Another Reassessment Notice under section 148 of Income Tax Act, 1961 cannot be Issued By Assessing Officer (AO) For the Same Assessment Year (AY) during Pending Proceedings.
Introduction
Under Income tax Act a complete set of assessment vehicles are provided to the Income Tax officers to assess and examine the filed returns of the assesses in order to ensure that there should be no loss of the revenue to the government. Assessment under Income tax Act includes Scrutiny assessment 143(3), income escaping assessment (147/148), best judgment assessment (144), and assessment under section 153A and 153C in case of search. However, one of the most important and highly debated is ‘Income Escaping Assessment’ under section 147/148. Section 147 and 148 of Income Tax Act is a well-designed and assembled vehicle for the Assessing officers empowering them to assess, re-assess or re-compute the income which has escaped assessment.
Conditions for Reassessment
As per Section 147 of the Income Tax Act, 1961, the Income Tax Department has the power to reassess an individual’s previously filed income tax returns. The Assessing Officer can pick income tax return for reassessment subject to some pre-defined criteria by sending a notice under section 148 for income Escaping Assessment.
For reassessment or assessment under section 147 of the Act the below conditions are required to be satisfied:
1. The Assessing Officer must have ‘reason to believe’ that income chargeable to tax has escaped assessment; and
2. He must also have a ‘reason to believe’ that such escapement occurred by reason of either;
a) Omission or failure to make a return of income under section 139 or in response to the notice issued under sub-section (1) of Section 142 or Section 148 or
b) Omission or failure to disclose fully and truly all the material facts necessary for his assessment for that purpose.
‘Reason to believe’ suggest that the belief must be that of an honest and reasonable person based upon reasonable grounds and that the Income-tax Officer may act on direct or circumstantial evidence but not on mere suspicion, gossip or rumour.
When a reassessment u/s 148 is said to be pending?
A reassessment u/s 147 of the Income Tax Act is said to be pending until any order is passed on by the Assessing Officer after disposing off the objections raised by the assessee.
Another Reassessment Notice U/S 148 When Proceedings on Previous Notice Are Pending
Section 148 of the Act does not authorize the AO to issue fresh notice when proceedings on a previous notice u/s. 148 of the Act are still pending and have not been finally disposed off. Similar view was taken by the Hon’ble Delhi High Court in Kamdhenu Enterprises Ltd. Vs. Income Tax Officer [2023] 146 taxmann.com 417 wherein it was held that second notice issued during the pendency of reassessment proceedings as well as consequential notices deserved to be quashed as it was a settled law that during the subsistence of a reassessment proceedings another reassessment notice could not be issued for same assessment year. A brief summary of the case is mentioned below:
Kamdhenu Enterprises Ltd. Vs. Income Tax Officer (Delhi High Court), Writ Petition- 8589 of 2022 Dated: 27.10.2022
In the case, two reassessment notices have been issued to the Petitioner under section 148 of the Act for the same assessment year. The first notice is dated 15th May, 2020, which has been issued by the Assessing Officer, Ward 14(2), Delhi, whereas the second notice has been issued on 07th June, 2021, by the Assessing Officer, Ward 14(1). It was contended that Assessing Officer, Ward 14(2) is not the Jurisdictional Assessing Officer (‘JAO’) of the Petitioner and also submits that two reassessment notices could not have been issued simultaneously.
Learned Counsel for the Petitioner further states that the assessment order dated 30th March, 2022, in respect of first notice issued dated 15/05/2020 has been passed without disposing of the objections raised by the Petitioner vide letter dated 22nd July, 2021. He submits that non-disposal of objections before passing the assessment order is in disregard of the law laid down by the Supreme Court in the case of GKN Driveshafts (India) Ltd v. ITO [2002] 125 Taxman 963/[2003] 259 ITR 19/179 CTR 11/[2003] 1 SCC 72.
It was held by the court that it is settled law that during the subsistence of a reassessment proceedings, another reassessment notice cannot be issued for the same assessment year. Thus, second notice issued during pendency of reassessment proceedings as well as consequential notices deserved to be quashed.
The Court is further in agreement with the submission of the learned counsel for the Petitioner that non-disposal of petitioner’s objections dated 22nd July, 2021, was contrary to the law laid down by the Supreme Court in the case of GKN Driveshafts (India) Ltd. (supra).
Further, the assessment order dated 30th March, 2022, as well as the demand and penalty notices dated 30th March, 2022 issued in pursuance to first reassessment notice dated 15th May, 2020, are quashed and the matter is remanded back for fresh decision by the Assessing Officer with a direction to first decide the objections filed by the Petitioner in accordance with the judgment of the Supreme Court in GKN Driveshafts (India) Ltd. (supra) within eight weeks and thereafter carry out the assessment in accordance with law.
Conclusion
It has been observed that many times Assessing officers initiate reassessment proceedings in haste, ignoring the CBDT guidelines and various judicial precedents. There is no doubt that the provisions of section 147/148 are inclined towards the revenue authorities as the ultimate mission of the Income Tax Act is to avoid the revenue losses to the exchequer but at the same time the contention of the law makers is not to harass taxpayers by issuing second notice during pendency of previous proceeding in a mechanical and casual manner. Also, it has been observed that on a routine basis, a large number of writ petitions are filed challenging the issuance of second notice of reassessments by the Revenue under sections 147 and 148 of the Act and despite numerous judgments on this issue, the same errors are repeated by the concerned Revenue authorities. Thus, the assessing officer should act in a reasonable manner to sub serve the purpose of guidelines by CBDT and various courts.
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