2021 (7) TMI 1036 - HC - Income Tax

Court rules in favor of appellant, allowing all contentions in reassessment proceedings.

M/s. The Karnataka State Co-Operative Apex Bank Limited Versus The Deputy Commissioner Of Income Tax Circle 3 (1), Bangalore

The court ruled in favor of the appellant, holding that the Supreme Court decision in CIT vs. Sun Engineering Pvt. Ltd. did not apply as there was no ... Reopening of assessment u/s 147 - no original assessment order in the case of the assessee passed - HELD THAT:- Admittedly, there is no original assessment order in the case of the assessee and it was only an intimation under Section 143(1)of the Act, which cannot be treated to be an order in view of decision of the Supreme Court in Rajesh Jhaveri [2007 (5) TMI 197 - SUPREME COURT]. Therefore, the question of re-assessment of the income of the assessee by the Assessing Officer does not arise. In the proceeding under Section 148 of the Act, it was the first assessment and the same could have been done considering all the claims of the assessee. Therefore, the decision rendered by the Supreme Court in Sun Engineering Works (P.) Ltd [1992 (9) TMI 1 - SUPREME COURT]had no application to the fact situation of the case. Even assuming for the sake of argument that if an intimation under Section 143(1) of the Act is considered to be an order of assessment, in the subsequent re-assessment proceeding, the original assessment proceeding get effaced and the AO was required to consider the proceeding de novo and to consider the claim of the assessee. Issues Involved:1. Applicability of the Supreme Court decision in CIT vs. Sun Engineering Pvt. Ltd. to the case.2. Right of the appellant to agitate all contentions in law in response to a notice under Section 148 of the Income Tax Act.3. Entitlement of the appellant to claim additional loss incurred on the sale of government securities in reassessment proceedings under Section 147 of the Act.4. Entitlement of the appellant to the additional claim of actual loss incurred on account of the sale of government securities.Issue-wise Detailed Analysis:1. Applicability of the Supreme Court decision in CIT vs. Sun Engineering Pvt. Ltd.:The Tribunal applied the Supreme Court's decision in CIT vs. Sun Engineering Pvt. Ltd., holding that concluded issues in the original proceeding cannot be re-agitated in reassessment proceedings. The appellant argued that this decision was not applicable as there was no original assessment proceeding in their case. The court noted that the Supreme Court's decision in Sun Engineering Works pertained to assessment years before the amendment to Section 143(1) of the Act, which came into effect on 01.04.1989. The court also referenced the Supreme Court decision in V. Jagan Mohan Rao, which held that the original assessment gets effaced upon the commencement of reassessment proceedings. The court concluded that the decision in Sun Engineering Works does not apply to the appellant's case as there was no original assessment.2. Right of the appellant to agitate all contentions in law in response to a notice under Section 148:The appellant contended that the notice under Section 148 was issued to 'assess' the income, and thus all contentions remained open for the appellant to agitate by filing a return in response to the notice. The court agreed, noting that in the absence of an original assessment, the reassessment proceedings should be considered de novo, allowing the appellant to raise all relevant contentions. The court referenced the Supreme Court's decision in Rajesh Jhaveri, which clarified that an intimation under Section 143(1) is not an order of assessment.3. Entitlement of the appellant to claim additional loss incurred on the sale of government securities:The Tribunal had denied the appellant's claim for additional loss on the grounds that it was not made in the original assessment proceeding. The court found that since there was no original assessment, the reassessment should consider all claims afresh. The court referenced the decision in V. Jagan Mohan Rao, which stated that reassessment proceedings should be conducted afresh, considering all claims.4. Entitlement of the appellant to the additional claim of actual loss incurred on account of the sale of government securities:The court did not express an opinion on this issue, as the authorities under the Act had not considered the claim of the appellant. The court quashed the orders dated 29.02.2016, 31.07.2014, and 30.03.2013, and remitted the matter to the Assessing Officer to adjudicate the claims of the appellant afresh.Conclusion:The court answered the first and second substantial questions of law in the negative and in favor of the appellant. It quashed the orders of the lower authorities and remitted the matter to the Assessing Officer for fresh adjudication of the appellant's claims. The appeal was disposed of accordingly.