2018 (5) TMI 1689 - AT - Income Tax

Tribunal quashes reassessment order due to limitation, emphasizing time constraints. Assessee's appeal allowed.

M/s. Goodwill Timber Supply Versus Income Tax Officer, Ward 1 (1), Kota

The Tribunal concluded that the reassessment proceedings were barred by limitation and quashed the reassessment order. The Tribunal emphasized that the ... Validity of reassessment proceedings u/s 147 - validity of notice u/s 148 - assessment barred by limitation - assessment in wrong hands - Held that:- The reopening is not permissible in the case of the assessee when the limitation was not available even on the date when the assessment order - the limitation is saved if the same was available on the date when the assessment order was passed in the wrong hands and, therefore, the subsequent time period consumed in the proceedings before the first appellate authority and thereafter will not affect the power of the AO for reopening of the assessment. - Decided in favor of assessee. Issues Involved:1. Validity of the assessment order dated 30.03.2016.2. Validity of reassessment proceedings initiated under sections 147/148 of the Income Tax Act, 1961.3. Invocation of Section 150(1) of the Income Tax Act, 1961.4. Consideration of the actual stamp duty value of the land.5. Maintenance of interest liability under sections 234B, 234C, and 234D of the Income Tax Act, 1961.Detailed Analysis:1. Validity of the Assessment Order:The assessee contended that the assessment order dated 30.03.2016 was bad in law, without jurisdiction, and illegal. This issue was tied to the validity of the reassessment proceedings and the invocation of Section 150(1).2. Validity of Reassessment Proceedings:The assessee argued that the reassessment proceedings initiated under sections 147/148 were barred by limitation. The AO issued a notice under section 148 on 3rd March 2015, based on an order by the CIT (A) dated 20th October 2014, which held that capital gains would arise in the hands of the firm and not in the hands of the partner. The assessee contended that the notice was beyond the limitation period provided under section 149 and not saved by section 150.3. Invocation of Section 150(1):The AO invoked Section 150(1) to justify the reassessment, arguing that the limitation under section 149 was relaxed due to the appellate order. However, the Tribunal noted that Section 150(1) is subject to the restrictions of Section 150(2), which limits the time for reassessment to the period available when the original assessment order was passed. The Tribunal referenced case law, including Ramesh Chand Soni HUF vs. ITO, to support the view that the limitation period for reassessment is not unlimited and must be within the period available when the original assessment was made.4. Consideration of Stamp Duty Value:The assessee also challenged the CIT (A)'s adoption of a higher stamp duty value for the land. However, since the Tribunal quashed the reassessment proceedings on the ground of being barred by limitation, it did not delve into the merits of this issue.5. Maintenance of Interest Liability:The assessee contested the interest liability under sections 234B, 234C, and 234D. Similar to the stamp duty value issue, the Tribunal did not address this due to the quashing of the reassessment.Conclusion:The Tribunal concluded that the reassessment proceedings were barred by limitation and quashed the reassessment order. The Tribunal emphasized that the AO's power to reopen an assessment is limited by the time constraints set forth in sections 149 and 150(2). Consequently, the appeal of the assessee was allowed, and the reassessment was deemed void ab initio. The Tribunal did not address the other grounds raised by the assessee due to the quashing of the reassessment proceedings.