Assessee not permitted to bypass assessment/ reassessment by invoking jurisdiction of High Court

Income Tax Act provides complete machinery for assessment/reassessment of tax, assessee is not permitted to abandon that machinery and invoke jurisdiction of High Court under Article 226

ABCAUS Case Law Citation:
ABCAUS 3790 (2023) (08) SC

Important Case Laws relied upon:
Gurinder Mohan Singh Nindrajog v. Commission of Income Tax, (2012) 348 ITR 170
Ardor Technopark Ltd. v. Dr. Zakir Hussein, Deputy Commissioner of Income Tax (2004) 271 ITR 50
Commissioner of Income Tax and Ors. Vs. Chhabil Das Agarwal, (2014) 1 SCC 603
CIT vs. Usha International Ltd. [2012] 348 ITR 485

In the instant case, the assessee had challenged the order passed by the Hon’ble High Court in dismissing Writ Petition against re-assessment notice / order. 

Supreme Court Judgment Abcaus

The case of the Petitioner had been selected under limited scrutiny (computer aided scrutiny selection) and accordingly a notice was issued under Section 143(2) of the Income Tax Act, 1961 (the Act) by the Assessing Officer raising queries regarding cash deposit made by the Petitioner during the demonetisation period.

Subsequently, assessment order was issued under Section 143(2) of the Act by the Assessing Officer under Section 143(3) of the Act for the concerned assessment year making an addition under Section 69A to the returned income of the Petitioner of the Act on the ground that the Petitioner was not able to satisfactorily explain the source of the fund for the cash deposit made by him in his one bank account during the demonetisation period

Being aggrieved by the assessment order the Petitioner preferred an Appeal before CIT(A) at NFAC.

During the pendency of the said appeal before the NFAC, the Department issued another reassessment notice under Section 148 of the Act seeking to reassess the income of the petitioner for the same Assessment year qua cash deposit made in another bank account jointly held with wife.

Subsequently, the reassessment order was passed under Section 147 read with Section 144B of the Act again making an addition on account of unexplained income towards cash deposit in joint bank account.

Aggrieved, the petitioner filed a Writ Petition before Hon’ble High Court impugning the second assessment order.

The case of the Petitioner was that issuance of the notice u/s 148 by the Department during the pendency of the appeal before the CIT(A) was impermissible as it amounted to a mere change of opinion.

It was contended that notice was null and void as it was an encroachment on the exclusive jurisdiction of the Commissioner (Appeals), in terms of Section 251 of the Act and was therefore liable to be quashed.

The Hon’ble Supreme Court observed that the first reassessment notice under Section 148 dealt with the alleged cash deposit made by the assessee in a particular bank. The cash deposit which was subject of the second notice was not adjudicated upon in the Section 143(3) proceedings.

The Hon’ble High Court stated that there is a difference between change of opinion and failure or omission of the Assessing Officer to form an opinion on a subject matter, entry, claim, deduction. When the Assessing Officer fails to examine a subject matter, entry, claim or deduction, he forms no opinion. It is a case of no opinion.

The Hon’ble High Court further observed that it has been held that Commissioner (Appeals) has the power to enhance such an assessment which was dealt by the Assessing Officer during scrutiny assessment proceedings and was subject matter of appeal. The appropriate action can be taken in a situation under Section 147 of the Act where the Assessing Officer inadvertently omits to tax an amount which ought to have been taxed and in respect of which he does not make any enquiry.

The Hon’ble High Court opined that just because the Appellate Authority has the power to modify an assessment order with regard to a source of income that has not been considered during assessment proceedings does not mean that the jurisdiction of the authorities under Section 148 of the act would be excluded when the issue involved in the proceeding under Section 148 of the Act is not the same as that being considered under Section 251 of the Act. The power under Section 148 of the Act is an independent power and would not stand excluded on exercise of powers of appellate jurisdiction by the CIT(A) under Section 251 of the Act.

The Hon’ble High Court observed that the Hon’ble Supreme Court has held that Income Tax Act, 1961 provides complete machinery for assessment/reassessment of tax, assessee is not permitted to abandon that machinery and invoke jurisdiction of High Court under Article 226. This Court is further of the view that the present cases do not fall under the exceptional grounds on which a writ petition is maintainable at the interim stage in tax matters.

Accordingly, the Hon’ble High Court dismissed the Writ Petition of the assessee.

Not satisfied with the order of the Hon’ble High Court, the assessee filed a Special Leave Petition (SLP before the Hon’ble Supreme Court.

However, the Hon’ble Supreme Court dismissed the SLP as being devoid of any merit.

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