2021 (12) TMI 1216 - HC - Income Tax

Reopening of assessment u/s 147 - income of Assessee escaped assessment in the subject Assessment year - HELD THAT - It is not the case of Revenue that the subject matter of the notice under Section 147 was not the subject matter before the Appellate Authority. Therefore, in all fours, the second proviso is attracted to the case on hand. After the reading of the second proviso to Section 147 of the Act and the consideration by the CIT(Appeals) and the Tribunal, we are of the view that the distinction sought to be introduced by the Standing Counsel fails, for the very reasons recorded by the Authorities in the orders under appeal. We are of the view that the re-assessment proceedings in the subject assessment year, has been initiated contrary to second proviso to Section 147 (1) of the Act. For the above reasons and expressing full agreement with the the findings recorded by the CIT(Appeals) and Tribunal, we answer the question against Revenue and in favour of the Assessee. Addition on electricity duty and short provision of interest on Government loan made u/s 43B - HELD THAT - Question No.2 is covered by the judgment of this Court in Kerala State Electricity Board V. Deputy Commissioner of Income Tax 2019 (8) TMI 727 - ITAT COCHIN against the Revenue and in favour of Assessee.

Summary

Issues Involved:
1. Validity of invoking Section 147 of the Income Tax Act for reassessment.
2. Interpretation of the second proviso to Section 147 regarding the subject matter of appeal.

Issue 1: Validity of invoking Section 147 for reassessment:
The High Court considered the appeal filed by the Principal Commissioner of Income Tax against the order of the Income Tax Appellate Tribunal. The appeal raised substantial questions of law regarding the jurisdiction of the Assessing Officer to reopen the assessment under Section 147 of the Income Tax Act for the assessment year 2005-06. The Assessing Officer had completed the initial assessment under Section 143(3) but later initiated reassessment proceedings under Section 147 due to alleged arithmetical errors in the original assessment order. The Court analyzed the provisions of Section 147 and noted that the notice for reassessment was issued on grounds that were already under appeal before the Commissioner of Income Tax (Appeals). The Court held that the reassessment made under Section 147 was invalid as it pertained to issues already subject to appeal, thereby deleting the additions made under the reassessment order.

Issue 2: Interpretation of the second proviso to Section 147:
The Court specifically addressed the second proviso to Section 147 of the Income Tax Act, which restricts the Assessing Officer from reopening assessments on matters already under appeal. The Appellant argued that the reassessment was based on over-assessment of business loss, which was not the subject matter of the pending appeal. However, the Respondent contended that the subject matter of the reassessment notice was indeed the same as the subject matter before the Appellate Authority. The Court examined the arguments in light of the second proviso and concluded that the reassessment proceedings were initiated in violation of the second proviso to Section 147(1) of the Act. Consequently, the Court upheld the findings of the Commissioner of Income Tax (Appeals) and the Tribunal, ruling against the Revenue and in favor of the Assessee. The appeal was dismissed with no order as to costs.

This detailed analysis of the judgment from the Kerala High Court provides a comprehensive overview of the issues involved, the legal arguments presented, and the final decision rendered by the Court.