2019 (1) TMI 1534 - HC - Income Tax

High Court Upholds Tribunal Decision on Validity of Assessment under Section 148

The High Court upheld the Tribunal's decision, ruling that the assessment under Section 148 was valid after the Settlement Commission's order. The court ... Order passed by the Settlement Commission - Enhancement of the income of the partners - partners did not file any return pursuant to the order passed by the Settlement Commission - reopening of assessment - ground so raised was that the Assessing Officer ought to have proceeded under Section 155(1)(C) of the Act and not under Section 148 - Held that:- The Tribunal found that the subject matter in Dalmia Manganese Corporation [1997 (3) TMI 13 - SUPREME COURT] was relating to the withdrawal of development rebate allowed by the Assessing Officer in the regular assessment order. Subsequently, proceedings were taken under Section 154 of the Act for rectification of the assessment. The Hon'ble Supreme Court found that when there is a specific provision in so far as re-opening of assessment, there could be no resort made to a general provision for rectification. The Tribunal found that the dictum does not apply in the present case, when there was no regular assessment made. Resort could only be had to Section 148, since Section 155 applies only in the case of a completed assessment of a partner and the share of the income of the firm as found in an order passed under Section 245D(4)[clause (c) of Section 155(1)] is not included in the partners completed assessment. We do not think any interference can be made to the order of the Tribunal, since the question has been answered perfectly in tune with the law. We hence answer the questions of law raised here against the assessee and in favour of the Revenue Issues:1. Validity of assessment under Section 148 of the Income Tax Act, 1961 after order by Settlement Commission.2. Application of Section 155(1)(C) versus Section 148 for assessment.Issue 1: Validity of assessment under Section 148 after Settlement Commission order:The case involved two partners of a firm whose income was enhanced by the Settlement Commission under Section 245D of the Income Tax Act, 1961. The partners did not file any return following the Commission's order, leading to the Assessing Officer issuing notices under Section 148 with sanction under Section 151. The assessment was completed under Section 144 after providing the assessee with an opportunity, which was not availed of. The partners argued that the assessment was barred by limitation due to two notices issued under Section 148. However, the First Appellate Authority ruled in favor of the partners, citing a Supreme Court decision that the Assessing Officer should have proceeded under Section 155(1)(C) instead of Section 148.Issue 2: Application of Section 155(1)(C) versus Section 148 for assessment:The Tribunal analyzed the applicability of Section 155(1)(C) in the context of the case. It noted that the Supreme Court's decision in Commissioner of Income Tax v. Dalmia Manganese Corporation was specific to the withdrawal of development rebate in a regular assessment order, which was rectified under Section 154. The Tribunal concluded that in the present case, where no regular assessment was made, Section 148 was the appropriate recourse as Section 155 applies only to completed assessments of partners, not including the income share from a Settlement Commission order under Section 245D(4). The High Court upheld the Tribunal's decision, stating that the questions of law were answered correctly in accordance with the law, ruling against the assessee and in favor of the Revenue. However, the matter of limitation was left open for the First Appellate Authority to consider.