ORDERS ANALYSIS UNDER SECTION 147

SECTION 147:

Section 147 of the Income Tax Act pertains to situations where income chargeable to tax has escaped assessment for a particular assessment year. In such cases, the Assessing Officer holds the authority, within the framework of sections 148 to 153, to assess or reassess the income. This includes the recomputation of losses, depreciation allowance, or any other deductions for the relevant assessment year.

The section provides the Assessing Officer with a broad scope, allowing them to address any issue related to the escaped assessment of income. Importantly, this authority extends to issues that may come to notice subsequently during the proceedings under this section. What sets this provision apart is its flexibility, as it remains applicable irrespective of whether the provisions of section 148A have been complied with or not. This discretion allows the Assessing Officer to comprehensively deal with aspects of income that may not have been considered in the initial assessment.

SCOPE OF SECTION 147:

1. Escaped Assessment Authority:

   - Section 147 empowers the Assessing Officer to address situations where income chargeable to tax has escaped assessment for a specific assessment year.

2. Reassessment Powers:

   - The Assessing Officer, under this section, can assess or reassess the income that has escaped assessment. This includes the ability to recompute losses, depreciation allowance, and other allowances or deductions for the relevant assessment year.

3. Comprehensive Reassessment:
   - The scope extends to any issue related to the escaped assessment of income. This means the Assessing Officer can consider aspects that might not have been covered in the initial assessment.

4. Flexibility in Issue Identification:

   - The Assessing Officer has the flexibility to identify and address any issue related to escaped assessment, even if it comes to notice subsequently during the proceedings under this section.

5. Operational Framework:

   - The section operates within the defined framework of sections 148 to 153, providing a legal structure for the reassessment process.

FAVORABLE ASPECTS FOR THE REVENUE:

1. Enhanced Reassessment Authority:

   - Section 147 significantly enhances the authority of the Income Tax Department by allowing the reassessment of income that has escaped initial assessment.

2. Flexibility in Issue Resolution:

   - The provision offers flexibility by permitting the Assessing Officer to address any issue related to escaped assessment, providing an advantage in addressing unforeseen aspects.

3. Independent of Section 148A Compliance:

   - Section 147 operates independently of the provisions of section 148A, allowing the Assessing Officer to proceed with the assessment or reassessment even if the specific compliance requirements of section 148A have not been met.

4. Holistic Recomputation Authority:

   - The section allows for the recomputation of losses, depreciation allowance, and other deductions. This ensures a holistic approach to reassessment, preventing omissions or errors in the initial assessment.

5. Timely Correction of Assessment Errors:

   - By providing the authority to reassess income, the section enables the timely correction of errors or oversights in the original assessment, contributing to the accuracy of tax collection.

Income escaping assessment.

147. If any income chargeable to tax, in the case of an assessee, has escaped assessment for any assessment year, the Assessing Officer may, subject to the provisions of sections 148 to 153, assess or reassess such income or recompute the loss or the depreciation allowance or any other allowance or deduction for such assessment year (hereafter in this section and in sections 148 to 153 referred to as the relevant assessment year).

Explanation.—For the purposes of assessment or reassessment or re-computation under this section, the Assessing Officer may assess or reassess the income in respect of any issue, which has escaped assessment, and such issue comes to his notice subsequently in the course of the proceedings under this section, irrespective of the fact that the provisions of section 148A have not been complied with. 

MADRAS HC ORDERS:

W.P. No.20897 of 2023 Mrs.Pramilavs. Assessment Unit

The writ petition challenges the assessment order under Section 147 read with Section 144(B) of the Income Tax Act, 1961, for the Assessment Year 2016-17. The petitioner raised concerns about the lack of a personal hearing opportunity and the absence of proper sanction for initiating proceedings. The petitioner`s request for a personal hearing was allegedly ignored, leading to the contested order. The court noted the petitioner`s claim of not receiving a personal hearing despite requests and the respondents` contention that ample opportunities were provided to submit documents. The court observed that before passing the assessment order, no personal hearing was granted, even though the petitioner requested video conferencing. It emphasized that providing opportunities for filing replies and furnishing documents did not fulfill the requirement of a personal hearing.

As a result, the court directed the respondents to afford the petitioner a personal hearing on a date determined by them. The court decided to remand the matter to the concerned authority for the assessment order after providing the necessary opportunity. Regarding the petitioner`s claim of improper sanction, the court opted not to delve into the issue, leaving it open for the petitioner to raise during the personal hearing. The writ petition was disposed of with no costs imposed, and connected Miscellaneous Petitions were closed.

2. W.P.No.20694 of 2023 NareshSangeetha Vs. Income Tax Officer-[2023] 201 TAXLOK.COM (IT) 125 (MAD)

The writ petition challenges a notice and orders issued by the respondents. The petitioner contends that proceedings were initiated based on the statement of Naresh Jain, yet relevant documents were not provided, and no opportunity for cross-examination was given. The court notes the petitioner`s requests for the statement and documents, as well as an opportunity to cross-examine Naresh Jain. The respondent argues against cross-examination, citing the reliance on documents and refers to the Telestar case.

