The Madras High Court ruled that the reassessment proceedings under Section 148 of Income Tax Act, 961 cannot be initiated without completing the assessment. The court also clarified that the notices under Section 143(2) can only be issued to the pending assessments.
Justice Anita Sumanth stated that “the issuance of notice under Section 143(2) will apply only in the case of pending assessment”.
In the Tax Case Appeal filed by the Commissioner of Income-tax-I against M/s.Super Spinning Mills Ltd, two issues were placed. The first issue deals with whether the appellate tribunal was right in law in holding that notice under section 148 of the Income Tax Act cannot be issued before the time limit for issuance of notice under section 143(2) had expired.
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The Second issue was whether the appellate tribunal was right in law in holding that the proceedings initiated by the assessing officer under section 147 of the Act for the assessment year 2002-03 while notice issued under section 148 was valid in law.
A return was filed on 30.10.2002 for the AY 2002-03. An intimation under Section 143(1) was issued on 19.12.2003. Later, a revised return was filed on 23.03.2004. Admittedly, the assessing authority had time till 31.03.2005 to issue a notice under Section 143(2). Notice under Section 148 has however been issued on 09.07.2004.
The counsel for the department, Mrs.R.Hemalatha Senior Standing Counsel submitted that taking a cue from the judgment of the Supreme Court in Assistant Commissioner of Income Tax v. Rajesh Jhaveri Stock Brokers Private Limited that since Section 147 applies to both assessment and reassessment, the action of the assessing authority in issuing notice under Section 148 will be saved.
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However, the bench found this argument misconceived on the grounds that the issuance of notice under Section 143(2) will apply only in the case of pending assessment. The bench further noted that this is a case where the assessment is pending and instead of completing the same, the assessing authority has initiated proceedings for re-assessment. Hence, the submission of Senior Standing Counsel was seen to be devoid of merit and was rejected by the court.
Thus, the bench guides that the reassessment proceedings should be initiated only after completion of the assessment and Section 143(2) notices can be issued only in the case of pending assessments. The court ruled in favour of the assessee and dismissed the revenue’s tax case appeal.
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