2022 (9) TMI 1379 - HC - Income Tax

Reopening of assessment u/s 147 - as no assessment orders are passed under sub clause (4) to section 144C - Assessee case was referred to the TPO u/s 92CA and the TPO inturn, passed an order under section 92CA (3) - whether the Assessing Officer can issue notice under section 148 of the Act when the Assessing Officer has not passed an assessment order under section 144C(4)? - HELD THAT - The basic requirement for invocation of section 147 is that the assessing officer has the reason to believe that income chargeable to tax, had escaped assessment; and after recording the reasons for reopening the assessment, the assessing officer has to issue notice under section 148 to the assessee. In the present case, the return of income filed by the assessee, was subjected to scrutiny. As there were international transactions involved, the case was referred to TPO, for determining the Arm's Length Price, who in turn filed his report, and based on the report of the TPO, the respondent passed the draft assessment order. Thereafter, the assessing officer, after having found that certain income had escaped assessment, reopened the assessment. Admittedly, the notice under section 148 was issued to the appellant within the period of limitation and the same was also not put to challenge by the appellant / assessee. But, what was challenged in the writ proceedings by the appellant is the rejection of their objections to the said notice by the respondent. While so, it cannot be said that the reassessment proceedings initiated by the assessing officer under section 147 of the Act, without completing the original assessment, is not proper. Further, there is no embargo under section 147 of the Act, to issue notice under section 148, where assessment order has not been passed, after starting scrutiny proceedings; and section 144C(4) only states that the assessing officer has to pass an assessment order in accordance with the provisions of the Act and it nowhere states that section 148 notice can be issued only after passing an assessment order. Therefore, the learned Judge has rightly concluded that the assessing officer is empowered to invoke section 147 of the Act, if he has reason to believe that the income chargeable to tax escaped assessment, in the cases, where no assessment orders are passed under sub clause (4) to section 144C. As rightly contended by the learned senior standing counsel appearing for the respondent, as per Explanation 2 of section 147, the Assessing Officer is free to reexamine correctness of a regular assessment and decide whether the tax assessed, rate applied, relief and allowances granted, etc., are in terms of the provisions of the Act and if not to revise the assessment in terms of section 147 of the Act. In the light of the same, the assessing officer, who has reason to believe that certain income chargeable to tax, has escaped assessment, reopened the assessment by issuing notice under section 148 of the Act to the appellant. As such, it cannot be stated that the Assessing Officer initiated the reassessment proceedings by issuing notice under section 148 to the assessee for rectifying the lapses of not passing the final assessment order under section 144C(4) of the Act. This court is of the opinion that the order in justifying the reassessment proceedings initiated by the assessing officer under section 147 of the Act, after following the mandatory requirements of the Act, is perfectly correct and the same does not call for any interference by this court. - Decided against assessee.

Issues Involved:
1. Validity of reopening assessment under Section 147 of the Income Tax Act.
2. Compliance with procedural requirements under Sections 144C(4), 148, and 153 of the Income Tax Act.
3. Jurisdiction of the Assessing Officer to issue notice under Section 148.
4. Applicability of judicial precedents cited by the appellant.

Detailed Analysis:

1. Validity of Reopening Assessment under Section 147:
The appellant contended that the reopening of assessment was illegal as it was based on the same facts and materials considered in the draft assessment order. The court held that Section 147 empowers the Assessing Officer to reassess income if it has escaped assessment, provided the officer has "reason to believe." The court noted that the draft assessment order was not final and thus, the officer was within his rights to issue a notice under Section 148 to reassess the escaped income. The court further emphasized that the sufficiency of the reasons for reopening cannot be questioned at this stage, and the officer's belief that income had escaped assessment was sufficient to initiate reassessment proceedings.

2. Compliance with Procedural Requirements:
The appellant argued that the Assessing Officer failed to pass the final assessment order within the time limit stipulated under Section 144C(4). The court observed that the Assessing Officer did not pass the final assessment order within the prescribed time limit but issued a notice under Section 148 for reopening the assessment. The court clarified that Section 147 does not restrict the stages at which reassessment can be initiated and that the officer is empowered to issue a notice under Section 148 if he has reasons to believe that income has escaped assessment. The court also noted that the reassessment was initiated within the limitation period and was in conformity with the relevant provisions of the Act.

3. Jurisdiction of the Assessing Officer:
The appellant contended that the Assessing Officer lacked jurisdiction to issue the notice under Section 148 as it was an attempt to cure the defect of not passing the final assessment order within the stipulated time. The court rejected this argument, stating that there is no prohibition under Section 147/148 for initiating reassessment if no final assessment order is passed. The court held that the Assessing Officer's jurisdiction to issue a notice under Section 148 was valid and in accordance with the law.

4. Applicability of Judicial Precedents:
The appellant relied on several judicial precedents to support their contention that the reopening of assessment was illegal. The court distinguished these cases, noting that they were factually different and not applicable to the present case. The court referred to the decision in Krishna Developers and Company v. Deputy Commissioner of Income-tax, where the Gujarat High Court upheld the reopening of assessment even when the original assessment failed on technical grounds. The court also noted that this decision was affirmed by the Supreme Court, reinforcing the principle that the Assessing Officer can reopen assessment if he has reasons to believe that income has escaped assessment, regardless of any procedural lapses in the original assessment.

Conclusion:
The court dismissed the appeal, upholding the validity of the reassessment proceedings initiated by the Assessing Officer under Section 147. The court emphasized that the procedural requirements were met, the officer had jurisdiction, and the reasons for reopening were sufficient. The judicial precedents cited by the appellant were found to be inapplicable to the facts of the case. The court concluded that the reassessment was lawful and in conformity with the provisions of the Income Tax Act.

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