Can the AO reassess issues other than the issues in respect of which proceedings were initiated u/s 147 when the original "reason to believe" on basis of which the notice was issued ceased to exist?
No. (As per the judgement on Ranbaxy Labs/Jet Airways)
However, Explanation 3 to Sec 147 states that
-for the purpose of assessment/reassessment under this section
-the AO may assess or reassess the income in respect of any issue, which has escaped assessment, and such issue comes to his notice subsequently in the course of the proceedings under this section, notwithstanding that the reasons for such issue have not been included in the reasons recorded u/s 148.
The provision and the Case laws seem to be in disagreement with each other. Can anybody please explain?
The provision states that AO can assess or reassess any issue which has escaped income whether such issue has been included in the notice u/s 148 or not.
However, where the original reasons to believe cease to exist then the notice u/s 148 is not valid.
Therefore in the case of Ranbaxy/Jet Airways, the court held that new notice u/s 148 needs to be issued in case the original reasons to believe cease to exist.
There is no contradiction between the case law and the provision.
CAclubindia
