphasized that the Tribunal did not assess the case on its merits. The Tribunal had remanded similar matters for other assessment years back to the Assessing Officer for reconsideration. The High Court reviewed the arguments and material on record, citing a previous judgment to support the view that the notice for reassessment was valid, and the matter should be reconsidered on merits by the Assessing Officer. Consequently, the substantial question of law was answered in favor of the revenue, and the appeals were allowed, remanding the matter to the Assessing Officer for fresh consideration.

The High Court clarified that since the reassessment proceedings were quashed by the Tribunal, there was no examination of the matter on its merits. Therefore, the matter was remanded to the Assessing Officer for reconsideration. The Assessing Officer was directed to conclude the reassessment in accordance with the law after hearing the assessee promptly, leaving all rights and contentions of the parties open.