Income Tax Act | Reassessment Beyond Four Years Invalid When Original Assessment Finalised U/S 143(3): Punjab & Haryana High Court

The Punjab and Haryana High Court has held that re-assessment proceedings beyond four years are invalid when the original assessment has been finalised under Section 143(3) of the Income Tax Act. In case of an Assessment under Section 143(3) of the Income Tax Act, a scrutiny is carried out to confirm the correctness and genuineness of various claims, deductions, etc., made by the taxpayer in the return of income. Justices Lisa Gill and Meenakshi I. Mehta stated that the assessing officer has the power to reopen, provided there is tangible material to come to the conclusion that there is escapement of income assessment. Assessment order under Section 143(3) of the Act is preceded by notice, inquiry and hearing under Section 142(1), (2) and (3), as well as under Section 143(2) of the Income Tax Act. The issue before the bench was whether the re-assessment proceedings can be initiated against the assessee after the expiry of 4 years when there was no concealment on the part of the assessee, as the original assessment had been finalised under Section 143(3) of the Income Tax Act. In the situation where the assessee had not made any false declaration, a subsequent subjective analysis by the Assessing Officer would amount to a mere change of opinion, which cannot be a ground for reopening of assessment, added the bench. In this case, the assessee/appellant is engaged in the business of manufacturing and export of engineering goods, filed its return on 30.11.2003 declaring total income of Rs. 2,96,59,322/-. The assessee had claimed a deduction under Sections 80-IB and 80HHC of the Income Tax Act, 1961. Return was processed under Section 143(1) of the Income Tax Act on 16.03.2004 at the same income, and after being selected for scrutiny, an order was passed by the Assessing Officer under Section 143(3) of the Act, assessing the income to be Rs. 4,35,32,840/-. A notice was issued under Section 148 of the Act on 18.03.2010 and served on the assessee on 19.03.2010. Assessee raised an objection that re-assessment could not have been carried out after expiry of four years, especially when there is no concealment on the part of the assessee and the original assessment was finalised under Section 143(3) of the Act by allowing deduction. The assessee filed an appeal before the CIT (Commissioner of Income Tax Appeals), which was dismissed. The assessee further challenged the CIT order before the Income Tax Appellate Tribunal, which was also rejected. The assessee argued that reassessment itself could not have been carried out while invoking provisions of Section 147 read with Section 148 of the Act beyond the period of four years especially keeping in view the fact that assessment was finalized under Section 143(3) of the Act and there was no concealment on the part of assessee who had claimed and was afforded deduction under Sections 80-IB and 80HHC of the Act. The bench noted that the department was unable to point out any concealment or non-disclosure on the part of the assessee. The bench agreed with the assessee that re-assessment could not have been carried out after the expiry of four years, especially keeping in view the fact that there is no concealment or false declaration on the part of the assessee. In view of the above, the bench allowed the appeal. Case Title: M/s King Exports v. Commissioner of Income Tax, Ludhiana Case Number: ITA-96-2012 (O&M) Counsel for Appellant/Assessee: S.K. Mukhi Counsel for Respondent/Department: Ranvijay Singh Click Here To Read/Download The Order

Income Tax Act | Reassessment Beyond Four Years Invalid When Original Assessment Finalised U/S 143(3): Punjab & Haryana High Court

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