Relevant Provisions of Income Tax Act, 1961

Section 142

Section 143

Section 147

Section 148 

Facts of the Case:

The assessee did not furnish his return of income voluntarily. The Assessing Officer issued notice under section 142(1) of the Act on 23.2.2000 calling upon him to furnish the return of the income. The assessee did not file any return up to 31.3.2001, i.e., the date up to which the assessee could file the said return. The assessee filed his return of income on 18.10.2001 declaring income of Rs.5,56,580/-.  Since the said return filed by the assessee was treated as invalid return, the Assessing Officer issued notice under section 148 of the Act on 21.11.2002 after recording reasons. Assessment under section 143(3)/147 of the Act was completed on 26.3.2004 at an income of Rs.26,04,210/-.

Findings and Decision of Honorable HC

ITAT held that Assessing Officer initiated proceedings under Section 142 vide notice 23.2.2000 and no assessment order was framed at all to conclude the proceedings initiated under section 142(1) of the Act and therefore, notice under Section 148 of the Act was invalid.

The question of initiating action under Section 147 read with Section 148 of the Act could not arise as the machinery of re-assessment was already set in motion by issuance of earlier notice and if re-assessment is not completed for whatever reasons, it could not be revived by issuing fresh notice as the time for completing re-assessment in pursuance of earlier notice had already expired. 

(For full text of judgment - visit  2008 -TMI - 3771 - High Court Punjab and Haryana)

Reassessment notice validity: a fresh notice cannot revive lapsed reassessment machinery once initial proceedings expired. A later re-assessment notice is invalid if the assessing officer previously initiated assessment proceedings by issuing an initial notice calling for a return and the reassessment machinery was thereby set in motion but remained uncompleted and its statutory period expired; a fresh notice cannot revive those lapsed proceedings.