According to the Delhi High Court, the order issued under Section 143(1) of the Income Tax Act of 1961 is not an assessment for the purposes of Section 147, and as a result, the Assessing Officer does not need to find any new tangible evidence to come to the conclusion that the assessee's income has escaped assessment in order to reopen the assessment. This was observed in the case of Ernst and Young U.S. LLP Vs. Assistant Commissioner of Income Tax.
In the instant case, an order to reopen its assessment on the grounds that the assessee had neglected to offer to tax certain professional fees received by it in its income tax return, the petitioner/assessee, Ernst and Young U.S. LLP, was served with a show cause notice. The Assessing Officer then issued an order in accordance with Section 148A(d) of the Income Tax Act, ruling that the case qualified for the issuance of a notice under Section 148 because the assessee had neglected to submit any pertinent supporting documentation for its claim. The assessee filed a writ suit with the Delhi High Court in opposition to this.
According to Section 148A of the Income Tax Act, the Assessing Officer must conduct an investigation and provide the assessee a chance to be heard before issuing a notice under Section 148. According to Section 148 A(d), before issuing any notice under Section 148, the Assessing Officer shall determine whether or not it is a fit case to issue a notice under Section 148 based on material available on record, including the assessee's reply, and accordingly pass an order, with the prior approval of specified authority.
If the assessee's income has escaped assessment, Section 148 allows the Assessing Officer to issue a notice. The assessee did not include the said receipts in the income tax return it filed, which the Revenue Department accepted. The petitioner, Ernst and Young U.S. LLP, argued before the Delhi High Court that the said professional charges received by it were not taxable in India in light of Article 15 of the India-US Double Taxation Avoidance Agreement and that, as a result, the assessee did not include the said receipts in the income tax return it filed.
The High Court noted that the Supreme Court had ruled in Assistant Commissioner of Income Tax Vs. Rajesh Jhaveri Stock Brokers Private Limited that the requirement of passing an assessment order has been waived and that only an intimation must be sent to the assessee in light of the amendment to Section 143 (1). Additionally, the Apex Court had ruled that the acknowledgement of the return filed by the assessee shall be deemed to be an intimation under Section 143 where neither a sum payable by the assessee nor a refund is due to him, with effect from the first of June 1999, under the first proviso to the newly substituted Section 143 (1).
The Delhi High Court had previously stated, as noted by the Court in Indu Lata Rangwala v. DCIT, that processing a return that was initially filed by an assessee under Section 143 (1) of the Income Tax Act and sending an intimation to the assessee does not constitute a "assessment" in the strict sense of the word for the purposes of Section 147, which calls for the assessment or reassessment of the assessee's income if it has
The Bench held that once the initial proceeding under Section 143(1) has been completed, there is no need for new tangible material in order to reopen the assessment and, as a result, the doctrine of change of opinion is not attracted. It was decided that no opinion is formed by way of the order passed under Section 143(1), and that only an intimation is issued to the assessee under said order.
"As a result, for the purposes of Section 147 of the Act, the order issued under Section 143(1) of the Act is not a charge. Furthermore, the Assessing Officer need not find any new tangible items in this situation in order to believe that income has eluded assessment "The Court declared.
Consequently, the Bench dismissed the writ petition and upheld the Assessing Officer's decision.