The assessee claimed benefit under Sec. 80 HHC for A.Y. 1995-96 for bad debt and in subsequent A.Y. claimed that the export was not realised due to which the Respondent initiated proceedings under Sec. 154. During the said proceedings, the Respondent also initiated proceedings under Sections 147, 148 of the Act and reopened assessment for A.Y. 1996-97 and passed an assessment order. On an appeal to ITAT, ITAT quashed and set aside the assessment proceedings which were re-opened under Section 148 of the Act by holding that as the proceedings under Section 154 initiated against the assessee were pending, no re-opening proceedings under Section 147/148 of the Act could have been issued/initiated and also quashed and set aside the Assessment Order for the A.Y. 1995-96. On an appeal to the High Court, the High Court passed an adverse order in favour of the Respondent and while remanding the matter back to the ITAT observed that the proceedings under Section 154 were beyond the period of limitation prescribed under Section 154(7) of the Act, the said notice was invalid and therefore, the re-opening proceedings under Section 147/148 would be maintainable. A review application by the assessee came to be dismissed by the High Court.

On an Appeal to the Supreme Court, it was opined that proceedings under Section 154 of the Act were not the subject-matter before the High Court and High Court has committed serious error in observing and holding that the notice under Section 154 was invalid as the same was beyond the period of limitation as prescribed/provided under Section 154(7) of the Act. The Supreme court thus held that during the pendency of the proceedings under Section 154 of the Act, it was not permissible on the part of the Revenue to initiate proceedings under Section 147/148 of the Act pending the proceedings under Section 154 of the Act and the impugned judgment and order passed by the High Court was quashed and set aside while the order passed by the ITAT was restored. ( AY. 1995 -96 )