Case Law Details

Case Name : Dushyant Kumar Jain Vs DCIT (Delhi High Court)
Appeal Number : W.P(C) 1569/2015 & CM No.2800/2015
Date of Judgement/Order : 15/01/2016
Related Assessment Year : 2007-2008
Courts : All High Courts (1346) Delhi High Court (462)

Brief of the Case

Delhi High Court held In the case of Dushyant Kumar Jain vs. DCIT held that it is only the AO who has issued the original assessment order under Section 143 (3) ,who is empowered to exercise powers under Section 147/148 to re-open the assessment. This is because he alone would be in a position to form reasons to believe that some income of that particular AY has escaped assessment. This again cannot be based on a mere change of opinion. Further, in terms of Section 151 of the Act such a move will have to have the prior approval of the CIT. Under the scheme of the Act, if a superior officer forms an opinion that the original assessment order is prejudicial to the interests of the Revenue, recourse can be had to Section 263. In any event the question of an ITO who is not the AO who passed the original assessment order under Section 143 (3) for particular AY, exercising the powers under Sections 147/148 to re-open that assessment does not arise.

Facts of the Case

The Assessee filed a return of income for AY 2007-08 on 18th September, 2007 declaring an income of Rs. 38,76,580. The DCIT, Circle 39(1), who is the Assessing Officer of the Assessee, issued a notice to the Assessee under Section 142(1) raising certain queries and calling for records. These were furnished by the Assessee and on 13th April 2009, an assessment order was passed by the AO under Section 143(3). On 14th March, 2014, the first impugned notice was issued to the Assessee under Section 148 by the ITO, Ward 39(2) recording the reasons for reopening of the assessment. Immediately, on receipt of the above reasons, the Petitioner addressed a letter dated 9th April, 2014 to the ITO, Ward 39(2) inter alia, pointing out that he does not have any jurisdiction over a case which was completed by the AO who was the DCIT, Circle 39(1).

An another notice dated 23rd June 2014, again under Section 148, issued this time by the ACIT, Circle 39(1), the AO of the Assessee stating that she had reasons to believe that the Assessee’s income of Rs. 53,97,053/- for AY 2007-08 had escaped assessment. The Assessee, in response to the above notice, addressed a letter dated 27th June, 2014 to the ACIT drawing attention to the above facts and pointing out that the notice was invalid and void as it was issued beyond four years (in terms of Section 147) and six years (in terms of Section 149 ).

One of the main points urged in the present petition is that the re opening of the assessment sought to be made under Section 148 of the Act is bad in law since the notice dated 14th March, 2014 for AY 2007-08 had been issued and the reasons for re-opening had been recorded by the ITO Ward 39(2), who was not the AO as far as the Petitioner was concerned for the AY in question. As far as the second impugned notice dated 23rd June, 2014 is concerned it was issued by the AO of the Petitioner but well beyond the period of limitation in terms of Section 149(1) (b) which expired on 31st March, 2014.

Contention of Revenue

The notice u/s 148 was a valid notice and was issued as per the procedure laid down. The notice u/s 148 was issued by the ITO Ward No.39(2) New Delhi on 14.3.2014 who was the legitimate Assessing Officer as far as the jurisdiction is concerned. As per Section 2(7A) of the Act, the Assessing Officer means the Assistant Commissioner of Income Tax, Deputy Commissioner of Income Tax, Additional Commissioner of Income Tax or Deputy Director of Income Tax or the Income Tax Officer who is vested with the relevant jurisdiction by virtue of direction or orders issued under sub-section (1) or sub-section (2) of Section 120 or any other provision of the Income Tax Act, and the Additional Commissioner or Additional Director or Joint Commissioner or Joint Director who is directed under clause (b) of Sub-section (4) of that section to exercise or perform all or any of the powers and functions conferred on, or assigned to, an Assessing Officer under the Act. The ITO Ward No. 39(2) New Delhi has issued the notice u/s 148 after recording the reasons for reopening. Subsequently the file was transferred to Assistant Commissioner of Income Tax Circle 39(1) New Delhi as the income was more than Rs.20 lakhs, and the Assistant Commissioner of Income Tax Ward 39(1) had again issued the notice dated 23.6.2014 under section 148.

Held by High Court

High Court held that from the counter affidavit filed by the revenue, it is a clear admission that the officer who issued the notice dated 14th March, 2014, and recorded the reasons for re-opening the assessment, i.e. the ITO Ward 39(2) was not the AO of the Assessee. That single fact in itself vitiates the reopening of the assessment. What is also evident is that, perhaps realizing the error, a subsequent notice dated 23rd June 2014 under Section 148 was issued by the AO of the Assessee. However, it was beyond the deadline of 31st March, 2014 under Section 149(1) (b).

Further, the reasons given by the Department in its counter affidavit do not in any way explain the patent illegality in invoking the powers under Section 148 for reopening the assessment of the Assessee for AY 2007-08. The mere fact that the definition of an AO in terms of Section 2(7-A) includes a DCIT and other superior officers or an ITO of some other ward who may be vested with the relevant jurisdiction by virtue of orders issued under Section 120 (1) or Section 120 (2) of the Act will not make a difference to the above legal position.

It is only the AO who has issued the original assessment order dated 13th April 2009 for AY 2007-08 under Section 143 (3) who is empowered to exercise powers under Section 147/148 to re-open the assessment. This is because he alone would be in a position to form reasons to believe that some income of that particular AY has escaped assessment. This again cannot be based on a mere change of opinion. Further, in terms of Section 151 of the Act such a move will have to have the prior approval of the CIT. Under the scheme of the Act, if a superior officer forms an opinion that the original assessment order is prejudicial to the interests of the Revenue, recourse can be had to Section 263 of the Act. In any event the question of an ITO who is not the AO who passed the original assessment order under Section 143 (3) of the Act for particular AY, exercising the powers under Sections 147/148 to re-open that assessment does not arise.

Accordingly appeals of the assessee allowed.

Download Judgment/Order

Posted Under

Category : Income Tax (20860)
Type : Judiciary (8910)
  • vswami

    The HC Ruling has brought to
    surface an additional dimension to the thus far prevailing never-ending controversies in the matter of scope for AO to invoke jurisdiction and initiate action under section 147. The
    lastly reported SC Ruling in the case of
    Zuari Estate (for short), giving a fresh lease of life and an added momentum to
    such controversies so to say, has been discussed in critique / write-ups published and shared in public domain.