The Supreme Court's division bench of Justices M.R. Shah and Justice C.T. Ravikumar has ruled that the income tax department cannot initiate reassessment proceedings while the rectification proceedings are still pending. The court also stated that the Punjab and Haryana High Court made a serious error in ruling that the notice under Section 154 was invalid because it was past the statute of limitations. The High Court was not hearing any proceedings under Section 154 of the Income Tax Act.

The assessment order was issued in accordance with Section 143(1) of the Income Tax Act. The benefit was claimed by the assessee under Section 80 HHC. However, in subsequent assessment years, the assessee claimed the bad debt on the grounds that the export had not materialised in the previous year, and thus the Department initiated Section 154 proceedings. During the proceedings, the Department also initiated reassessment proceedings and reopened the assessment for 1996-1997. The court determined that the proceedings initiated under Section 154 of the Act could be said to be pending in the absence of a specific order of withdrawal.

The High Court's judgement and order were overturned by the court.

Case Title: S.M. Overseas (P) Ltd. Versus CIT
Citation: Civil Appeal No. 3612-3613 Of 2012
Link: 

https://main.sci.gov.in/supremecourt/2010/37433/37433_2010_5_102_40348_Order_07-Dec-2022.pdf