1989 (4) TMI 112 - AT - Income Tax

Summary

Issues:
Validity of reassessment order under section 147(b) of the Income-tax Act, 1961 based on reasons recorded after the notice was issued.

Analysis:
In this appeal, the primary challenge is to the reassessment order dated 20-9-1982 made under section 147(b) of the Income-tax Act, 1961. The original assessment for the assessment year 1976-77 was completed on 12-9-1979. The Income-tax Officer reopened the assessment by notice dated 23-3-1981 under section 148, stating that income chargeable to tax had escaped assessment. The Commissioner of Income-tax (Appeals) upheld the reassessment order based on information from a previous Tribunal order in the assessee's case for the assessment year 1975-76. The reassessment was challenged on the grounds that the reasons for reopening the assessment were recorded a day after the notice was issued, violating the provisions of section 148(2) of the Act.

The reasons for reopening the assessment were recorded on 24-3-1981, a day after the notice was issued on 23-3-1981. The Income-tax Officer argued that the notice was posted on 25-3-1981 and served on the assessee on 26-3-1981, fulfilling the requirement of recording reasons before the notice left the precincts of the Income-tax Officer. However, the Tribunal found that the recording of reasons before the notice was served is a mandatory requirement under section 148(2). The date of posting or service of the notice does not equate to the date of issue by the Income-tax Officer, as clarified by the Supreme Court in previous decisions.

The Tribunal held that since the reasons were recorded after the notice was issued, the reassessment order was invalid and void ab initio. The requirements of section 148(2) were not satisfied before the notice was issued, rendering the assumption of jurisdiction for reopening void. The appeal of the assessee was allowed, reversing the order of the Commissioner of Income-tax (Appeals). As the appeal was decided on this preliminary ground, other grounds of appeal on the merits of the assessment were not adjudicated upon.