The Supreme Court has held that the income tax department cannot initiate the reassessment proceedings during the pendency of the rectification proceedings.
The division bench of Justice M.R. Shah and Justice C.T. Ravikumar has observed that the Punjab and Haryana High Court has committed a serious error in holding that the notice under Section 154 was invalid as it was beyond the period of limitation. The proceedings under Section 154 of the Income Tax Act were not the subject matter before the High Court.
The assessment order was passed under Section 143(1) of the Income Tax Act. The assessee claimed the benefit under Section 80 HHC. However, in the subsequent assessment years, the assessee claimed the bad debt on the ground that, in the earlier year, the export had not materialized and, therefore, the proceedings under Section 154 were initiated by the Department. During the pendency of the proceedings, the Department also initiated the reassessment proceedings and reopened the assessment for the years 1996–97.
The ITAT quashed and set aside the assessment proceedings that were reopened under Section 148, holding that as the proceedings under Section 154 initiated against the assessee were pending, no reopening proceedings under Section 147 or 148 could have been issued or initiated. The ITAT quashed and set aside the assessment order for 1995-96.
The department appealed the order passed by the ITAT to the High Court. By its judgment and order, the High Court has allowed the appeal preferred by the department and remanded the matter to the ITAT, observing that, as the proceedings under Section 154 were beyond the period of limitation prescribed under Section 154(7), the notice was invalid and, therefore, the re-opening proceedings under Section 147 or 148 would be maintainable.
The court held that in the absence of any specific order of withdrawal of the proceedings under Section 154, the proceedings initiated under Section 154 of the Act can be said to have been pending.
The court quashed the judgment and order passed by the High Court.
- Case Title: S.M. Overseas (P) Ltd. Versus CIT
- Citation: Civil Appeal No. 3612-3613 Of 2012
- Date: 07.12.2022
- Counsel For Appellant: Advocates Kavita Jha, Anant Mann
- Counsel For Respondent: ASG Balbir Singh
Original copy of the judgment has been enclosed herewith
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