In this context, it`s important to note that Section 147 of the Income Tax Act allows the Assessing Officer to assess or reassess income if it has escaped assessment. The court considers the submissions, highlighting the respondent`s reliance on documents obtained from Naresh Jain`s statement. It notes the petitioner`s request for documents and directs the respondent to provide them within 30 days. The petitioner is then instructed to file a reply within 30 days of receiving the documents. The court sets aside the impugned order, remitting it to the respondent for reconsideration. The respondent is to pass an appropriate order after providing a personal hearing to the petitioner. The writ petition is disposed of with no costs.

3. W.P.No.21515 of 2023 S. Raja Vs. The Principal Commissioner of Income Tax-8-[2023] 200 TAXLOK.COM (IT) 579 (MAD)

The petitioner challenges an order dated 28.03.2023, where the 1st respondent, Principal Commissioner of Income Tax-8, Chennai, rejected the petitioner`s request under Section 264 of the Income Tax Act, 1961. The petitioner asserts that a specific deduction related to interest disallowed in the assessment order should be adjusted under the proviso to Section 28(v) of the Act.

The 1st respondent justifies the rejection, arguing that disallowance of expenditure in the partnership firm, M/s. Selvam Motors, doesn`t entitle the petitioner to claim deduction, as entities are distinct. The respondent contends that the petitioner received interest, benefited, and the revision under Section 264 is without merit.

The court refers to Section 28(v) and Section 40(b) of the Act, emphasizing the proviso allowing adjustment if any interest is not deductible. The court notes the disallowance in the firm`s assessment and concludes that the petitioner`s claim for revision lacks merit. Additionally, the court highlights that the petitioner`s assessment was reopened under Section 147, leading to the re-assessment order dated 13.12.2019, which is integral to the petitioner`s plea. The court dismisses the writ petition, and no costs are awarded. Connected miscellaneous petitions are closed.

4. W.P.No.21596 of 2021 Napa RadhakrishnanVs. The Income Tax Officer

The petitioner challenges the assessment order dated 08.09.2021, asserting that it was passed hastily to avoid time limitations under Section 153 of the Income Tax Act, 1961. The impugned order adds Rs.69,26,823/- to the petitioner`s income, alleging escaped income related to trading transactions. The petitioner contends that despite repeated requests, the respondent failed to provide a proper explanation or reasons for the addition.

The impugned order refers to notices issued under Section 148 and Section 142(1), with the latter indicating a lack of compliance by the petitioner. The court notes discrepancies in dates and emphasizes that the reasons for reopening were not furnished, violating the principles laid down in GKN Driveshafts (India) Ltd. vs ITO [2002] 91 TAXLOK.COM (IT) 277 (SC). Citing Ajay AjitTanna vs Union of India [2023] 197 TAXLOK.COM (IT) 658 (BOM), the court underscores the necessity of providing reasons. The court sets aside the impugned order, directing the respondent to furnish detailed reasons for the Rs.69,26,823/- addition within 30 days. The petitioner is instructed to cooperate, and the respondent must pass a fresh order within 30 days thereafter. The writ petition is allowed with no costs. Connected miscellaneous petitions are closed.

PROBLEMS FACED BY REVENUE IN COURT:

1. Not providing opportunity of hearing and natural justice.

2. Sending notices and orders in the wrong email ID and not serving it properly.

3. Non delivery - Late delivery of Notices and orders which does not reach the assesse.

4. Closing of payment links or notice reply links before the stipulated time.

5. Technical glitches for online filing and reply

NOTE & SOLUTION TO REVENUE:

1. Following procedure and sending notices as per the amended sections and noticing dates as per the judgements and precedents.

2. Provide enough opportunity to the assesse and giving opportunity to submit documents.

3. Making proper documentation of the same in orders passed by the department. Providing more details on the assessee’s actions and following of the dates as provided under the act and precedents.

4. Sending Notice as per the correct e-mail ID of the assesse and serving it to them in a timely manner. Better to deliver it through Speed Post and saving proof of the same which is very necessary as it causes the most problem in court.

5. Avoiding technical errors such as early closing of links, non-provision links, etc. to facilitate smooth and easy filing of details for the assesse.

6. Give enough time and opportunity before passing the orders and give assesse no chance to raise question in court and record all the opportunities in the order. Give enough reasoning for the assessment.

CONCLUSION:

The exploration of Section 147 of the Income Tax Act and its applications in recent Madras High Court cases sheds light on the complexities faced by both taxpayers and the revenue. Section 147, providing authorities with the ability to reassess escaped income, stands as a powerful tool, but its application requires strict adherence to legal procedures and principles of natural justice. The Madras High Court orders reveal recurrent issues, including the lack of personal hearings, improper service of notices, and technical glitches in online proceedings. The importance of providing detailed reasons for reopening assessments, as emphasized in various judgments, emerges as a crucial aspect for the Revenue to address.

The court`s consistent stance on the necessity of affording taxpayers a fair opportunity to present their case underscores the significance of procedural compliance. Ensuring proper documentation, adherence to timelines, and meticulous handling of technical aspects can contribute to the seamless execution of assessments and minimize challenges in court. In conclusion, while Section 147 grants significant powers to tax authorities, the judicious and fair application of these powers is paramount. The cases discussed highlight the delicate balance between the interests of the Revenue and the rights of taxpayers. A transparent and legally sound assessment process not only strengthens the Revenue`s position but also upholds the principles of justice and equity in taxation.