The Delhi High Court has held that the Assessing Officer cannot trigger reassessment when a pending appeal on income tax addition is sustained.
The appellant/revenue challenged the common order dated 03.09.2019 passed by the Income Tax Appellate Tribunal [“Tribunal”]. The Tribunal has quashed the reassessment proceedings triggered against the respondent/assessee under Section 148 of the Income Tax Act, 1961 [“Act”]. The Tribunal has taken recourse to the third proviso appended to Section 147 of the Act.
The appellant made an addition upon the Return of Income [ROI] being filed by the respondent/assessee, Shri Gautam Bhalla. The assessment order dated 30.03.2015 was framed under Section 153A, read with Section 143(3) of the Act. It is required to be noticed that recourse to Section 153A was taken by the appellant/revenue in the backdrop of search and seizure proceedings initiated in and about 16.01.2013 against Vatika Group as also the respondent/assessee.
The respondent/assessee being aggrieved, preferred an appeal with the Commissioner of Income Tax (Appeals) [“CIT(A)”] against the assessment order. The CIT(A), deleted the aforementioned additions made qua the respondent/assessee principally on the ground that since no incriminating material was found and the assessments for the AYs in issue stood completed, the Assessing Officer (AO) had no jurisdiction to frame an assessment order.
The appellant/revenue to trigger reassessment proceedings against the respondent/assessee. Accordingly, a notice dated 29.03.2017 was issued by the respondent/assessee under Section 148 of the Act. Pending further progress of the reassessment proceedings, both the appellant/revenue as well as the respondent/assessee preferred appeals before the Tribunal vis-à-vis the order dated 07.03.2017 passed by the CIT(A). These appeals were lodged in and about June 2017.
While the appeals were pending before the Tribunal, two separate orders dated 28.12.2017 were passed under Section 148, read with Section 143(3) of the Act. Consequently, the respondent/assessee’s income for AY 2010-11 was assessed at Rs.5,88,09,223/-. Likewise, insofar as the AY 2011-12 was concerned, the respondent/assessee’s income came to Rs.5,43,83,644/-.
On appeal by the respondent/assessee before the CIT(A), the additions made were confirmed under Section 68 of the Act. Mr Aseem Chawla, senior standing counsel, who appeared on behalf of the appellant/revenue, has attempted to assail the impugned order by placing reliance upon the explanatory note appended to the provisions of Finance Act, 2008 contained in Circular no.1 of 2009 dated 27.03.2009.
It was argued that if recourse had not been taken to the provisions of Section 148, only because the appeals were pending before the Tribunal, it may have resulted in the reassessment proceedings being time-barred.
On the other hand, Mr C S Aggarwal, senior counsel, who appeared on behalf of the respondent/assessee, has submitted that the third proviso appended to Section 147 squarely applied in the instant cases, and therefore, no interference is called for with the impugned order passed by the Tribunal.
A careful perusal of the third proviso appended to Section 147 of the Act reveals that the AO is free to assess or reassess such income which is chargeable to tax, provided he has reason to believe that income has escaped assessment, other than income which is the subject matter of any appeal, reference or revision.
It was observed that the appellant/revenue had directed its appeal towards the additions made under Section 68 of the Act. The reassessment proceedings, concededly, also dealt with the additions made under Section 68 of the Act.
A division bench of Justice Rajiv Shakdher and Justice Girish Kathpalia held that “while the appeals preferred were pending adjudication with the Tribunal, the AO could not have triggered reassessment proceedings against the additions which were the subject matter of the appeal.”
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