2007 (1) TMI 138 - HC - Income Tax

Challenged the initiation of reassessment proceedings u/s 147 - notice issued u/s 148 - escaped income notices u/s 143(3) - reasons to believe - HELD THAT:- Once an inquiry has been initiated by the Assessing Officer, it cannot but result in either the return being accepted as having been correctly computed by the concerned assessee, or in an assessment being conducted and concluded thereon by the Assessing Officer. The provisions of section 147 would have no role to play at this stage of the proceedings. Once a return of income attracts the attention and scrutiny of the Assessing Officer, it is his bounden duty to delve into every aspect thereof. The Assessing Officer is sufficiently empowered to ask for all information necessary for framing the assessment.

The only fetter on the amplitude of his discretion is that the assessment must be framed within the time limit set-down by section 153 which, in substance, is two years from the end of the assessment year in which the income was first assessable or one year from the end of the financial year. A perusal of its second sub-section makes it clear that proceedings u/s 147 are altogether-different to those under section 143. This distinction appears to have escaped the attention of the Revenue. Sub-section (2) stipulates that no order u/s 147 shall be made after the expiry of one year from the end of the financial year in which notice u/s 148 was served.

The inescapable conclusion that would have to be reached is that while assessment proceedings remain inchoate, no "fresh evidence or material" could possibly be unearthed. If any such material or evidence is available, there would be no restrictions or constraints on its being taken into consideration by the Assessing Officer for framing the then current assessment. If the assessment is not framed before the expiry of the period of limitation for a particular assessment year, it would have to be assumed that since proceedings had not been opened u/s 143(2), the return had been accepted as correct. It may be argued that thereafter recourse could be taken to section 147, provided fresh material had been received by the Assessing Officer after the expiry of limitation fixed for framing the original assessment. So far as the present case is concerned we are of the view that it is evident that, faced with severe paucity of time, the Assessing Officer had attempted to travel the path of section 147 in the vain attempt to enlarge the time available for framing the assessment. This is not permissible in law.

Suffice it to state that wherever and whenever it appears to the High Court that proceedings have been initiated or are continuing without the authority of the law, the High Court would be in dereliction of duty if it hesitated in exercising the extraordinary powers contained under article 226/227 of the Constitution of India. In the present case since the Assessing Officer was duty-bound to conclude the assessment before resorting to section 147 of the Income-tax Act, it is our bounden duty to issue a writ of certiorari so as to bring these legal proceedings to a definitive halt. The dicta in GKN Drive Shafts [2002 (11) TMI 7 - SUPREME COURT] have been not duly followed since the objections filed by the petitioners, in our view, have been disposed of contrary to law.

In this analysis the writ petitions are allowed. The initiation of proceeding u/s 147 of the Income-tax Act was irregular and illegal on the short ground that returns of income having been filed and since no order of assessment had been finalised by the Assessing Officer, there was no scope for invoking section 147. The pending proceedings are quashed.