Delhi High Court in its recent judgment has upheld that if the reassessment proceedings are in progress and not finished, a fresh reassessment can-not be initiated by issuing a notice under Section 148 of the Income Tax Act,1961

Case Details:
ITA-92/2012 93/2012 94/2012 96/2012; AY 2001-02 AY 2002-03 AY 2003-04 AY 2004-05
Commissioner of Income Tax (CIT) (Appellant) vs Sanjay Kumar Garg (Respondent)
Date of Judgment/Order: 02-09-2015

Substantial Question before the Court:

1. Whether the Income Tax Appellate Tribunal („ITAT‟) was right in nullifying the assessment orders on the ground that they were barred by limitation?

2. Whether the order of the Tribunal is perverse as the Assessee had never accepted service of notice under Section 147/148 of the Income Tax Act, 1961 dated 23.09.2005 and had claimed that the said notice was never served or received by him?

Case Law Referred:
S. B. Jain, Income Tax Officer, Nagpur v. Mahendra [1972] 83 ITR 104 (SC)
Nilofer Hameed v. Income Tax Officer [1999] 235 ITR 161 (Ker)

Facts of the case:
Assessee was engaged in the business of commission agent of food grains under the name and style of M/s. Rahul Enterprises as its proprietor. During a survey u/s 133A of the Income tax Act, 1961 (Act) some loose papers were found which led to re-assessment proceedings under Section 147 and the notice was issued on 23-09-2005 by speed post. The notice was not returned undelivered to the Department.  The authorised representative of the Assessee appeared before the Assessing Officer (AO) on 16-03-2006 requesting photo-stat copies of the documents impounded at the time of the search and the photocopies were made available to the assessee.

On 18-04-2006 AO intimated the date of hearing fixed mentioning that enough adjournments had already been granted and that the assessment proceedings for the AYs upto 2004-05 are going to be barred by limitation that year itself. However on request the case was adjourned to 05-05-2006. Again, on the scheduled date another adjournment for 20 days was sought.

A notice under Section 142(1) along with a questionnaire dated 21-09-2006 was issued and served at the same address at which speed post notice was issued on 23-09-2005. Again a notice under Section 143 (2) was issued on 31-10-2006 informing assessee of the hearing fixed for 10-11-2006. This notice was served on the Assessee by the Inspector on 06-11-2006. On the reverse of the said notice, the Assessee wrote in Hindi that till that date he had not received any earlier notice. He also filed an affidavit on 10th November 2006 denying that he had received any notice prior to 6th November 2006.

The AO again issued yet another notice u/s 148 on 24-11-2006 for AYs 2001-02 to 2004-05. The reasons for re-opening, as recorded in the notice, were identical to the reasons recorded on 22-09-2005. The fresh notices were served on the Assessee on 05-12-2006. The assessment was completed on 24th December 2007 under Section 143(3)/147 of the Act.

Contentions of the Assessee :
The contention of the Assessee which was accepted by the ITAT was that when the re-assessment proceedings pursuant to the notices issued on September 2005 were still pending and had not been completed by 31st December 2006 as was required by law, it was illegal to issue fresh notices u/s 148. ITAT held that the issuing of fresh notices under Section 148 of the Act for AYs 2001-02 to 2004-05 was impermissible in law and assessments for the said AYs were annulled as being barred by limitation.

 

Excerpts from the Judgment:

11. In Nilofer Hameed v. Income Tax Officer [1999] 235 ITR 161 (Ker) after referring to a number of judgments of the High Courts, it was held by the Kerala High Court that “if an assessment is pending either by way of original assessment or by way of reassessment proceedings, the Assessing Officer cannot issue a notice under Section 148 but if no proceedings are pending either by way of original assessment or by way of reassessment, he can issue a notice under Section 148 within the time mentioned.”

12. In the present case, the time limit for completing the reassessment proceedings pursuant to the notice issued on 23rd September 2005 was 31st December 2006. As is evident from the narration hereinabove, the reassessment proceedings were in progress and were being adjourned from time to time. Without those proceedings having come to an end a fresh reassessment could not have been initiated by the AO by issuing a notice under Section 148 of the Act on 24th November 2006. The proceedings initiated by the notice dated 23rd September 2005 ought to have been completed within the time stipulated and till such time there was no occasion to initiate fresh reassessment proceedings by issuing notice under Section 148 of the Act.

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