2018 (11) TMI 272 - HC - Income Tax

Validity of reopening of assessment - reassessment proceedings were initiated to assess the income which had escaped assessment during the original assessment proceedings - Held that - In the reassessment proceedings, the income which had already been determined or assessed to tax is also added to the escaped income. If the reassessment proceedings were held to be invalid by the Tribunal or a Court of Law, in that situation, it cannot be held that the original assessment stands obliterated. If the initiation of reassessment proceedings is held to be invalid, the assessee would revert back to the situation where he originally stood, i.e. the original assessment order would revive. The doctrine of merger would have no application in the present case as the subsequent order was held to be unsustainable in law. The said doctrine would apply only in a situation where the subsequent reassessment order has been held to be valid in law. The Tribunal had rightly held that where the reassessment order was annulled, the original assessment order would automatically get restored. No substantial question of law

Summary

Issues:
1. Delay in refiling the appeal
2. Multiple assessment orders for one assessment year
3. Validity of reassessment proceedings and original assessment order
4. Doctrine of merger in the context of reassessment proceedings

Analysis:

Issue 1: Delay in refiling the appeal
The judgment begins by condoning a delay of 37 days in refiling the appeal, allowing the case to proceed. This procedural matter is addressed at the outset to ensure the timely consideration of the substantive issues raised in the appeal.

Issue 2: Multiple assessment orders for one assessment year
The primary issue in the appeal concerns the existence of two assessment orders for the same assessment year. The appellant questioned the validity of having two assessment orders simultaneously and raised concerns about the receipt of the original assessment order by the Tribunal after it was defaced during the reassessment process. The appeal also referenced relevant judgments from the Supreme Court to support the arguments presented.

Issue 3: Validity of reassessment proceedings and original assessment order
The judgment delves into the facts surrounding the assessment process, highlighting the sequence of events leading to the reassessment order and subsequent appeals filed by the assessee. It outlines how the original assessment order was revived following the dismissal of the appeal against the reassessment order by the CIT(A) and subsequent Tribunal decisions. The Tribunal's role in annulling the reassessment proceedings and reinstating the original assessment order is a key aspect of this issue.

Issue 4: Doctrine of merger in the context of reassessment proceedings
The judgment provides a detailed analysis of the doctrine of merger in the context of reassessment proceedings. It explains that if reassessment proceedings are deemed invalid, the original assessment order would automatically be restored. The Tribunal's observations on the limited application of the doctrine of merger and the potential undesired consequences of interpreting it broadly are discussed, citing relevant case law to support the reasoning. The judgment emphasizes the importance of upholding the scheme of the Act and principles laid down in previous judgments to prevent unintended outcomes.

In conclusion, the judgment dismisses the appeals by the assessee after finding no merit in the arguments presented. It affirms the Tribunal's decision regarding the restoration of the original assessment order following the annulment of the reassessment proceedings. The legal analysis provided in the judgment clarifies the application of the doctrine of merger and the implications of invalid reassessment proceedings on the original assessment order.