INCOME TAX ACT, 1961

Section 147

Reassessment - Reason to believe - No assessment carried out under section 143(3) - Item being subject-matter of reopening being already disclosed in return filed under section 139(1)

AO issued notice under section 148 and reopneed assessment on the reasoning that expenditure of Rs. 1 crore pertaining to legal expenses and external consultants fees was contingent in nature and hence not allowable and as such a revenue of Rs. 1 crore was chargeable to tax as escaped income. Assessee contended that the issue for which AO had reason to believe that income had escaped assessment, had already been disclosed by assessee in return of income filed by assessee under section 139, therefore, issue noted by AO was not tangible material to reopen assessment under section 147. AO rejected this on the ground that in assessee's case no assessment was carried out by AO under section 143(3) and only intimation had been issued under section 143(1). Held: Since item for which AO had reopened assessment had already been disclosed by assessee in return of income filed by him under section 139(1), AO had every power to issue notice under section 143(2) to do scrutiny assessment under section 143(3), which he has failed to do so in the assessee's case and for that assessee could not be penalized and AO having not carried out scrutiny assessment within prescribed statutory limit, could not be given another innings for no fault of assessee and as AO failed to point out any new tangible material to reopen assessment under section 147, reopening of assessment was void ab initio.

REFERRED :

FAVOUR : In assessee's favour.

A.Y. : 2009-10

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