1986 (6) TMI 1 - HC - Income Tax

High Court invalidates reassessments for 1962-64 due to procedural errors; reaffirms limits on multiple notices.

The High Court of Madras ruled in favor of the assessee, declaring the reassessments for the years 1962-63 and 1963-64 as invalid due to procedural ... Reassessment Issues Involved:The judgment involves the validity of reassessments made for the assessment years 1962-63 and 1963-64, and whether they were beyond the period of limitation prescribed under section 153(2) of the Income-tax Act.Validity of Reassessments for 1962-63 and 1963-64:The assessee, a registered firm in the cloth business, initially filed returns for the years in question, which were accepted by the Income-tax Officer. Subsequently, revised returns were filed, leading to a notice under section 148 seeking to reopen the assessments. Despite the assessee filing returns in response to the notices, no action was taken within the prescribed time limit. The jurisdiction of the Income-tax Officer changed, and a second notice was issued in 1968. The reassessment orders were made in 1973 by a different officer, which the Appellate Assistant Commissioner deemed as without jurisdiction. However, the Tribunal disagreed, citing a previous case and the absence of a limit on the number of notices under section 34. The High Court, referencing prior decisions, including one affirmed by the Supreme Court, held that once reassessment proceedings are initiated, the original assessment ceases to be final, and no reassessment is possible without a fresh order. It was established that no further notice can be issued under section 148 until the return made in response to the initial notice is disposed of. The first question was answered in favor of the assessee, rendering the second question moot.Conclusion:The High Court of Madras ruled in favor of the assessee, declaring the reassessments for the years 1962-63 and 1963-64 as invalid due to procedural irregularities. The judgment emphasized the legal principle that once reassessment proceedings are initiated, the original assessment loses finality, necessitating a fresh order before any further reassessment can take place. The decision aligned with previous rulings by the Supreme Court and other High Courts, establishing a clear precedent regarding the limitations on issuing multiple notices under section 148 of the Income-tax Act.