Tax authorities can initiate afresh proceeding if the earlier proceeding was invalid as per law

The Hon’ble Calcutta High Court ("the High Court") in the case of M/s. KK Agarwal and Sons HUF v. Income Tax Officer (WPA 25770 of 2022) dated December 14, 2022, held that Income Tax authorities can initiate afresh proceedings if the previous proceeding were invalid as per law. 

Facts

M/s. KK Agarwal and Sons HUF ("the Petitioner") was issued a Notice under Section 148A(b) of the Income Tax Act, 1961 ("the IT Act") for initiating assessment for the Financial Year 2015-16. The Notice was issued by the Principal Commissioner of Income Tax ("the PCIT") who did not have the jurisdiction to issue the Notice for initiating assessment after the lapse of 3 Assessment Years. Thereafter, the proceedings were initiated by the tax authorities.

The Petitioner filed the Writ Petition l before the High Court, contending that, since the PCIT did  not have the jurisdiction to issue the Notice, therefore, the Notice itself along with all subsequent proceeding would become invalid as per law.

Issue

1.  Whether the PCIT can issue Notice under Section 148A(b)  of the IT Act for the period beyond his jurisdictional power?
2.  Whether the tax authorities can initiate afresh proceeding, ones the previous proceeding was quashed on the ground being invalid as per law?

Held

The High Court held that

• The Approval was granted by the PCIT for issuing notice under section 148A(b) of the IT Act. However, the PCIT was not the competent authority under Section 151(ii) of the IT Act for issuing notice. Therefore, such approval was not sustainable in the eyes of law. Therefore, the Notice and subsequent proceeding are liable to be quashed.
• Further, the impugned Notice and subsequent proceedings does not bar Income Tax authorities to initiate any fresh proceeding in accordance with law.

By saying so, the appeal filed by the Petitioner was disposed by the High Court.

Relevant Provisions

Section 148A(b) of the IT Act

The Assessing Officer shall, before issuing any notice under section 148,-

(b) provide an opportunity of being heard to the assessee, by serving upon him a notice to show cause within such time, as may be specified in the notice, being not less than seven days and but not exceeding thirty days from the date on which such notice is issued, or such time, as may be extended by him on the basis of an application in this behalf, as to why a notice under section 148 should not be issued on the basis of information which suggests that income chargeable to tax has escaped assessment in his case for the relevant assessment year and results of enquiry conducted, if any, as per clause (a);

Section 151 of the IT Act

Specified authority for the purposes of section 148 and section 148A shall be,-

(i) Principal Commissioner or Principal Director or Commissioner or Director, if three years or less than three years have elapsed from the end of the relevant assessment year;

(ii) Principal Chief Commissioner or Principal Director General or where there is no Principal Chief Commissioner or Principal Director General, Chief Commissioner or Director General, if more than three years have elapsed from the end of the relevant assessment year