The Assessing Officer cannot issue a fresh notice under Section 148 of the Income Tax Act to circumvent the statutory time limit for reassessment once proceedings initiated by an earlier notice have lapsed under Section 153(2).

ORDER:

(per the Hon’ble Sri Justice P.Sam Koshy)

Heard Mr. S.Ravi, learned Senior Counsel for the petitioner; and Ms. J.Sunita, learned Senior Standing Counsel for Income Tax Department appearing on behalf of the respondent.

2. The instant writ petition has been filed by the petitioner under Article 226 of the Constitution of India challenging the second notice dated 03.10.2008, passed by the respondent under Section 148 of the Income Tax Act, 1961 (for short the ‘Act’) as illegal, arbitrary and contrary to the provisions of Section 147, 148 and 153(2) of the Act.

3. The facts of the case, are that, the petitioner filed its income tax return for the Assessment Year 2002-2003 on 25.10.2002 declaring an income of Rs.2,50,73,780/- which was processed under Section 143(1) of the Act without variations. On 28.03.2007, the respondent issued a notice under Section 148 of the Act to reopen the assessment citing concerns about cash payments exceeding Rs.20,000/- made to successful punters and their treatment under Section 40A(3) of the Act. The petitioner responded by requesting reasons for reopening and clarified that the original return should be treated as compliance with the notice while reserving the right to file detailed objections. On 28.05.2007, the Assessing Officer issued hearing notices under Section 143(2) of the Act fixing the date of hearing on 14.06.2007 and similarly on 28.09.2007 further notice was issued fixing a date of hearing on 22.10.2007, during which the petitioner’s representatives appeared but no progress was made in the proceedings. Under the second proviso of Section 153(2) of the Act, (which was amended with effect from 01.04.2005) reassessments pursuant to notice under Section 148 of the Act issued after 01.04.2005, must be completed within 9 months from the end of the financial year in which the notice was issued. Since the notice was issued on 28.03.2007 (within the financial year ending 31.03.2007), the assessment should have been completed by 31.12.2007. When the Assessing Officer issued another hearing notice on 22.08.2008, the petitioner pointed out the statutory time-bar in a letter dated 29.08.2008 whereupon the Assessing Officer realizing the limitation, issued a fresh notice under Section 147 of the Act on 03.10.2008 followed by a notice under Section 142(1) of the Act on 04.11.2008 requiring the petitioner to file a return and produce documents by 14.11.2008.

4. Therefore, the petitioner challenges this second notice as illegal and without jurisdiction contending that once the statutory time limit for completing the reassessment had expired the assessment becomes final and the Assessing Officer cannot circumvent the mandatory time limit by issuing a fresh notice for the same assessment year, as such repetitive notice defeats the legislative intent behind imposing strict time limits and deprives the assessee of the statutory protection and finality contemplated by Section 153 (2) of the Act, leaving assesses’ perpetually vulnerable to reassessment proceedings contrary to the principles of certain and finality in tax matters.

5. Learned Senior Counsel for the petitioner contended that the first notice under Section 148 of the Act was issued on 28.03.2007 within the financial year ending on 31.03.2007 which triggered the mandatory time limit prescribed under the second proviso of Section 153(2) of the Act as amended with effect from 01.04.2005. This provi