Non-Communication Of Reassessment And Demand Notice Within Time: Manipur High Court Quashes Assessment

The Manipur High Court has held that the reassessment made by the Income Tax Officer without communicating the order of reassessment and the demand notice of the reassessment within time cannot be treated as a valid assessment.

The bench of Justice Ahanthembimol Singh has observed that the two reassessment notices under Section 148 were served in the months of December 2005 and March 2006. The period of limitation for completing the proceeding of the reassessment will be nine months, starting on April 1, 2006, and ending on December 31, 2006, as provided under Section 153(2) of the Income Tax Act. Even though the assessment order was passed on December 28, 2006, it was communicated to the authorized representative of the assessee only on January 5, 2007.

The petitioner/assessee filed a return of her income on June 4, 2004, disclosing a total income of Rs. 1,00,240. The return filed by the petitioner was processed under Section 143(1), and an intimation was issued on the same date. After about one year from the date of filing the return, the Income Tax Officer, holding that he had reasons to believe that the income chargeable to tax had escaped assessment within the meaning of Section 147, issued notice under Section 148 dated July 28, 2005, to the original petitioner, requiring her to submit a return of her income in the prescribed form within 30 days from the date of service of the notice. There is nothing on record to indicate when the notice was received by the original petitioner.

However, the petitioner submitted that notice under Section 148 was received on June 12, 2005, which was not denied by the department.

The petitioner contended that when the petitioner complied with all the subsequent notices, the case was discussed with the authorized representative of the assessee, who appeared before the Assessing Officer from time to time, and on completion of the reassessment proceeding, the Assessing Officer passed the assessment order dated December 28, 2006, under Section 143(3)/147. By the order, the Assessing Officer assessed the total income of the assessee at Rs. 3,17,508 and raised a demand of Rs. 1,07,969. The notice of demand dated December 28, 2006, under Section 156 was issued by the Assessing Officer, raising a demand of Rs. 1,07,969 for the assessment year, and copies of the assessment order/demand notice and challan were served on the authorized representative of the assessee on January 5, 2007.

The petitioner contended that the proceeding of the reassessment and passing of the impugned assessment order dated December 28, 2006, as well as the communication of the order, were not completed within the period prescribed under Section 153(2). The assessment order and the consequential order passed in the penalty proceeding are illegal, violative of the provisions of Section 153(2), and liable to be quashed and set aside.

The petitioner contended that under section 153(2), no order of assessment, reassessment, or recomputation shall be made under section 147 after the expiry of one year from the end of the financial year in which the notice under section 148 was served, and that under the second proviso to section 153(2), it is provided that where the notice under section 148 was served on or after the 1st day of April, 2005, but before the 1st day of April, 2011, the provisions of this subsection shall have effect as if for the words "one year," the words "nine months" had been substituted.

The department contended that there is provision for filing a statutory appeal under Section 246 of the Income Tax Act, 1961; however, without availing herself of such an opportunity to file a statutory appeal, the assessee approached this court directly by filing the present writ petition for redressing her grievances. Since there is an alternative and effective remedy of filing an appeal, the writ petition is not maintainable and is liable to be rejected outright. There is no requirement under law for communicating the impugned assessment order within the prescribed period of limitation stipulated under Section 153(2).

The issue raised was whether the reassessment made by the Income Tax Officer without communicating the order of reassessment and the demand notice of the said reassessment within time can be treated as a valid assessment made within the period of limitation prescribed under Section 153(2) of the Income Tax Act, 1961.

The court noted that the order of any authority cannot be passed unless it is in some way pronounced or published or the party affected has the means of knowing it, and that it is not enough if the order is made, signed, and kept in the file because the order may be liable to change at the hands of the authority, who may modify or even destroy it before it is made known, based on subsequent information, thinking, or a change of opinion.

The court, while quashing the assessment order, held that the proceeding of the reassessment of the return submitted by the assessee for the assessment year 2003–2004 shall be deemed to have been completed only on May 4, 2007, when the assessment order was served or communicated to the representative of the assessee and it was not completed within the period prescribed under Section 153(2).

Counsel For Petitioner: H.S. Paonam

Counsel For Respondent: Kh. Samarjit

Case Title: Smt. Mema Paul Versus Income Tax Officer

Case No.: WP(C) No. 626 of 2007

Click Here To Read The Order