2019 (7) TMI 1053 - HC - Income Tax

Reopening of assessment u/s 147 - assessment proceedings initiated under Section 142(1) - unexplained expenditure u/s 69C - as per assessee assessment order u/s 143(3) r.w.s. 147 was illegal and erroneous in law as the assessment proceedings initiated under Section 142(1) of the Act were pending on the date of the issue of the notice u/s 148 - revenue submitted that the assessee could not have questioned the jurisdiction of the Assessing Officer having failed to file his return allowed by the notice under sub-section (1) of Section 142 or under Section 148 or under the first proviso to Section 144 of the Act - HELD THAT - It is settled law that unless the return of income already filed is disposed of, the notice for reassessment under Section 148 of the Act cannot be issued, i.e. no reassessment proceedings can be initiated so long as the assessment proceedings pending on the basis of the return already filed are not terminated. (see Trustees of H.E.H. The Nizam's Supplemental Family Trust v. Commissioner of Income-Tax 2000 (2) TMI 4 - SUPREME COURT If an assessment is pending either by way of original assessment or by way of reassessment proceedings, the Assessing Officer cannot issue a notice under Section 148, but if no proceedings are pending either by way of original assessment or by way of reassessment, he can issue a notice under Section 148 within the time as stipulated. (see Nilofer Hameed and another v. Income Tax Officer, 1998 (8) TMI 75 - KERALA HIGH COURT We are afraid, Section 124(3)(b) of the Act would not save the situation. Section 124 talks about the lack of jurisdiction on the part of the Assessing Officer. In other words, Section 124(3) of the Act stipulates a bar to any contention about lack of jurisdiction of an Assessing Officer. The illegality in the case on hand would not be saved by virtue of Section 124(3) of the Act. We are convinced that the Tribunal applied the correct principle of law and passed the impugned order. We may only say that Section 142(1) and Section 148 of the Act cannot operate simultaneously. There is no discretion vested with the Assessing Officer to utilize any one of them. Such a view would be directly opposed to the decision of the Supreme Court in the case of Commissioner of Income Tax, Bombay City, I, Bombay v. M/s.Narsee Nagsee and Co. Bombay, 1960 (5) TMI 5 - SUPREME COURT . The very same contention was raised before the Supreme Court and was specifically rejected. The two provisions govern different fields and can be exercised in different circumstances. If income escapes assessment, then the only way to initiate assessment proceedings is to issue notice under Section 148 of the Act. In fact, if notice has already been issued under Section 142 of the Act and the proceedings are pending, it looks absurd to call for a return under Section 148 of the Act. It is settled law that income cannot be said to have escaped assessment when the assessment proceedings are pending. - Decided against revenue

Summary

Issues:
1. Validity of assessment under Section 148 of the Income Tax Act.
2. Interpretation of Sections 142(1) and 148 of the Income Tax Act regarding assessment proceedings.

Issue 1: Validity of assessment under Section 148
The case involved an appeal by the Revenue against an order passed by the Income Tax Appellate Tribunal (ITAT) regarding the assessment for the Assessment Year 2011-12. The Tribunal had allowed the appeal by the assessee, holding that the assessment under Section 143(3) read with Section 147 was illegal and erroneous as the notice under Section 148 was issued during pending assessment proceedings initiated under Section 142(1). The ITAT quashed the assessment under Section 143(3) read with Section 147, stating that the notice under Section 148 during the pendency of assessment proceedings was bad in law and invalid. The Tribunal relied on legal findings and a previous case to support its decision.

Issue 2: Interpretation of Sections 142(1) and 148
The Revenue contended that the ITAT erred in quashing the notice under Section 148, arguing that Section 142(1) does not preclude the Assessing Officer from issuing a notice under Section 148. The Revenue claimed that the assessment was completed within the time limit and that the ITAT overlooked this fact. However, the Court held that unless the return of income already filed is disposed of, no notice for reassessment under Section 148 can be issued. The Court cited legal precedents to support this principle and emphasized that if an assessment is pending, the Assessing Officer cannot issue a notice under Section 148. Additionally, the Court discussed Section 124(3)(b) of the Act, stating that it does not save the situation in this case as it pertains to the lack of jurisdiction of the Assessing Officer.

Conclusion:
The Court dismissed the Tax Appeal, affirming the ITAT's decision to quash the assessment under Section 143(3) read with Section 147. The Court emphasized that Sections 142(1) and 148 cannot operate simultaneously, and income cannot be said to have escaped assessment when assessment proceedings are pending. The judgment highlighted the importance of following the correct legal procedures to ensure the integrity of the assessment process and safeguard revenue collection.