Where change of AO happens, newly appointed AO shall continue the proceeding from the stage where it was left by the earlier AO: SC
Fact and Issue of the case
The assessee filed return of income for the A.Y. 2008-09 declaring loss of Rs.6,10,314/- which was processed under Section 143(1) of the Income Tax Act, 1961. After obtaining the prior approval of the Additional Commissioner of Income Tax for re-opening of the assessment, the Assessing Officer issued a notice under Section 148 of the Act dated 23.03.2015.
At the instance of the assessee, the Assessing Officer supplied the reasons for re-opening, vide letter dated 18.05.2015. However, it appears that thereafter, the earlier Assessing Officer, who issued the notice under Section 148 of the Act dated 23.03.2015, was transferred and the new Assessing Officer was in charge and therefore, though not required considering Section 129 of the Act, the subsequent Assessing Officer issued another notice under Section 148 of the Act on dated 18.01.2016. Again, at the request of the assessee, the subsequent Assessing Officer supplied the reasons for re-opening of the assessment. That thereafter, the Assessing Officer issued the notice under Section 142(1) of the Act and also issued a notice under Section 143(2) of the Act dated 16.02.2016.
The Assessing Officer, vide letter dated 23.02.2016, informed the assessee of the reasons for re-opening of the assessment for the A.Y. 2008-09. The assessee submitted its objections to the re-opening of the assessment, vide communication/letter dated 07.03.2016. The Assessing Officer rejected the objections of the assessee to the re-opening of the assessment, vide letter/communication dated 21.03.2016. That thereafter, the Assessing Officer passed the order of assessment under Section 143(3) of the Act on 30.03.2016 making an addition of Rs.1,35,00,000/- on account of accommodation entry and zero addition of Rs.2,43,000/- on account of commission.
The assessee approached the High Court by way of writ petition challenging the re-opening of the assessment for the A.Y. 2008-09 on 01.04.2016. The High Court passed an interim order on 01.04.2016 that the assessment proceedings may go on but no final assessment order shall be passed and the same shall be subject to the ultimate outcome of the final decision in the writ petition. At this stage, it is required to be noted that prior thereto, the actual final assessment order was already passed on 30.03.2016. By the impugned judgment and order, the High Court has set aside the reopening of the assessment for the A.Y. 2008-09, the finding recorded by the High Court that the subsequent notice dated 18.01.2016 can be said to be barred by limitation is unsustainable.
Observation of the court
The court has heard the counsels appearing for the respective parties and considering the facts narrated hereinabove and the material on record, the court is of the opinion that the impugned judgment and order passed by the High Court quashing and setting aside the re-opening of the assessment for the A.Y. 2008-09 is unsustainable. As such, Section 129 of the Act permits to continue with the earlier proceedings in case of change of the Assessing Officer from the stage at which the proceedings were before the earlier Assessing Officer. In that view of the matter, as such, fresh show cause notice dated 18.01.2016 was not at all warranted and/or required to be issued by the subsequent Assessing Officer. Still, for whatever reason, the subsequent Assessing Officer issued the fresh notice on dated 18.01.2016 which, as observed hereinabove, was not warranted and/or required at all. Section 129 of the Act is very clear.
In that view of the matter, the subsequent issuance of the notice dated 18.01.2016 cannot be said to be dropping the earlier show cause notice dated 23.03.2015, as observed and held by the High Court. The reasons to reopen the assessment for the A.Y. 2008-09 were already furnished after the first show cause notice dated 23.03.2015 which ought to have been considered by the High Court. However, the High Court has considered the reasons recorded after the second show cause notice dated 18.01.2016 which was not required to be considered at all. In view of the above finding, the finding recorded by the High Court that the subsequent notice dated 18.01.2016 can be said to be barred by limitation is unsustainable.
At this stage, it is required to be noted that the Assessment Order is passed on the basis of the first notice dated 23.03.2015 and not on the basis of the notice dated 18.01.2016. Under the circumstances and in view of the above factual aspect, the High Court has erred in quashing and setting aside the reopening of the assessment for the A.Y. 2008-09. The impugned judgment and order passed by the High Court holding so is unsustainable and the same deserves to be quashed and set aside.
At the same time, as the assessee did not challenge the Assessment Order on merits which it ought to have challenged before the CIT-A and the High Court has set aside the Assessment Order on the ground that initiation of the reassessment is bad in law, we relegate the original petitioner to file an Appeal before the CIT-A and if the same is filed within a period of 4 weeks from today, the same be considered in accordance with law and on its own merits, subject to compliance of other requirements, while preferring the appeal against the Assessment Order. However, the assessee shall not be permitted to re-agitate before the CIT-A and/or the Appellate Authority that the reopening was bad in law.
In view of the above and for the reasons stated above, the impugned judgment and order passed by the High Court is set aside. However, we reserve the liberty in favour of the assessee to challenge the Assessment Order before the learned CIT-A and if the same is filed within a period of four weeks from today.
Conclusion
The Court quashed the order passed by the high court stating that the re-opening of the assessment for the A.Y. 2008-09 is unsustainable and permitted the assessee to file an appeal before the CIT of appeals within four weeks. The court dismissed the appeal and ruled in favor of the assessee.
DCIT-Vs-Mastech-Technologies-Pvt.-Ltd.-Supreme-Court-of-India
