Facts of the Case

  • The assessee filed returns for AY 2010-11 and AY 2011-12.
  • Additions of ₹4.95 crore and ₹4.62 crore respectively were made under Section 68.
  • Assessment was completed under Section 153A read with Section 143(3) following search proceedings.
  • CIT(A) deleted additions citing absence of incriminating material and relied on CIT vs Kabul Chawla.
  • However, CIT(A) indicated that reassessment proceedings under Section 148 could be initiated.
  • Revenue issued notice under Section 148 and completed reassessment.
  • Appeals against CIT(A)’s earlier order were already pending before ITAT when reassessment was initiated.
  • ITAT quashed reassessment proceedings relying on third proviso to Section 147.
  • Revenue challenged ITAT order before Delhi High Court.

Issues Involved

  1. Whether reassessment proceedings under Section 147/148 can be initiated on issues already pending before an appellate authority.
  2. Whether the third proviso to Section 147 bars reassessment when the same matter is subject to appeal.
  3. Whether Assessing Officer can reassess additions under Section 68 while such additions are under appellate consideration.

Petitioner’s Arguments (Revenue)

  • Reassessment was necessary to prevent proceedings from becoming time-barred.
  • Reliance placed on CBDT Circular explaining amendments under Finance Act, 2008.
  • It was argued that pendency of appeal should not restrict reassessment powers where income has escaped assessment.

Respondent’s Arguments (Assessee)

  • The third proviso to Section 147 clearly bars reassessment on issues already under appeal.
  • Reassessment proceedings were invalid as they dealt with the same additions under Section 68.
  • Reliance placed on judicial precedents including:
    • CIT vs Edward Keventer (Successors) Pvt. Ltd.
    • Alcatel Lucent France vs ADIT

Court Findings / Order

  • The Delhi High Court upheld the ITAT’s order.
  • It held that:
    • The third proviso to Section 147 explicitly prohibits reassessment of matters which are subject to appeal.
    • The additions under Section 68 were already under challenge before the Tribunal.
    • Therefore, reassessment proceedings on the same issue were not permissible.
  • The Court emphasized that the correct approach is to examine the grounds of appeal to determine whether reassessment is barred.
  • No substantial question of law arose; hence, appeals of the Revenue were dismissed.

Important Clarification by Court

  • The Assessing Officer cannot reassess income which forms the subject matter of appeal, reference, or revision.
  • The scope of reassessment must exclude issues already under appellate consideration.
  • The grounds of appeal act as the determining factor for applicability of the third proviso to Section 147.

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

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