2018 (5) TMI 584 - AT - Income Tax

Reopening of assessment - notice issued u/s 148 issued beyond the statutory time of six years from the end of the assessment year - Held that - In merits embargo enshrined in section 149 is operative and here within six years notice should have been issued but in the case of the assessee, it was not done and the appellate order itself, which is the basis of issue of notice under section 148 and very basis for invoking provisions of section 150(1), was passed on 28/2/2013. Notice under section 148 was issued thereafter, therefore, it is beyond the period of limitation. The ingredients of section 150(1), which the Revenue has made the basis for issue of notice under section 148, itself is not satisfied, therefore, issuance of notice under section 148 is directly hit by the provisions of section 149 limitation. We are, therefore, of the considered view that since issuance of 148 notice is barred by limitation, serving of notice itself is invalid and bad in law and, therefore, any consequent assessment or re-assessment is obviously null and void. Direct quashing of the re-assessment proceedings. - Decided in favour of assessee.

Summary

Issues:
Challenge to proceedings under section 147/148 and order passed under section 147/143(3) of the Act for being without jurisdiction and beyond statutory time limit.

Analysis:
1. The appeal challenged the proceedings initiated under section 147/148 and the consequential order passed under section 147/143(3) of the Act, contending they were without jurisdiction and beyond the statutory time limit of six years from the end of the assessment year. The notice under section 148 was issued for assessment year 2005-06 on 14/1/2016, and the assessee argued it was barred by limitation under section 149 of the Act. The appellate authorities found that no capital gains tax liability arose during the year under consideration, leading to the issuance of the notice under section 148. The ITAT and the High Court confirmed this view, stating that capital gains could only be computed in the year when the property was transferred, i.e., in the financial year 2004-05, relevant to assessment year 2005-06.

2. The Revenue argued that all appellate authorities agreed that the Assessing Officer should consider the computation of capital gain in assessment year 2005-06, justifying the issuance of the notice under section 148. However, the assessee contended that the notice was beyond the limitation period, as the assessment order was passed after the expiry of the prescribed time limit. The ITAT analyzed sections 148, 149, and 150(1) of the Act, emphasizing that notice under section 148 must be issued within six years, unless there is a finding or direction necessitating a different timeline under section 150(1).

3. Referring to the case law of Rajinder Nath vs. CIT, the ITAT clarified that a specific and necessary finding or direction is required to lift the limitation period under section 149. In this case, the ITAT found that the ld. CIT(A)'s order did not contain a specific direction but rather an observation, rendering the application of section 150(1) inapplicable. The ITAT further cited the decision in K.M. Sharma vs. ITO, emphasizing the strict construction of fiscal statutes, and concluded that the notice under section 148 was invalid and bad in law due to being barred by limitation, leading to the quashing of the re-assessment proceedings.

4. Consequently, the ITAT allowed the appeal of the assessee, setting aside the order of the ld. CIT(A) and directing the quashing of the re-assessment proceedings. The ITAT held that since the notice under section 148 was invalid, any consequent assessment or re-assessment was null and void. The legal ground of the validity of proceedings under section 147/148 being decided in favor of the assessee, all other grounds in the appeal became infructuous.