Delhi ITAT: Reasons for reopening assessment necessarily to be provided within time limit of section 149(1) i.e. 4 years or 6 years

Balwant Rai Mehta v. ITO, on 14^th January, 2011

Assessment Year: 2001-2002

Question/s before the Hon’ble Tribunal

Whether valid service of notice has been served upon the assessee within the limitation provided u/s 149 (1) (b) of the Act?

Relevant facts: AO sought to reopen the asstt. just two days prior of the expiry of the 6 years. He has served notice u/s 148 on 28th March, 2008. Such notice could be served upon the assessee upto 31st March, 2008. The reasons were not supplied to assessee by the AO by 31st March,. 2008 rather these were supplied to the assessee vide letter dated 15th May, 2008.

Upholding the appeal of the assessee, the Hon’ble Tribunal held that:

“A plain reading of the above exposition of law at the end of Hon’ble Jurisdictional High Court make it clear that issuance of the notice and the communication and furnishing of reasons would go hand in hand. The reasons are to be supplied to the assessee before the expiry of period of 6 years. If it has not been done then validity u/s 148 could not be upheld… The notice could be served at any point of time before the expiry of 6 years, if AO has reasons to believe that income has escaped assessment but, such reasons are also to be communicated to the assessee before the expiry of the limitation otherwise validity of such notice could not be sustainable.”

The decision is available here.

ITAT, Visakhapatnam: Notice served u/s 142(1) after end of relevant AY not barred by limitation

ITO, Rajahmundry v. M. Raghava Reddy on 4^th January, 2011

Question before the Hon’ble Tribunal: Whether notice served u/s 142(1) after the end of the relevant Assessment Year is barred by limitation in view of the proviso inserted u/s 142(1)(i)?

Relevant facts: In a matter pertaining to AY 2005-06, the notice u/s 142(1) was issued calling for the return of the assessee. The notice was served on the assessee on 05-09-2007. In the absence of the filing of the return, best judgment assessment was carried out u/s 144. Subsequently, the notice u/s 142(1) was challenged on the ground of limitation.

Allowing the appeal of the Revenue, the Hon’ble Tribunal held that:

(Para 6): “On a plain reading of the above said proviso, one can notice that a notice served under section 142(1) after the end of the relevant assessment year shall be deemed to have been served in accordance with the provisions of sec. 142(1). Thus, the decision rendered by the Special bench in the case of Motorola inc., (Supra) has been nullified by the insertion of the proviso. In the instant case, the impugned notice under section 142(1) has been served upon the assessee on 05-09-2007, i.e. after the insertion of the proviso cited above. Hence, in our view, the said notice shall be deemed to have been validly served in accordance with the provisions of sec. 142(1).”

The decision is available here.