AO can initiate proceedings either u/s 143(2) or 147 of IT Act before completion of Assessment of Deemed Income Escapement: ITAT

The Delhi bench of Income Tax Appellate Tribunal (ITAT) has recently held that assessing officers could initiate proceedings either under Sections 143(2) or 147 of Income Tax Act, 1961 before completion of assessment in case of deemed income escapement.

Ajay Vohra, advocate apperad for the assesee.Kanv Bali, advocate appeard for the revenue.

Assessee Sahara India Power Corporation Limited, entered into contract with Sahara India Commercial Corporation Ltd. (SICCL) which is developing and managing Amby Valley project near Lonavala for energy management and maintenance of the above referred valley effective from the month of September 2002.

Assesee filed the appeal with regard to quashing of assessment framed under Section 143(3) read with Section 147 of the Income Tax Act.

The facts of the issue are that the assessee has challenged the proceedings under Section 147 of the Income Tax Act on various legal grounds, particularly the issue of notice under Section  148 even when the time limit for the proceedings under Section 143(3) of the IT Act had not expired.

Assessee submitted that return of income was filed on 31.10.2005. The said return was processed under Section 143(1) of the Income Tax Act. Thereafter, on 02.02.2006 notice under Section 148 of the Income Tax Act was issued on the appellant.

As per the proviso to subsection (ii) of Section 143(2) the assessing officer had the power to issue a notice under Section 143(2) of the Income Tax Act within a period of 12 months from the end of the month in which the return was furnished by the assessee.

Since in this case the return was furnished on 31.10.2005 a notice under section 143(2) could have been validly issued by the Assessing Officer on the same return filed which was pending before him up to 31.10.2006.

Instead of issuing a notice under Section 143(2) the Assessing Officer had issued a notice under Section 148 of the Income Tax Act.

Thus, there is no justification at all for initiation of the proceedings under section 147 of the Income Tax Act more particularly when the department had sufficient time available to make regular assessment of the appellant on the basis of return which was filed therefore, the notice issued under Section 148 of the Income Tax Act is void ab-initio.

Counsel for assesee submitted that notice issued under Section 148 of the Income Tax Act and consequent assessment framed under Section 143(3)/148 the Income Tax Act is invalid.

When the matter placed  before the CIT(A),   the appeal of assessee was allowed, quashing the assessment order. Aggrieved by the order, revenue filed the present appeal before the tribunal.

It was observed by the tribunal that The AO rightly recorded the reason that reopening of assessment so as to bring the escaped income into tax. The notice issued by AO under section  147 r.w.s. 148 of the Income Tax Act is not time barred on the reason that the AO has not initiated the proceedings by issue of notice under Section 143(2) of the Income Tax Act.

Therefore, the two member bench of the Dr. B.R.R. Kumar, (Accountant Member) and  Yogesh Kumar Us, (Judicial Member) allowed the appeal filed by the revenue.

To Read the full text of the Order CLICK HERE

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