If an income has escaped assessment and which has not been subject matter of an appeal, reference or revision, notice U/s 148 can be issued for assessment or reassessment of that income
Amendments in respect of reassessment proceedings to clarify correct legislative intention
The Income-tax Act empowers assessing officer to reopen a case under section 148 if he has reason to believe that any income has escaped assessment. Adequate safeguards have been provided so that such power of reopening is not arbitrarily used by the assessing officers. The issue of valid reopening of assessment has been a matter of dispute between the department and the taxpayers. Some of the judicial interpretations on the subject have been found to have a bearing on the legality of such reopening. Two of such judicial interpretations are given below:-
(i) One of the judicial interpretation on this issue is that if the order of the Assessing Officer has been interfered by the CIT (A) and further proceedings are pending before the ITAT, any notice under section 148 for the said assessment year is invalid. In the light of such interpretation, it may not be possible to issue notice under section 148 in any case which is pending before the ITAT/courts. Further, by the time the Tribunal or the court judgment is received, reopening of the case may be barred by limitation. Such a situation is not in conformity with legislative intent and some other judicial pronouncement. Infact, in one of the other judgment, it has been held that in a case where an assessment is made the subject of an appeal, only that part of assessing officer’s order merges with the appellate authority’s order in respect of which the appellate authority has exercised the appellate jurisdiction [CIT Vs. Sakseria Cotton Mills Ltd. 124 ITR 570 Bombay]. Hence, the legislative intent is clear that if an income has escaped assessment and which has not been subject matter of an appeal, reference or revision, notice under section 148 can be issued for assessment or reassessment of that income.
(ii) Section 151 of the Income-tax Act requires an assessing officer to seek the approval of the Joint Commissioner, in a case,-
• where no assessment under sub-section (3) of 143 or section 147 has been made for the relevant assessment year; and
• the notice is to be issued after expiry of four years from the end of the relevant assessment year.
It has been provided that notice in such a situation shall be issued by the assessing officer only when the Joint Commissioner is satisfied, on the reasons recorded by the assessing officer, that it is a fit case for the issue of such notice. Hon’ble Allahabad High Court in the case of Dr. Shashi Kant Garg Vs. CIT 285 ITR 158 has observed that notice under section 148 in such a situation is to be issued by the Joint Commissioner. The legislative intent, in such a situation, has been very clear. The Joint Commissioner is only required to be satisfied on the reasons recorded by the assessing officer. There is no further requirement for him to issue the notice himself.
Hence, in order to correctly reflect the legislative intention, the following amendments have been carried out:-
(i) Section 148 of the Income-tax Act has been amended to provide that the assessing officer may assess or reassess an income which is chargeable to tax and has escaped assessment other than those income involving matters which are the subject matter of any appeal, reference or revision.
(ii) Section 151 of the Income-tax Act has been amended to provide that the Joint
Commissioner, the Commissioner or the Chief Commissioner, as the case may be, being satisfied on the reasons recorded by the assessing officer about fitness of a case for the issue of notice under section 148, need not issue the notice himself.
Similar amendments have also been carried out in the Wealth-tax Act.
Applicability: The amendment relating to section 148 has been made applicable with effect from 1st April, 2008.
The amendment relating to section 151 has been made applicable with retrospective effect from 1st October, 1998.
Note: Above is the Analysis of Amendment made by The Finance Act, 2008.