Income Tax Dept Cannot Initiate Reassessment Proceedings When Proceedings U/s. 154 Of IT Act Are Pending- SC
The Supreme Court has observed that the income tax department cannot initiate proceedings under Sections 147/148 of the Income Tax Act when the proceedings under Section 154 of the Act are pending.
The Bench of Justice MR Shah and Justice CT Ravikumar held, "…during the pendency of the proceedings under Section 154 of the Act, it was not permissible on the part of the Revenue to initiate the proceedings under Section 147/148 of the Act pending the proceedings under Section 154 of the Act. The High Court has erred in presuming and observing that the proceedings under Section 154 were invalid because the same were beyond the period of limitation."
In this case, the Assessment order came to be passed under Section 143(1) of the Income Tax Act. The assessee claimed benefit under Section 80HHC of the Act. However, in the subsequent assessment year, the assessee claimed the bad debt on the ground that in the earlier year, the export was not materialized and therefore, the proceedings under Section 154 of the Act were initiated by the Department. During the pendency of the said proceedings, the Department also initiated the proceedings under Section 147-148 of the Act and reopened the assessment.
The Assessing Officer passed the Assessment Order. The same was carried out before the ITAT. The ITAT quashed and set aside the assessment proceedings which were re-opened under Section 148 of the Act by holding that as the proceedings under Section 154 initiated against the assessee were pending, no re-opening proceedings under Section 147/148 of the Act could have been issued/initiated.
The order passed by the ITAT was the subject matter of Appeal before the High Court. The High Court allowed the Appeal preferred by the Revenue and remanded the matter to the ITAT by observing that as the proceedings under Section 154 were beyond the period of limitation prescribed under Section 154(7) of the Act, the said notice was invalid and therefore, the re-opening proceedings under Section 147/148 would be maintainable.
The review application preferred by the Assessee was dismissed.
Aggrieved, an appeal was preferred before the Apex Court.
AOR Kavita Jha appeared for the Appellant while ASG Balbir Singh appeared for the Respondent before the Court.
The Apex Court noted that High Court committed a very serious error in holding that the notice under Section 154 was invalid as the same was beyond the period of limitation as prescribed/provided under Section 154(7) of the Act and thus observed –
"It is required to be noted that the proceedings under Section 154 of the Act were not the subject-matter before the High Court. Nothing was on record that in fact, the notice under Section 154 of the Act was withdrawn on the ground that the same was beyond the period of limitation prescribed under Section 154(7) of the Act. In the absence of any specific order of withdrawal of the proceedings under Section 154 of the Act, the proceedings initiated under Section 154 of the Act can be said to have been pending."
The Court held during the pendency of the proceedings under Section 154 of the Act, it was not permissible on the part of the Revenue to initiate the proceedings under Section 147/148 of the Act pending the proceedings under Section 154 of the Act and thus added –
"The High Court has erred in presuming and observing that the proceedings under Section 154 were invalid because the same were beyond the period of limitation."
Accordingly, the Court set aside the impugned order of the High Court and allowed the appeal, and restored the order of ITAT.
Cause Title – M/s. SM Overseas Pvt. Ltd. v. Commissioner of Income Tax
