2nd reopening notice issued without completing earlier reassessment proceedings invalid

Second reopening notice u/s 148 issued without completing earlier reassessment proceedings is invalid

ABACUS Case Law Citation
ABCAUS 3370 (2020) (08) ITAT

Important case law relied upon by the parties:
A.S.S.P. & Co. vs. CIT 172 ITR 274 (Mad)
CIT vs. P. Krishnankutty Menon, 181 ITR 237 (Ker)
Tao Publishing (P) Ltd. vs. Dy. CIT, 370 ITR 135 (Bom.)
Hindustan Lever Ltd. vs. R.B. Wadkar, 268 ITR 332 (Bom.)
Akshar Anshul Construction LLP vs. Asstt. CIT, 264 Taxman 65 (Bom.)
Parashuram Pottery Works Co. Ltd. vs. ITO, 106 ITR 1(SC)
German Remedies Ltd. vs. DCIT, 287 ITR 494 (Bom.)
My Car (Pune) (Pvt.) Ltd. vs. ITO, 263 Taxman 626 (Bom.)
Sesa Sterlite Ltd. vs. ACIT, 417 ITR 334 (Bom.)

In the instant case, the assessee had challenged the reopening of assessment under section 147 of the Income Tax Act, 1961 (the Act).

In the instant case, the appellant assessee had filed its return of income and the assessment u/s 143(3) was completed.

Subsequently, the first notice under section 148 of the Act was issued to the assessee which the assessee duly replied and filed return of income.

However, no action was taken by the Assessing Officer (AO) on the said reply and the return filed in response to the notice.

Later on, after a gap of almost three years, second notice u/s 148 was issued to the assessee.

The assessee’s contentions were threefold; first, it was asserted that where the proceedings from first notice issued for reopening assessment were still pending, second notice issued u/s 147/148 of the Act for reopening was bad in law. Secondly, that the reopening was not on account of any failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment and thirdly, that the CIT had accorded its approval for reopening in a mechanical manner.

The Tribunal observed that after issuance of first notice u/s 148 of the Act, no action whatsoever was taken by the Assessing Officer to complete the reassessment proceedings. After a slumber for almost three years Revenue reinitiated reassessment proceedings, by issuing second notice u/s 148.

Second reopening notice u/s 148 during subsistence of earlier reassessment proceedings is illegal

The Tribunal observed that the Hon’ble High Courts have held that the Income Tax Officer is not authorised to initiate successive reassessment proceedings when assessment proceedings are already pending. where second notice under section 148 of the Act is issued during the subsistence of earlier reassessment proceedings, the subsequent reopening is invalid.

Accordingly, the Tribunal held that issuance of second notice under section 148 of the Act without completing pending assessment proceedings u/s 147 of was illegal and the subsequent proceedings arising therefrom were vitiated.

Reopening beyond four years without failure of assessee to disclose fully and truly all material facts is illegal

Regarding the second contention of the assessee, the Tribunal stated that reading of the reasons for reopening did not suggest that the reopening of assessment beyond four years was a result of failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment.

The Tribunal held that the case did not fall within any of the conditions set out in proviso to section 147 for initiating reassessment proceedings. Hence, the reassessment was liable to be quashed on this ground as well.

Reopening approval in mechanical manner without application of mind is illegal

The Tribunal noted that the AO in his communication seeking approval for reopening had clearly brought the fact to the notice of the CIT that the reassessment proceedings had time barred itself and hence, reassessment order under section 143(3) r.w.s. 147 was not passed within time barring limit and the case could not be opened again.

The Tribunal opined that the CIT without commenting on the observations made by the AO, approved permission for reopening the assessment in a mechanical manner without application of mind. Hence, reassessment proceedings arising therefrom were vitiated and hence, liable to be quashed.

The Tribunal concluded that the impugned reassessment proceedings suffered from multiple incorrigible legal defects and hence, are unsustainable. The second notice issued u/s 148 of the Act was itself invalid.

Accordingly, the Tribunal quashed the reassessment proceedings.  

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