Court : Supreme Court
Brief : : Reassessment — An assessee cannot change the legality of the notice issued u/s.148 of the Act reopening the assessment on the grounds of change of opinion in a case where no assessment is made u/s.143(3) of the Act, but only an intimation is issued u/s.143(1)(a) of the Act.
Citation : ACIT v. Rajesh Jhaveri Stock Brokers P. Ltd.
The respondent, a private limited company, filed its return of income for the A.Y. 2001-02 on October 30, 2001, declaring total loss of Rs.2,70,85,105. The said return was processed u/s.143(1) of the Act, accepting the loss returned by the respondent. Notice u/s.148 of the Act was issued on the ground that claim of bad debts as expenditure was not acceptable. On May 12, 2004, a return of income declaring the loss at the same figure, as declared in the original return, was filed by the respondent under protest. A copy of the reasons recorded was furnished by the appellant on the respondent’s request some time in November, 2004. The respondent raised various objections, both on jurisdiction and the merits of the subject matter recorded in the reasons. On February 4, 2005, the appellant disposed of the objections, holding that the initiation of reassessment proceedings was valid and he had jurisdiction to undertake such an exercise. It was in the aforesaid backdrop of facts that the impugned notice u/s.148 of the Act, dated May 12, 2004, was challenged by the respondent before the High Court. The High Court allowed the writ petition following its decision in Adani Exports v. Deputy CIT, (1999) 240 ITR 224 (Guj.). On an appeal, the Supreme Court after considering the history of the provisions of S. 143(1) held that the intimation u/s.143(1)(a) cannot be treated to be an order of assessment. There being no assessment u/s.143(1)(a), the question of change of opinion for the purposes of S. 147, as contended, did not arise. The Supreme Court further held that the scope and effect of S. 147, as substituted with effect from April 1, 1989, as also S. 148 to S. 152, were substantially different from the provisions as they stood prior to such substitution. Under the old provisions of S. 147, separate clauses (a) and (b) laid down the circumstances under which income escaping assessment for the past assessment years could be assessed or reassessed. To confer jurisdiction u/s.147(a), two conditions were required to be satisfied : firstly, the Assessing Officer must have reason to believe that income, profit or gains chargeable to income tax have escaped assessment, and secondly, he must also have reason to believe that such escapement has occurred by reason of either omission or failure on the part of the assessee to disclose fully or truly all material facts necessary for his assessment of that year. Both these conditions were conditions precedent to be satisfied before the Assessing Officer could have jurisdiction to issue notice u/s.148 read with S. 147(a). But under the substituted S. 147, existence of only the first condition suffices. In other words, if the Assessing Officer for whatever reason has reason to believe that income has escaped assessment, it confers jurisdiction to reopen the assessment. It is, however, to be noted that both the conditions must be fulfilled if the case falls within the ambit of the proviso to S. 147. According to the Supreme Court, therefore the case at hand was covered by the main provision and not the proviso, and the High Court had wrongly applied Adani’s case (1999) 240 ITR 224 (Guj.), which had no application to the case on the facts in view of the conceptual difference between S. 143(1) and S. 143(3) of the Act.