Case Law Details
Vimoni India Pvt. Ltd Vs DCIT (ITAT Delhi)
In the case of Vimoni India Pvt. Ltd. vs. DCIT, the Income Tax Appellate Tribunal (ITAT) Delhi ruled that reassessment proceedings initiated under Section 148 of the Income Tax Act were invalid due to the pending rectification proceedings under Section 154. The appeal challenged the order of the Commissioner of Income Tax (Appeals)-19, New Delhi, primarily on the grounds that the Assessing Officer (AO) had issued a rectification notice under Section 154 and, within a week, proceeded with reassessment under Section 148 without disposing of the initial rectification request. The assessee argued that both notices were based on identical reasons, making the reassessment legally untenable. Referring to the Supreme Court’s judgment in the case of SM Overseas Pvt. Ltd., the ITAT concluded that reassessment proceedings could not be initiated while rectification proceedings were still pending.
The ITAT reviewed the approval form submitted by the AO, which confirmed that the reasons for both notices were identical. It held that initiating reassessment without addressing the pending rectification exceeded the AO’s jurisdiction, thereby rendering the reassessment proceedings invalid. Based on this, ITAT Delhi quashed the Section 148 proceedings, upholding the principle that parallel proceedings on the same issue cannot coexist. Other grounds raised by the assessee were left open for future adjudication. Consequently, the appeal was partly allowed, reinforcing the requirement for procedural compliance in tax assessments.
FULL TEXT OF THE ORDER OF ITAT DELHI
1. This appeal is filed by the assessee against the order of ld. Commissioner of Income-tax (Appeals)-19, New Delhi (hereinafter referred to as ‘ld. CIT (A)) dated 03.11.2014 for the assessment year 2005-06 raising following grounds of appeal :-
“1. The order dated 03.11.2014 passed by the learned Commissioner of Income-tax (Appeal) is bad in law and in facts.
2. That the Ld. CIT(A) has erred in upholding the reopening of assessment despite the fact that no fresh material was available with the AO warranting issue of notice u/s. 148 of the I.T. Act.
2.1. That all the facts related to actual payment/non payment of sales tax, provident fund and ESI were available in Annexure H and Annexure I to the tax audit report filed in the form no. 3CD and hence, notice issued u/s. 148 tantamount to change of opinion which is not permissible under the law.
2.2. That the Id. CIT(A) has erred in not considering the fact that prior to issue of notice u/s. 148, the AO had issued notice u/s. 154 which was not disposed off and therefore the reassessment proceedings were bad in law and liable to be quashed.
3. Without prejudice to the above, the amount disallowed u/s. 43(8) in respect of unpaid sales tax liability, provident fund and ESI is not correct and hence, the Assessing Officer may kindly be directed to make correct disallowance if any, in accordance with law.”
2. At the time of hearing, ld. AR of the assessee made the submissions mainly on ground2 raised by the assessee which is a legal issue. Ld. AR submitted that the AO has issued notice under section 154 of the Income-tax Act, 1961 (for short ‘the Act’) which is placed on record at page 57 of the paper book and further submitted that within seven days, the AO has issued section 148 notice which is placed at page 58 of the paper book. Further he submitted that section 154 proceedings were initiated by the AO, however same was not disposed off. He submitted that the reasons recorded in the notice u/s 154 are exactly similar to the reasons recorded for reopening the assessment. He brought to our notice Annexure-1 submitted which is an approval form for initiating the proceedings u/s 148 submitted by the AO before the ACIT. As per the reasons recorded in the approval form, the reasons recorded therein are exactly similar to the reasons recorded in the notice issued u/s 154 proceedings. In this regard, he submitted that the issue under consideration is covered and brought to our notice decision of Hon’ble Supreme Court in the case of SM Overseas Pvt. Ltd. vs. CIT in Civil Appeal Nos.3612-3613 of 2012 dated 7th December, 2022, which is placed at page 215A of the paper book.
3. On the other hand, ld. DR of the Revenue relied on the orders of the authorities
4. Considered the rival submissions and material placed on record.We observed from the record submitted before us mainly the approval form submitted by the AO before the ACIT/Commissioner of Income-tax dated 27.03.2012. As per the reasons to believe recorded by the AO are as under :-
And notice issued u/s 154 of the Act for rectification of mistake u/s 154 of the Act, for the sake of clarity, the same is reproduced below :-
5. From the above, we noticed that the reasons recorded for both the proceedings are exactly similar and in the similar facts on record, Hon’ble Supreme Court in the case of S.M. Overseas Pvt. Ltd. (supra) has considered the same and adjudicated as under :-
“ Having heard learned counsel appearing on behalf of the respective parties and having gone through the impugned judgment and order passed by the High Court, we are of the opinion that the High Court has committed serious error in observing and holding that the notice under Section 154 was invalid as the same was beyond the period of limitation as prescribed/provided under Section 154(7) of the Act. It is required to be noted that the proceedings under Section 154 of the Act were not the subject-matter before the High Court. Nothing was on record that, in fact, the notice under Section 154 of the Act was withdrawn on the ground that the same was beyond the period of limitation prescribed under Section 154(7) of the Act. In the absence of any specific order of withdrawal of the proceedings under Section 154 of the Act, the proceedings initiated under Section 154 of the Act can be said to have been pending.
In that view of the matter, during the pendency of the proceedings under Section 154 of the Act, it was not permissible on the part of the Revenue to initiate the proceedings under Section 147/148 of the Act pending the proceedings under Section 154 of the Act. The High Court has erred in presuming and observing that the proceedings under Section 154 were invalid because the same were beyond the period of limitation.”
6. Respectfully following the above decision, we are of the view that in the proceedings initiated u/s 154, the AO has not acted upon pending proceedings/s 154, the AO cannot initiate the proceedings u/s 148 of the Act which is beyond his jurisdiction. Two simultaneous proceedings cannot be initiated. Respectfully following the decision of Hon’ble Supreme Court in the case of S.M. Overseas Pvt. Ltd. (supra), we are inclined to quash 148 proceedings as bad in law. Accordingly, ground no.2 is allowed.
7. All other grounds are not adjudicated at this stage and kept them open.
8. In the result, the appeal of the assessee is partly allowed.
Order pronounced in the open court on this 22nd day of January, 2025.
Author Bio
