In case of change of AO; proceedings are to be continued from stage at which they were left by earlier AO: SC

Case Details: DCIT Vs. Mastech Technologies (P.) Ltd. - [2022] 145 taxmann.com 157 (SC)

Judiciary and Counsel Details

• • M.R. Shah & M.M. Sundresh, JJ
  • Balbir Singh, ASG Samarvir Singh, Monica Benjamin, Rukhmini Bobde, Rupesh Kumar, Adit Khorana, Udai Khanna, Naman Tandon, Advs. Raj Bahadur Yadav, AOR Prahlad Singh, Adv. for the Appellant.
  • Apoorv Kathore, Adv. Vikas Mehta, AOR for the Respondent.

Facts of the Case

Assessee-company filed return of income for the relevant assessment year which was processed by the department under section 143(1). After obtaining all necessary approvals, Assessing Officer (AO) issued a reassessment notice under section 148 and supplied reasons for the same at a later date.

However, due to the transfer of the Assessing Officer in charge, a new Assessing Officer was assigned to the case. The subsequent AO issued another notice under section 148 though not required by law.

The assessee again asked for reasons for reopening the assessment and submitted its objections. AO rejected the assessee’s contention and passed the order under section 143(3).

Aggrieved-assessee filed a writ petition to the High Court. The High Court held that the second notice issued by AO was to be considered a fresh notice and the same was barred by limitation. Aggrieved-AO moved a petition to the Supreme Court.

Supreme Court Held

The Apex Court held that section 129 of the Income-tax Act empowers the subsequent AO to continue with the earlier proceedings in case of change in AO. AO can start the proceedings from the stage at which they were left by the earlier AO. This provision makes it clear that fresh notice by the subsequent AO was not required at all.

In the present case, the Assessment Order is passed by the second AO based on the first notice and not based on the second notice. Thus, the assessment cannot be considered time-barred by limitation.

Further, the issuance of fresh notice cannot be considered as dropping the earlier show-cause-notice. Accordingly, the order passed by the High Court quashing the assessment was to be set aside.

Since the assessee did not challenge the assessment order before CIT(A), the assessee was directed to prefer an appeal to CIT(A) with respect to the assessment without raising the issue with respect to limitation.