Facts of the Case

  • The assessee, Shri Gautam Bhalla, was subjected to search and seizure proceedings (2013).
  • Assessments were completed under Section 153A read with Section 143(3) for AY 2010–11 and AY 2011–12.
  • Additions of ₹4.95 crore and ₹4.62 crore respectively were made under Section 68.
  • The CIT(A) deleted these additions citing:
    • No incriminating material found during search
    • Reliance on CIT vs. Kabul Chawla
  • However, CIT(A) observed that AO may consider reassessment under Section 148.
  • Based on this, AO initiated reassessment proceedings.
  • Meanwhile, appeals against CIT(A)’s order were pending before ITAT.
  • AO still passed reassessment orders making additions again.
  • ITAT quashed reassessment proceedings invoking third proviso to Section 147.
  • Revenue appealed before the High Court.

Issues Involved

  1. Whether reassessment under Section 147/148 can be initiated when the same issue is already pending in appeal before ITAT.
  2. Applicability and scope of the third proviso to Section 147.
  3. Whether reassessment proceedings become invalid when they cover matters already under appellate consideration.

Petitioner’s Arguments (Revenue)

  • Reassessment was validly initiated to prevent limitation bar.
  • Reliance placed on CBDT Circular No. 1/2009 (Finance Act, 2008 explanation).
  • Argued that non-initiation of reassessment would have led to loss of revenue due to time constraints.
  • Asserted AO had “reason to believe” income escaped assessment.

Respondent’s Arguments (Assessee)

  • The third proviso to Section 147 clearly bars reassessment of issues already under appeal.
  • Additions under Section 68 were identical in both appellate and reassessment proceedings.
  • Relied on judicial precedents:
    • CIT vs. Edward Keventer (Successors) Pvt. Ltd.
    • Alcatel Lucent France vs. ADIT
  • Contended reassessment was jurisdictionally invalid.

Court’s Findings / Order

  • The Court upheld ITAT’s decision and dismissed Revenue’s appeals.
  • Held:
    • The third proviso to Section 147 prohibits reassessment of matters already subject to appeal.
    • The correct approach is to examine grounds of appeal to determine barred issues.
    • Since Section 68 additions were already under challenge before ITAT, reassessment on the same was invalid.
  • No substantial question of law arose.

 Final Order: Appeals dismissed; reassessment proceedings quashed.

Important Clarification by Court

  • The third proviso to Section 147 acts as a jurisdictional restriction on the Assessing Officer.
  • AO cannot reassess income that is the subject matter of appeal, revision, or reference.
  • The test is to examine grounds of appeal, not merely existence of proceedings.
  • Even if reassessment is otherwise valid, it fails if overlapping with appellate issues.

Link to download the order -https://delhihighcourt.nic.in/app/showFileJudgment/RAS07112023ITA462020_165836.pdf

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