Self-Assessment U/S 143(1) Income Tax Act Doesn't Qualify As Assessment By AO, No Bar On Reopening Assessment U/S 147: Delhi HC

“The assessment of tax under Section 143(1) of the Act is a self-assessment and in a strict sense cannot be stated as assessment framed by the AO,” observed a bench of Justices Vibhu Bakhru and Swarana Kanta Sharma.

Section 143(1) relates to self-assessment of chargeable income. Section 143(3) pertains to scrutiny assessment by the Assessing Officer (AO) to verify the accuracy and truthfulness of claims and deductions made in a tax return.

Section 147 allows AO to re-assess income that may not have been reported to the tax authorities.

The first proviso thereof states that where an assessment under Section 143(3) or under Section 147 has been made for the relevant AY, no action shall be taken under this section after expiry of 4 years from the end of relevant AY, unless any income chargeable to tax has escaped assessment due to assessee's failure to make a return or truly disclose all material facts.

Thus, if scrutiny assessment is made under Section 143(3), power to re-assessment under Section 147 is to some extent curtailed. So is not the case with respect to self-assessment under Section 143(1).

The petitioner in this case was aggrieved by a notice issued to it under Section 148 of the Income Tax Act in 2018, for reopening its income assessment for AY 2011-12.

Its counsel argued that all material, on the basis of which the assessment was sought to be reopened, was examined in assessment proceedings for the previous AY 2010-11 in which sale advances were received.

It was further submitted that Petitioner had furnished its explanation with regard to its books of accounts for the previous year 2010-11 in connection with the proceedings initiated in respect of AY 2011-12. Therefore, the counsel contended that the AO had all the material on which assessments for the said AY could be framed at the material time.

The AO reasoned that an entity found to be involved in bogus billing had made payments to the Petitioner, leading to an apprehension that the petitioner's income chargeable to tax had escaped assessment.

“The contention that there are no credible reasons for issuing the impugned notice for reopening the assessment for the Assessment Year 2011- 12 is thus insubstantial,” the Court observed at the outset.

It added that Petitioner's contention that all receipts had been taxed during the previous AY 2010-11 is prima facie erroneous and Petitioner's explanation that its books of accounts were available with the AO prior to its assessment does not carry the case any further.

The bench explained that the AO had not assessed the petitioner's income for the Assessment year 2011-12 under Section 143(3) of the Act.

It relied on Indu Lata Rangwala v. Deputy Commissioner of Income Tax (2016) where a division bench of the High Court held that where the return initially filed is processed under Section 143(1) of the Act, and an intimation is sent to an Assessee, it is not an 'assessment' in the strict sense of the term for the purposes of Section 147 of the Act.

“The first proviso to Section 147 of the Act applies only (i) where the initial assessment is under Section 143 (3) of the Act…” it was held.

In this light, the petition was dismissed.

Appearance: Advocate S. Krishnan for Petitioner; Advocates Vipul Agrawal, Gibran Naushad & Sakashi Shairwal for Respondent

Case title: RP Foam Home (P) Ltd. v. Assistant Commissioner Of Income Tax

Case no.: W.P.(C) 13224/2018

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