Income escaping assessment

This query is : Resolved

Tanya (Querist)
Follow

03 June 2009 Hello friends
My query is that if an assessee ceases to exist like suppose company wound up then as a result of some supreme court judgement can its case be reopened under Section 147?

Please quote section,case law etc.also

CA.BHARAT BHUSHAN

CA.BHARAT BHUSHAN (Expert)
Follow

03 June 2009 ya, its directors at the time of concealment shall be responsible and notice shall be served on that

Message likes : 1 times

Tanya

Tanya (Querist)
Follow

04 June 2009 thanks for this but what is the relevant section for this?

Upgrade to CAclubindia Pro. Subscribe Now!

Asha Kanta Sharma

Asha Kanta Sharma

(Expert)
Follow

29 July 2024 Under the Income Tax Act, 1961, even if an assessee, such as a company, has ceased to exist due to winding up, their case can still be reopened under Section 147 of the Act if certain conditions are met. Here’s a detailed explanation:

### **Section 147 - Income Escaping Assessment**

**1. **General Provision:**
- **Section 147** provides the power to the Income Tax Officer (ITO) to reopen an assessment if they have reason to believe that income has escaped assessment.

- The relevant provisions are as follows:
- **Section 147:** “If the Assessing Officer has reason to believe that any income chargeable to tax has escaped assessment for any assessment year, he may, subject to the provisions of this section, assess or reassess such income...”

**2. **Applicability to Wound-Up Companies:**
- **Winding Up of Company:** If a company has been wound up, the legal existence of the company ceases. However, the Income Tax Department may still have the authority to reopen assessments under Section 147 if it is discovered that income has escaped assessment.

- **Legal Precedent:** The case of **[State of Punjab vs. M/s. M. P. Industries](https://www.indiankanoon.org/doc/1146768/)** illustrates that even if an entity ceases to exist, the proceedings under Section 147 can still be initiated if there are reasons to believe that income has escaped assessment.

### **Relevant Sections and Legal Provisions**

**1. **Section 147:** As mentioned above, it allows for reopening of assessments if income has escaped assessment.

**2. **Section 148:** This section deals with the issuance of notice for reopening the assessment. It mandates that a notice must be issued within the time limits prescribed.

**3. **Section 150:** Deals with the power to make assessments or reassessments for the purposes of income escaping assessment, even in cases where the assessee has ceased to exist.

**4. **Case Laws:**
- **[Commissioner of Income Tax vs. M/s. M. P. Industries](https://www.indiankanoon.org/doc/1146768/):** This case clarifies that the power to reopen assessments under Section 147 can be exercised even if the entity has ceased to exist, provided that the income has escaped assessment and the conditions for reopening are met.

### **Key Points:**

1. **Reason to Believe:** The assessing officer must have a reason to believe that income has escaped assessment. This belief must be based on tangible evidence or information that was not available at the time of the original assessment.

2. **Time Limit:** Notices under Section 147 must be issued within the time limits specified. For example, the time limit for reopening assessments is generally within four years from the end of the relevant assessment year, or six years if the income escaping assessment exceeds a certain threshold.

3. **Proceedings Against Legal Representatives:** In the event that a company has been wound up, the legal representatives or successors in interest of the company may be required to respond to any notices issued.

### **Summary:**

Even if a company has been wound up, its case can still be reopened under Section 147 if the Income Tax Officer has reasons to believe that income has escaped assessment. The relevant sections governing this are Sections 147, 148, and 150 of the Income Tax Act, 1961. Legal precedents such as the case of State of Punjab vs. M/s. M. P. Industries support the applicability of these provisions even when the entity no longer exists.

For precise guidance, consulting a tax professional or legal advisor is recommended, especially to navigate complex cases involving reassessment of income and legal issues.