2012 (10) TMI 541 - AT - Income Tax

Tribunal voids reassessment order, citing improper initiation under Income Tax Act.

The Tribunal upheld the annulment of the reassessment order initiated under Section 147 of the Income Tax Act, emphasizing that proceedings under Section ... Reassessment proceedings u/s 147 - block assessment - cash has been requisitioned under section 132A dated 30.06.1998 (block period 01.04.1988 to 04.06.1998) - Held that:- On a plain reading of provisions of Chapter XIV-B of the Act, it becomes apparent that once a provision has been made for assessment under Chapter XIV-B of the Act, no other provision of the Act shall be applicable, but if there is no provision made in Chapter XIV-B of the Act, all other provisions of the Act shall apply to assessment made under Chapter XIV-B of the Act - the stage of impugned assessment is not an assessment made under section 147/148 after completion of block assessment but it is a case of original block assessment itself. As decided in CIT v. Peer Chand Ratan Lal Baid HUF [2009 (5) TMI 474 - GAUHATI HIGH COURT ] notice under section 148 is required to be issued for the purpose of proceedings under the Chapter XIV of the Act whereas in the case under consideration, the A.O. initiated proceedings under section 147 by issuing notice under section 148 for the A.Y. 1999-2000 which is a part of block period assessment and there was no original block period assessment. Under the facts and circumstances, the action taken by the A.O. is not in accordance with law. The material based on which the A.O. reopened the regular assessment is the material pertained to requisition under section 132A and such material is subject to only block assessment. As decided in Ramballabh Gupta Versus Assistant Commissioner of Income-Tax And Others.(2005 (8) TMI 99 - MADHYA PRADESH HIGH COURT ) wherein it has been held that the A.O. does not have jurisdiction to issue notice under section 148 in respect of those 6 Assessment Years which falls within the exclusive jurisdiction of section 153A. Thus once the A.O. proceed to make block assessment under section 158BC based on material gathered during the search under section 132, he cannot proceed to make reassessment under section 147 on the basis of same material - in favour of assessee. Issues Involved:1. Validity of proceedings initiated under Section 147 of the Income Tax Act.2. Jurisdiction and applicability of Chapter XIV-B versus Section 147 for assessment.3. Validity of reassessment proceedings initiated by the Assessing Officer (AO).4. Directions for initiation of penalty proceedings under Section 271D of the Income Tax Act.Detailed Analysis:1. Validity of proceedings initiated under Section 147 of the Income Tax Act:The Revenue contended that the Commissioner of Income Tax (Appeals) [CIT(A)] erred in holding the initiation of proceedings under Section 147 as bad in law and void ab initio. The CIT(A) had annulled the reassessment framed by the AO, citing that the proceedings under Section 147 read with Section 148 were not validly initiated. The Tribunal upheld the CIT(A)'s decision, emphasizing that the AO cannot initiate reassessment proceedings under Section 147 when the cash was requisitioned under Section 132A, which falls under the purview of Chapter XIV-B.2. Jurisdiction and applicability of Chapter XIV-B versus Section 147 for assessment:The Tribunal discussed the special procedure for assessment of search cases under Chapter XIV-B. It highlighted that once a provision has been made for assessment under Chapter XIV-B, no other provision of the Act shall be applicable. The Tribunal referred to the judgment in Cargo Clearing Agency (Gujarat) v. JCIT, which stated that the normal procedure laid down in Chapter XIV has been overridden by Chapter XIV-B for search cases. The Tribunal concluded that the AO's action of initiating proceedings under Section 147 was not in accordance with law, as the material pertained to requisition under Section 132A and should be subject to block assessment only.3. Validity of reassessment proceedings initiated by the Assessing Officer (AO):The Tribunal examined whether the AO could initiate reopening proceedings under Section 147 by issuing notice under Section 148 for the Assessment Year 1999-2000, where cash had been requisitioned under Section 132A. It concluded that the reassessment proceedings were void ab initio, as the AO should have proceeded under Chapter XIV-B. The Tribunal cited multiple judgments, including those from the Gujarat High Court and Kerala High Court, supporting the view that once block assessment proceedings are initiated, reassessment under Section 147 based on the same material is not permissible.4. Directions for initiation of penalty proceedings under Section 271D of the Income Tax Act:The CIT(A) had directed the AO to explore the possibility of initiating penalty proceedings under Section 271D for prima facie violation of Section 269SS. The Tribunal found this direction unwarranted and deleted it, noting that once the assessment was annulled, such directions were not required.Conclusion:The Tribunal confirmed the CIT(A)'s decision to annul the assessment order framed by the AO, holding that the initiation of reassessment proceedings under Section 147 was void ab initio. It also deleted the CIT(A)'s direction for initiating penalty proceedings under Section 271D. The appeal by the Revenue was dismissed, and the Cross Objection by the assessee was partly allowed.