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2025 (5) TMI 792 - HC - Income TaxReopening of assessment u/s 147 - reasons to believe - as argued AO has sought to reopen the assessment in question on the very same ground HELD THAT - No order was passed u/s 147 of the Act as proposed in the notice dated 27.03.2021. The question would be whether the notice u/s 148A(b) dated 25.03.2023 which was challenged by the assessee after the order was passed u/s 148A(d) dated 19.04.2023 was maintainable on the aforementioned grounds raised by appellant. To get an answer we have perused the notice issued u/s 148A(b) and we find that the information was received by the department in the insight portal regarding search and seizure action u/s 132 of the Act carried out in the business and residential premises of one Kailash Kumar Pattowari and his key persons and entities controlled and managed by Kailash Kumar Pattowari on 8.3.2022. The reasons as set out in the said notice is by alleging that the assessee is a beneficiary of transactions accommodated by Kailash Kumar Pattowari. Thus we find the reasons which have been set out for initiating the proceedings u/s 148A(b) are completely different and has no bearing upon in any of the proceedings which are pending or was disposed of. Therefore the department was well within their jurisdiction to issue notice under Section 148A(b) of the Act and thereafter proceeded to pass order under Section 148A(d). So far as the decisions which have been referred to by the learned advocate appearing for the appellant/assessee which is suffice to note the earliest of the decisions of S. Raman Chettiar 1964 (10) TMI 18 - SUPREME COURT which decision has been followed in the case of Indian Tubes Co. Ltd. 2004 (6) TMI 18 - CALCUTTA HIGH COURT and also noted in EIT Services India (P.) Ltd. 2023 (12) TMI 1135 - KARNATAKA HIGH COURT In the said case the decision was to the effect that when a notice under Section 148 of the Act is issued the original assessment proceedings are entirely opened up or left open and the finality which had occurred in the first assessment order does not exist any longer. Therefore it was held that without disposing of the return of income filed by the assessee in response to the first notice the assessing officer could not have issued a second notice for reopening of the assessment which at the relevant point of time did not exist in the eye of law. To the same effect with the decision of the Hon ble Supreme Court of India in M/s. S.M. Overseas Pvt. Ltd. 2022 (12) TMI 702 - SC ORDER in our considered view these decisions can be of no assistance to the case of the assessee as on facts we find that no proceedings under Section 148A(b) of the Act was initiated pursuant to the search and seizure operations which were conducted against the above named person and his entities and the allegation is that the assessee was a beneficiary. Therefore reopening proceedings would not suffer from any jurisdictional error for the writ court to interfere in exercise of its powers under Article 226 of the Constitution of India. At this juncture it would be relevant to take note of the decision in Sardari Lal Co 2001 (9) TMI 1130 - DELHI HIGH COURT as that whether the question of taxability of income from a new source of income is concerned which had not been considered by the assessing officer the jurisdiction to deal with the same in an appropriate cases may be dealt with under Section 147/148 and under Section 263 of the Act if requisite conditions are fulfilled. With regard to the assessment order which is sought to be brought on record by the assessee by way of a supplementary affidavit dated 20.03.2025 we are unable to entertain any challenge to the assessment order for the reasons which have set out in the preceding paragraphs and it will be well open to the assssee to work out his rights and remedies available under the provisions of law. We find no grounds to interfere with the impugned order. Accordingly the intra-court appeal stands dismissed and the connected application stands closed.
The core legal questions considered in this judgment include:
1. Whether the issuance of the notice under Section 148A(b) of the Income Tax Act, 1961 was valid and maintainable, given the pendency of a statutory appeal before the Commissioner of Income Tax (Appeals) and a pending rectification application under Section 154 of the Act. 2. Whether the reopening of assessment under Section 148A(d) was permissible on the grounds stated, particularly when the issues raised in the reopening notice differed from those in the pending appeal. 3. Whether the assessing officer committed any procedural irregularity in issuing the notice under Section 148A(b) and passing the order under Section 148A(d). 4. Whether the assessment order passed during the pendency of the writ petition could be considered or entertained by the court. 5. The scope and applicability of judicial precedents concerning reopening of assessments, especially in cases where rectification applications are pending or appeals are filed. Issue-wise detailed analysis: Validity of notice under Section 148A(b) amid pending appeal and rectification application The legal framework involves the provisions of the Income Tax Act, 1961, specifically Sections 148A(b), 148A(d), 154, 143(3), and 147/148. The relevant precedents include the Supreme Court's ruling in M/s. S.M. Overseas Pvt. Ltd. and decisions by various High Courts such as Principal Commissioner of Income-tax v. Coal India Ltd., Indian Tubes Co. Ltd., and others. The appellant contended that since a statutory appeal was pending before the CIT(A) against the original assessment order dated 30.12.2018, and a rectification application under Section 154 filed by the assessee was pending disposal, the issuance of the notice under Section 148A(b) was impermissible. Reliance was placed on the principle that reopening proceedings cannot be initiated while rectification proceedings are pending, as held in M/s. S.M. Overseas Pvt. Ltd. The Court examined the facts and noted that the rectification application filed by the assessee on 13.04.2020 was essentially a merit-based contention and its maintainability under Section 