Validity of reassessment proceeding if there is no increase in tax liability

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Validity of reassessment proceeding if there is no increase in tax liability

Validity of reassessment proceeding if there is no increase in tax liability

“Income Escaped Assessment”  & “Reason to believe” are important preconditon for reassessment proceeding under section 147
If “Reason to Believe” recorded by AO does not Increase any tax liability after Reassessment Procredings then whether Reassessment Proceeding is still Valid is question by by lot many tax professionals.
For Income Escaped Assessment under section 147 , AO shall Record ” REASON TO BELIEVE” before issuing notice under section 148 for Reassessment.
At times, it is seen that TDS was done from Income like in the case of SALARY Income wherein entire Tax liability was deducted but there was failure on the part of the Assessee to file Income Tax Return .
In such cases where there was no Increase in the tax Liability then  whether Reassessment Proceeding is valid?
It was the issue before the court in the case of ” Motto Tiles Pvt Ltd vs. ACIT”.
It was held that reassessment proceeding is not at all valid where there is no increase in Tax Liability due to Additions made in the Reassessment Proceedings on the basis of ” Reasons for Belief” recorded by AO.
In short, if there is no increase in Tax Liability,  entire Reassessment proceedings is bad in law and not valid.

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