Gujarat H.C : scrutiny and assessment came to be framed under section 143(3)

High Court Of Gujarat

Connection Vs. ITO

Assessment Year 1992-93

Section : 147

Ms. Harsha Devani And H.B. Antani, JJ.

Sc Appl. No. 7110 Of 2001

March  18, 2011

JUDGMENT
 
Ms. Harsha Devani, J. – By this petition under article 226 of the Constitution of India, the petitioner has challenged notice dated May 28, 2001, issued by the respondent under section 148 of the Income-tax Act, 1961, (“the Act) reopening the assessment for the assessment year 1992-93.

2. The petitioner, a registered partnership firm, filed its return of income on October 23, 1992, for the assessment year 1992-93, declaring total income of Rs. 1,44,943. The case was taken up for scrutiny and assessment came to be framed under section 143(3) of the Act at an income of Rs.1,57,650. Thereafter, by the impugned notice, the assessment for the assessment year 1992-93 has been reopened. Being aggrieved, the petitioner has filed the present petition challenging the notice under section 148 of the Act.

3. In response to the petition, the respondent has filed an affidavit-in-reply annexing therewith a copy of the reasons recorded for reopening the assessment. The assessee has filed an affidavit-in-rejoinder to the affidavit-in-reply filed by the respondent.

4. Ms. Bhoomi Thakore, learned advocate appearing on behalf of the petitioner, invited attention to the reasons recorded to submit that in respect of the same issues on which assessment is sought to be reopened, block assessment had been framed by the Assessing Officer and the very same items had been considered by the Assessing Officer in the block assessment proceedings. That against the order of the Assessing Officer, the petitioner had preferred an appeal before the Tribunal and that the Tribunal had set aside the addition made in respect of bogus purchases. It was submitted that in the circumstances once the Tribunal has already deleted the said addition, it is not permissible for the Assessing Officer to reopen the assessment in respect of the same subject-matter.

5. On the other hand, Mrs. Mauna Bhatt, learned senior standing counsel appearing on behalf of the respondent, placed reliance upon the affidavit-in-reply filed by the respondent and more particularly to the observations made by the Tribunal in the appeal against the block assessment order. It was submitted that it is pursuant to the observations made by the Tribunal that the Assessing Officer has reopened the assessment.

6. In rejoinder, Ms. Bhoomi Thakore invited attention to the affidavit-in-rejoinder filed by the petitioner to submit that what was observed by the Tribunal was only by way of a passing remark. It was submitted that the addition on account of bogus purchases had been deleted by the Tribunal on the merits and not on the ground that the same can be added in regular assessment or reassessment proceedings.

7. In the present case, the earlier assessment had been framed under section 143(3) of the Act for the assessment year 1992-93 and notice under section 148 of the Act has been issued on May 28, 2001, in relation to the said assessment year, which is clearly after the expiry of a period of four years from the end of the relevant assessment year. In the circumstances, the proviso to section 147 of the Act would clearly be attracted. The Assessing Officer can, therefore, assume valid jurisdiction only if he has reason to believe that income chargeable to tax has escaped assessment ; and that such escapement is by reason of failure on the part of the petitioner to (i)file a return under section 139 or in response to a notice issued under sub-section (1) of section 142 or under section 148 of the Act, and (ii) disclose fully and truly all material facts necessary for his assessment for that assessment year.

8. In the present case, from the reasons recorded, it is apparent that the reopening is based upon the material gathered during the course of the search operation. The reasons recorded for reopening the assessment indicate that the assessment is sought to be reopened on the ground that the total purchases of Rs. 93,56,495 debited to the trading account are bogus and non-existent, which is established by the document found at the time of search and the statements recorded at the time of search. In this regard, it may be pertinent to refer to the order dated February 6, 2001, made by the Tribunal in the appeal preferred by the petitioner against the order made in the block assessment proceedings. A perusal of the said order of the Tribunal indicates that an addition of Rs. 5,23,468 had been made in the block assessment proceedings including for the year under consideration in respect of bogus purchases. The Tribunal, after appreciating the evidence on record, has set aside the addition on the merits after recording a finding to the effect that the order of the Assessing Officer on the point of bogus purchases was fallacious. In the circumstances, when in respect of the same purchases the Tribunal has already set aside the addition, it is now not permissible for the Assessing Officer to reopen the assessment in respect of the very same items. Reliance placed by the respondent upon the observation of the Tribunal that if the Assessing Officer did not believe the purchases to be genuine, addition could have been made only in the course of regular assessment proceedings and not in the block assessment proceedings is also misconceived, inasmuch as in the present case, the Tribunal has on the merits found that the addition made on account of bogus purchases was not justified. Thus, in so far as the issue in respect of which the assessment is sought to be reopened is concerned the same has become final by the aforesaid order of the Tribunal. The Assessing Officer, under the guise of reopening of assessment, therefore, cannot sit in appeal over the aforesaid order passed by the Tribunal.

9. In the light of the aforesaid discussion, it is apparent that the very basis for reopening the assessment is misconceived inasmuch as the same is based upon the very ground, which has been set aside by the Tribunal on the merits in block assessment proceedings. In the circumstances, the very assumption of jurisdiction under section 147 of the Act by the Assessing Officer is invalid and as such the impugned notice cannot be sustained.

10. For the foregoing reasons, the petition succeeds and accordingly it is allowed. The impugned notice dated May 28, 2001, issued by the respondent under section 148 of the Act (annexure A to the petition) is hereby quashed and set aside. Rule is made absolute accordingly with no order as to costs.

[Citation : 335 ITR 465]

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