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Re-assessment proceedings are unsustainable where no reasons had been recorded by the AO before issuing notice to such end; legally sound findings of Tribunal warrant no interference with: HC

2019-TIOL-1979-HC-MUM-IT

IN THE HIGH COURT OF BOMBAY

Income Tax Appeal No. 639 of 2017

PRINCIPAL COMMISSIONER OF INCOME TAX-2

Vs

TATA SONS LTD

M S Sanklecha & Nitin Jamdar, JJ

Dated: August 19, 2019

Appellant Rep by: Mr Suresh Kumar
Respondent Rep by: 
Mr Shrihari Iyer

Income Tax – Section 148

Keywords – Reassessment

The assessee had filed its return for the relevant. Initially the assessment was framed u/s 143(3) on the basis of return as filed. Subsequently, the AO issued a notice u/s 148 seeking to re-open the assessment. In response to the notice the assessee contended that the reopening notice was issued much before the reasons were recorded for reopening the assessment, thus the reopening notice was without jurisdiction. However the AO did not accept the assessee’s contention and passed an order of assessment u/s 143(3) r/w 148. On appeal, the CIT(A) held the entire proceeding of reopening to assessment is vitiated as notice u/s 148 is bad in law. On appeal, the Tribunal upheld the decision of the CIT(A).

On appeal, the High Court held that when the CIT(A) & the Tribunal have concurrently come to a finding that no reasons were recorded by the AO prior issuing the reopening notice and nothing has been shown by the Revenue before the court to suggest the finding of fact is perverse. Thus, this Court see no reason to entertain this question.

Revenue’s appeal dismissed

JUDGEMENT

This Appeal under section 260-A of the Income Tax Act 1961(the ‘Act’), challenges the order dated 9 December 2015 passed by the Income Tax Appellate Tribunal, Mumbai (‘Tribunal’). This Appeal relates to Assessment Year 2004-05.

2. Mr.Suresh Kumar, learned counsel for the Revenue urges the following two questions of law for our consideration :

“(i) Whether the Tribunal was correct in holding that due process of law has been not been followed in reopening of the case by the AO when the reasons were recorded before issue of notice u/s 148 of the IT Act 1961?

(ii) Whether the Tribunal was justified in law in holding that the error in dates mentioned while furnishing reasons for reopening and quashing the reopening proceedings while failing to appreciate that such mistake is covered under u/s 292B of the IT Act?”

3. Regarding Question no.(i) .

a) On 6 March 2009, the Assessing Officer issued a notice under section 148 of the Act seeking to re-open the assessment for Assessment Year 2004-05. The Respondent contended that the reopening notice was issued much before the reasons were recorded for reopening the assessment, thus the reopening notice was without jurisdiction. However the Assessing Officer did not accept the Respondent’s contention and passed an order of assessment under section 143(3) r.w. section 148 of the Act.

b) In appeal, the Commissioner of Income Tax (Appeals) held that the reopening notice had been issued without having recorded the reasons which led the Assessing Officer to form a reasonable belief that income chargeable to tax escaped assessment. It records that reasons were recorded on 19 March 2009 while the impugned notice issued is dated 6 March 2009. In the above facts, the Commissioner of Income Tax (Appeals) held the entire proceeding of reopening to assessment is vitiated as notice under section 148 of the Act is bad in law.

c) Being aggrieved the Revenue filed Appeal to the Tribunal. The Tribunal specifically asked the Revenue to produce the assessment record so as to substantiate its case that impugned notice under section 148 of the Act was issued only after recording the reasons for reopening the assessment. The Revenue produced the record of assessment for Assessment Year 2004-05 before the Tribunal. However the Tribunal on facts found from the entries made in the Assessment record produced, found an entry as regards issue of notice under section 148 dated 6 March 2009. However no entries prior thereto i.e. 6 March 2009 were produced before the Tribunal, so as to establish that the reasons were recorded prior to the issue of notice dated 6 March 2009 u/s.148 of the Act. Thus the Tribunal concluded that prior to 6 March 2009 there is nothing in the record which would indicate that any reasons were recorded prior to the issue of notice. Therefore in the absence of the Revenue being able to show that the reasons were recorded prior to 6 March 2009, the impugned order held that reopening notice is without jurisdiction.

d) We note that both the CIT(A) and the Tribunal have concurrently come to a finding of fact that no reasons were recorded by the Assessing Officer prior to issuing the reopening notice dated 6 March 2009. Nothing has been shown to us to suggest that the above finding of fact is perverse. Thus we see no reason to entertain this question as it does not give rise to any substantial question of law.

4. Regarding Question no.(ii).

a) Section 292B of the Act, would have no application in the present facts as the condition precedent for issuing of the reopening notice namely, recording of reasons has not been satisfied by the Assessing Officer. In this case on facts it has been found that no reasons were recorded by the Assessing Officer in support of the reopening notice dated 6 March 2009. Thus it is not a case of clerical error, but the substantial condition for a valid reopening notice viz. recording of reasons to form a reasonable belief is not satisfied.

5. In the above view, the questions as proposed do not give rise to any substantial question of law. Thus not entertained.

6. Appeal dismissed.

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