Reopening notice u/s 148 void if original assessment pending in appeal – ITAT

Reopening notice u/s 148 void if original assessment pending in appeal.  ITAT quashed notice where proceedings u/s 153A were pending before CIT(A)

ABCAUS Case Law Citation
ABCAUS 2363 (2018) 06 ITAT

The instant appeal was preferred by the assessee against the order of the Commissioner of Income Tax (Appeals) (‘CIT (A)’), inter alia, challenging sustaining of the disallowance u/s 40A(3) of the Income Tax Act, 1961 (the Act).

There was a search and seizure operation in the case of the assessee persuant to which a notice u/s 153A of the Income Tax Act, 1961 (the Act) was issued. The assessment was completed after making an addition of u/s 68 of the Act on account of loan received and interest thereon.

Aggrieved by the assessment order u/s 153A,  the assessee approached the First Appellate Authority contending that no addition could have been made in absence of any incriminating material found during the course of search. The CIT (A) allowed the assessee’s appeal.

The Income Tax department (Revenue) filed an appeal before the Tribunal challenging the order of the CIT (A). The ITAT restored the matter back to the file of the CIT (A) for de novo re-adjudication. Meanwhile, during the pendency of appeal before the CIT(A), the department initiated re-assessment proceedings against the assessee and issued notice u/s 148 of the Act and the re-assessment proceedings were completed by making the same addition u/s 68 on account of loan received and interest thereon.

Aggrieved by the re-assessment order, the assessee filed an appeal before the CIT (A) which was dismissed and hence the present appeal.

Before the Tribunal, it was contended that as per the settled legal position, two parallel proceedings on the same subject matter cannot be sustained. It was prayed that in view of this finding in assessee’s own case for the same year under consideration, the CIT(A) was incorrect in upholding the validity of re-assessment proceedings u/s 148.

The Tribunal observed that it was undisputed that the proceedings initiated u/s 153A of the Act were still pending for adjudication before the CIT (A) when the notice u/s 148 of the Act was issued. It is a settled law that there cannot be two parallel proceedings on a similar subject matter and proceedings initiated first must come to an end for making way for initiation of another proceedings on the same subject matter.

It was observed that Hon’ble Kerala High Court after referring to a number of judgments of other Hon’ble High Courts had held, “if an assessment is pending either by way of original assessment or by way of re-assessment proceedings, the assessing officer cannot issue a notice u/s 148 but if no proceedings are pending either by way of original assessment or by way of re-assessment, he can issue a notice u/s 148 within the time mentioned.”

It was further observed that the judgment of the Hon’ble Kerala High Court was also followed by the Hon’ble Delhi High Court. A similar view had been taken by the Hon’ble Rajasthan High Court wherein it was held that where the original proceedings were pending before the CIT (A), the adjudicating authority could not have issued second show cause notice u/s 148 of the Act.

The Tribunal observed that in assessee’s own case, the Tribunal had held that as per the statutory scheme and provisions of the Act, during the pendency of proceedings u/s 153A of the Act, the AO was not empowered to issue notice u/s 147/148 of the Act.

The Tribunal held that the reassessment proceedings suffered from basic defect of the re-assessment notice being illegal and, therefore, the re-assessment proceedings could not be sustained. Accordingly, the reassessment proceedings were quashed holding it as vide ab initio.

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