Reopening of assessment: If no assessment order is 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

The issue for consideration relates to the Assessment Year 1997-98 under the Interest Tax Act, 1974. On the return filed by the appellant/assessee for this Assessment Year, no assessment order was passed. However, much after the last date of the Assessment Year is 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 aforesaid 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 before the High Court, 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. The High Court held that the judgment of the Supreme Court in Trustees of H.E.H. The Nizam’s Supplemental Family Trust v. CIT [2000]242 ITR 381 SC would not govern the case at hand. On appeal by the assessee to the Supreme Court HELD reversing the High Court:

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.