By TIOL News Service

NEW DELHI, MAR 03, 2016: THE issue is - Whether reassessment can be initiated even if there is no assessment order. NO is the verdict.

Facts of the case

Assessee is a finance company. It filed its return but no assessment order was passed. However, much after the last date of the Assessment Year was over, the Assessing Officer sought to re-open the assessment by issuing notice under Section 10 of the Act and thereafter proceeded to re-assess the interest chargeable under the aforesaid Act. The matter was carried in appeal by the assessee. The main contention of the assessee was that when there was no assessment order even passed in the original proceedings there was no question of re-opening the so-called assessment and make the re-assessment.

The Commissioner of Income Tax (Appeals) accepted the contention and set aside the re-assessment order. This order was upheld by the Income Tax Appellate Tribunal as well. However, in further appeal filed by the Revenue, the High Court reversed the view taken by the Tribunal holding that even if there was no original assessment order passed under Section 10 of the Act, there could be re-assessment.

On appeal, the Apex Court held that,

++ we may note that the assessee had relied upon various judgments in support including the judgment of this Court in Trustees of H.E.H. The Nizam's Supplemental Family Trust v. CIT 2002-TIOL-1139-SC-IT. The High Court has held that the said judgment would not govern the case at hand;

++ we are of the opinion that the High Court has wrongly not acted upon the ratio laid down in Trustees of H.E.H. The Nizam's Supplemental Family Trust's which squarely applies in the instant case in favour of the assessee. The ratio of the said judgment is that in those situations where there is no assessment order passed, there cannot be a notice for re-assessment inasmuch as the question of re-assessment arises only when there is an assessment in the first instance.

(See 2016-TIOL-22-SC-IT)