Urmish M. Udani Vs ACIT (ITAT Mumbai)
When time to issue 143(2) was still available, AO could not invoke 147 reopening held illegal entire assessment cancelled- ITAT Mumbai
Assessee, an individual & Managing Director of U.S. Roofs Ltd., filed his return of income belatedly on 14.06.2010 declaring ₹62.96 lakh. He subsequently filed a revised return on 16.06.2010 declaring ₹80.96 lakh. Since the return filed u/s 139(4) was a valid return, AO had time till 30.09.2011 to issue a notice u/s 143(2) to scrutinize the return.
However, instead of issuing a notice u/s 143(2) during the available period, AO issued a notice u/s 148 on 24.11.2010, alleging escapement of income-even though the regular assessment window under Section 143(2) was still open.
Assessee challenged this as jurisdictional illegality, arguing that unless the time to issue notice u/s 143(2) has expired, AO cannot assume escapement of income & cannot bypass the regular assessment route by using Section 147/148.
Tribunal agreed with the assessee. It held that:
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- A valid return was already on record.
- AO still had the power & time to scrutinize it u/s 143(2).
- Therefore, the return was pending disposal, not concluded.
- Unless the original assessment proceeding is concluded or time to issue 143(2) expires, AO cannot form belief of escapement u/s 147.
Tribunal relied on binding judicial precedents:
- Madras High Court in CIT v. K.M. Pachayappan (304 ITR 264) – Reopening is invalid when return is pending & 143(2) time is still available.
- Supreme Court in Trustees of HEH Nizam’s Family Trust (242 ITR 381) – AO cannot reopen without first disposing the pending return.
- Bombay High Court in Smt. Suman (84 taxmann.com 267) – 147 cannot be used to short-circuit the regular 143(2)/143(3) route while time is still available.
- Madras High Court in Qatalys Software Technologies (308 ITR 249) – Same principle reiterated.
Tribunal emphasized that Section 147 is not a parallel power to abort or bypass Section 143(2). It is an extraordinary power to reopen only after the window for regular assessment has closed. Accordingly, Tribunal set aside the notice u/s 148 and quashed the entire reassessment order as void ab initio. Since the reopening itself was invalid, Tribunal did not even go into the merits of the additions (such as capital gains on sale of agricultural land, director’s remuneration, loose papers, Section 68, non-compete receipt, capital account, etc.).