154 was doubtful. More importantly, the notice under Section 148A(b) dated 25.03.2023 was issued based on new information received from a search and seizure operation under Section 132 against a third party, Kailash Kumar Pattowari, and his controlled entities. The notice alleged that the assessee was a beneficiary of transactions accommodated by the said person, which was a ground distinct from the earlier appeal and rectification proceedings. The Court held that since the reasons for reopening were different and based on new information, the issuance of the notice under Section 148A(b) was within jurisdiction and valid. The prior pendency of appeal or rectification application did not bar the initiation of reopening proceedings on new grounds. Permissibility of reopening under Section 148A(d) on new grounds Section 148A(d) empowers the assessing officer to pass an order after considering the assessee's submissions following issuance of notice under Section 148A(b). The Court analyzed whether the reopening was justified on the grounds stated. The Court observed that the grounds for reopening related to the assessee being a beneficiary of transactions linked to a search and seizure operation, which was not the subject matter of the earlier appeal or assessment. This distinction was critical to uphold the reopening. Precedents such as CIT v. S. Raman Chettiar and Indian Tubes Co. Ltd. were reviewed, which clarify that once a notice under Section 148 is issued, the original assessment is reopened and the finality of the first order ceases to exist. However, these precedents do not preclude reopening on new grounds discovered later. The Court found no jurisdictional error or procedural irregularity in the reopening process and held that the reopening was valid and did not warrant interference under Article 226 of the Constitution. Procedural regularity in issuance of notices and orders The appellant challenged the procedural propriety of the notice under Section 148A(b) and order under Section 148A(d), contending that replies and representations filed by the assessee were not properly considered. The Court reviewed the sequence of notices and replies, including the submission of returns and legal arguments by the assessee, and found that the assessing officer had complied with the procedural requirements. The Court noted that the assessing officer had granted opportunities and considered the submissions before passing the order under Section 148A(d). Therefore, the Court concluded that there was no procedural irregularity that would vitiate the reopening order. Consideration of assessment order passed during pendency of writ petition The appellant sought to bring on record the assessment order dated 13.03.2025 passed during the pendency of the writ petition by way of a supplementary affidavit. The Court declined to entertain any challenge to this assessment order in the present proceedings, emphasizing that the assessee was free to pursue available remedies under the law, including filing an appeal within the prescribed time. Scope of judicial precedents on reopening and rectification The Court examined several precedents cited by both parties. The appellant relied on rulings that emphasize the bar on reopening during pendency of rectification proceedings and the necessity of disposing of returns filed in response to earlier notices before issuing subsequent reopening notices. The Court distinguished the present facts from those precedents, noting the new information obtained from search and seizure operations and the distinct grounds for reopening. The Court also relied on the Division Bench decision in Sardari Lal & Co., which recognized the jurisdiction of the assessing officer to reopen assessments on new sources of income under Sections 147/148. Thus, the Court clarified that the principles established in the cited precedents do not apply to the facts at hand where the reopening was based on fresh material and distinct grounds. Significant holdings include the following verbatim excerpt: "Therefore, we are of the view that the reopening proceedings would not suffer from any jurisdictional error for the writ court to interfere in exercise of its powers under Article 226 of the Constitution of India." Core principles established: - The pendency of a statutory appeal or rectification application under Section 154 does not bar the issuance of a notice under Section 148A(b) if the reopening is based on new and distinct grounds arising from fresh information. - Once a notice under Section 148 is issued, the original assessment proceedings are reopened, and the finality of the earlier order ceases to exist. - The assessing officer must comply with procedural requirements, including considering the assessee's submissions before passing an order under Section 148A(d), but mere pendency of other proceedings does not invalidate reopening on new grounds. - The writ court should exercise caution in interfering with reopening proceedings where jurisdictional and procedural requirements are met, especially when new information justifies reopening. - Challenges to assessment orders passed during the pendency of writ petitions should be pursued through appropriate statutory remedies rather than in writ proceedings. Final determinations on each issue: 1. The notice under Section 148A(b) dated 25.03.2023 was validly issued based on new information unrelated to the pending appeal or rectification application. 2. The order under Section 148A(d) dated 19.04.2023 reopening the assessment was legally sustainable and not vitiated by procedural irregularity. 3. The pendency of the appeal before the CIT(A) and the rectification application under Section 154 did not bar the reopening proceedings. 4. The assessment order passed during the pendency of the writ petition cannot be challenged in the present proceedings; the assessee may pursue statutory remedies. 5. The intra-court appeal challenging the order dated 14.08.2023 dismissing the writ petition was dismissed, with liberty granted to the assessee to file a statutory appeal against the assessment order within thirty days without being barred by limitation.
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