2007 (11) TMI 327 - AT - Income Tax

Assessment order quashed due to invalid notice under Income Tax Act

The Tribunal ruled in favor of the assessee, quashing the assessment order due to the invalidity of the notice issued under section 148 of the Income Tax ... Reassessment Issues:Validity of reassessment proceedings under section 148 of the Income Tax Act for the assessment year 1999-2000.Analysis:The appeal challenged the validity of the reassessment proceedings initiated by a notice under section 148 of the Income Tax Act. The Authorized Representative argued that the notice was issued after the expiry of four years from the end of the relevant assessment year, which was in violation of section 151(2) of the Act. The Representative relied on a decision by the Allahabad High Court to support the claim that the notice was not valid. On the other hand, the Departmental Representative contended that the notice was valid as it was issued after necessary satisfaction of the Additional CIT.The Tribunal carefully examined the notice issued under section 148 of the Act and considered the relevant provisions of section 151(2) along with the Allahabad High Court decision. It noted that the original return filed by the assessee was processed under section 143(1) of the Act and the reassessment proceedings were initiated after the expiration of four years from the assessment year. Section 151 of the Act specifies the competent authority for sanction to issue such a notice. Since there was no prior assessment under section 143(3) or section 147, section 151(2) was deemed relevant in this case.Referring to the Allahabad High Court decision, the Tribunal emphasized that the notice under section 148 could only be issued by an officer of the rank of Joint CIT after being satisfied on the reasons recorded by the Assessing Officer. It highlighted the importance of adhering to the prescribed manner when exercising powers under the Act, as established by the Supreme Court in previous cases. Noting that the notice was issued by the ITO and not by the Joint CIT or Additional CIT as required, the Tribunal concluded that the notice was not valid. Consequently, the assessment order based on an invalid notice was deemed invalid and liable to be quashed.The Tribunal ruled in favor of the assessee, allowing the appeal and quashing the assessment order due to the invalidity of the notice. Since the assessment order was nullified, further adjudication of other grounds was deemed unnecessary, resulting in the allowance of the assessee's appeal.