GOLDMINE INVESTMENTS Vs. DEPUTY COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) The respondent issued a notice under Section 148 of the Income Tax Act proposing to reopen the assessment for the year 1995-96. Following the issuance of notice, the same was served on the petitioner on 09.05.2008, which required the petitioner to furnish a return of income for the assessment year 1995-96. As the petitioner had already filed a return of income for the assessment year 1995-96 on 29.02.1996, clearly admitting that there was no income, an order of assessment has been passed under Section 143(3) of the Income Tax Act on 31.03.1998, accepting the return filed by the petitioner. Since the notice was issued to the petitioner and as the petitioner had already filed return of income for the assessment year 1995-96 on 29.02.1996 making absolutely clear that there was no escapement of income or change in the income, the return already filed by the petitioner to be treated as having been filed pursuant to the aforesaid notice only. Therefore, the petitioner submitted before the assessing authority that it has complied with the notice and relied on the decision of the Supreme Court in GKN Driveshafts (India) Ltd. Vs. Income Tax Officer (259 ITR 19), which mandates that the petitioner is entitled to be furnished a copy of the reasons recorded by the Assessing Authority before the issue of notice under Section 148. Subsequently, in view of the letter of the petitioner seeking a copy of the reasons recorded, the respondent also issued a letter dated 25.05.2009 informing the reasons for reopening of the assessment, stating that in the course of assessment proceedings of the assessment year 1996-97, it was noticed by the Assessing Officer that the assessee had received an amount of Rs.5,60,00,000/- from Ashok Leyland Finance Ltd. This amount was received based on a Memorandum of Understanding / Agreement for joint development dated 27.11.1994 between the assessee and Ashok Leyland Finance Limited and as per which the assessee had offered to surrender its share of development rights on the land purchased from one Mr.Mani Nagappa to Ashok leyland Finance Limited for a consideration of Rs.560 lakhs. But, the assessing officer did not accept the claim of the assessee and assessed the amount as profits from business for the assessment year 1996-97. But, in the order of the Commissioner of Income-Tax (Appeals), it was held that the amount to be treated only as an advance. Therefore, the addition made in the assessment was reversed subsequently. When a notice dated 25.05.2009 was issued under Section 143(2) of the Income Tax Act, which is in the nature of enquiry for completing the assessment, the respondent required the petitioner to attend the respondent's office and produce document, accounts or other evidence, which the petitioner may rely in respect of return filed by it. Therefore, the petitioner submitted before the respondent that the aforesaid notice is totally invalid and illegal, in so far as the assessment proceedings initiated is beyond the limitation and consequently, the proceedings are totally invalid.

(2.) In respect of the above submission, the petitioner also relied upon a judgment of the Supreme Court in GKN Driveshafts (India) Ltd. Vs. Income Tax Officer (259 ITR 19) , wherein the Apex Court has held that after communicating to the petitioner, the reasons recorded before the issue of notice under Section 148, the petitioner should be given as opportunity to make its objections to the said reasons and only after the objection is adjudicated by a speaking order only then any proceedings can be initiated for making an assessment. When this is the position, the respondent along with a letter dated 25.05.2009, communicating the reasons stated to have been recorded prior to the issue of notice, issued a notice under Section 143(2) proposing to make an assessment and for enquiry in connection therewith. On the basis of the above judgment, it was further contended that the action of the respondent is totally illegal and violative of the procedure set out by the Supreme Court in the above said decision.

(3.) Learned counsel appearing for the petitioner further submits that the respondent has issued notice under Section 148 for reopening the assessment for the year 1995-96 on the ground that such notice is valid, since there was a finding by the Income Tax Appellate Tribunal that the assessment was made for the year 1995-96 and not for the year 1996-97. The proceedings are totally barred by limitation. Further, it was argued that though the Tribunal has got power to direct an income excluded from one year to be assessed for another year, neither explanation 2 to Sub Section (4) of Section 153 nor any other provisions of the Income Tax Act extends the limitation or waives the procedure for making such assessment for the simple reason that the proviso provides that no proceedings for reopening of an assessment in a year for which an assessment is originally completed under Section 143(3) shall be taken beyond four years from the end of the Assessment year. On that basis, it was prayed for quashing of the impugned order.