Interest-tax Act – Reassessment – Where there is no assessment order passed; there cannot be a notice for reassessment inasmuch as the question of reassessment arises only when there is an assessment in the first instance.

On the return of chargeable interest filed by the appellant/assessee under the Interest-tax Act, 1974 for the assessment year 1997-98, no assessment order was passed. However, much after the last date of the assessment year was over, the Assessing Officer sought to reopen the assessment by issuing notice u/s. 10 of the Act and thereafter proceeded to reassess 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 passed in the original proceedings there was no question of reopening the so-called assessment and make the reassessment. The Commissioner of Incometax (Appeals) accepted the aforesaid contention and set aside the reassessment order. This order was upheld by the Income-tax Appellate Tribunal (“the Tribunal”) as well. However, in further appeal 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 u/s.10 of the Act, there could be a reassessment. The assessee had relied upon various judgments in support including the judgment of the Supreme Court in Trustees of H.E.H. the Nizam’s Supplemental Family Trust vs. CIT [2000] 242 ITR 381 (SC). The High Court held that the said judgment would not govern the case at hand.

The Supreme Court after hearing the learned counsel for the parties, was of the opinion that the High Court had wrongly ignored upon the ratio laid down in Trustees of H. E. H. the Nizam’s Supplemental Family Trust’s case which squarely applied in the instant case in favour of the assessee. The ratio of the said judgment was that in those situations where there is no assessment order passed, there could not be a notice for reassessment inasmuch as the question of reassessment arises only when there is an assessment in the first instance.

The Supreme Court allowed the appeal and set aside the order passed by the High Court.