2007 (10) TMI 626 - HC - Income Tax

Reopening of the assessment - Escapement of Income - Income from undisclosed source - Seizure of goods - Whether the Tribunal was justified in upholding the CIT(A) s order quashing the reassessment made u/s 143(3)/148?- HELD THAT - Tribunal held that - ''We are unable to accept the submission of the counsel for the revenue. As noticed, the goods were seized by the customs authorities somewhere in the third week of October, 1979 and after valuation of the said goods having been got done by the customs authorities from the Appraiser, Foreign Post Office, Jaipur, the said goods were delivered to Income-tax Officer under the provisions of section 132A(2), on 29-12-1980. As a matter of fact, the ITO, H-Ward, Jaipur framed provisional assessment order u/s 132(5), assessing the income of the assessee at ₹ 3,48,116. The assessee filed return of income for the assessment year 1980-81 thereafter on 31-5-1982 and the order u/s 143(1) accepting the return of income was passed on 15-6-1982. The Assessing Officer, thus, at the time of passing of the order dated 15-6-1982 had in his possession all primary facts necessary for framing the assessment and it was for him to draw proper inference from those facts which the Income-tax Officer did not do. It was, thus, plainly a case of oversight by the Assessing Officer and not that the income chargeable to tax had escaped assessment by the reason of omission or failure on the part of the assessee to disclose fully and truly all material facts. Our view finds support from the decision of the Supreme Court in the case of Gemini Leather Stores v. ITO 1975 (5) TMI 1 - SUPREME COURT wherein the Supreme Court upon consideration of the decisions in the case of Calcutta Discount Company v. ITO 1960 (11) TMI 8 - SUPREME COURT ; CIT v. Burlop Dealers Ltd. 1971 (1) TMI 10 - SUPREME COURT and CIT v. Hemchandra Kar 1970 (4) TMI 3 - SUPREME COURT .'' The consideration of the matter by the Income-tax Appellate Tribunal is in accord with the law exposited by the Supreme Court in the afore-referred case. We are, thus, satisfied that the order of Income-tax Appellate Tribunal dated 27-3-1992 does not give rise to any question of law and the rejection of the application u/s 256(1) is not flawed. The Income-tax Application is, accordingly, dismissed.

Summary

Issues:
1. Validity of reopening assessment under section 147 of the Income-tax Act.
2. Interpretation of the order passed under section 143(1) of the Income-tax Act.
3. Disclosure of material facts by the assessee for assessment purposes.
4. Justifiability of reassessment proceedings based on new information.

Analysis:
1. The case involved a reference application under section 256(2) of the Income-tax Act, 1961 by the revenue challenging the order of the Tribunal upholding the Commissioner of Income-tax (Appeals) decision to set aside the reassessment under section 147. The revenue contended that the reassessment was valid due to the failure of the assessee to disclose material facts regarding the seized goods, leading to the initiation of reassessment proceedings.

2. The Assessing Officer had passed an order under section 143(1) accepting the return of income on 15-6-1982. The revenue argued that this was only an intimation and not an assessment order, but the Court clarified that the acceptance of return under section 143(1) constituted an assessment order. The Court also highlighted that failure to take steps under section 143(3) did not render the Assessing Officer powerless to initiate reassessment proceedings.

3. The assessee challenged the reassessment by filing an appeal before the Commissioner of Income-tax (Appeals), who set aside the order of the Assessing Officer. The Tribunal affirmed this decision, emphasizing that the reassessment was not justified as all primary facts were within the knowledge of the Assessing Officer when the original assessment was made. The Court cited precedents to support the view that the Assessing Officer's oversight did not constitute a valid reason for reassessment.

4. The Court rejected the revenue's argument that the reassessment was based on new information concerning the seized goods, asserting that the Assessing Officer had all primary facts necessary for assessment at the time of the original order. The Court concluded that the Tribunal's decision did not raise any question of law, and the rejection of the reference application was upheld, resulting in the dismissal of the Income-tax Application.

This detailed analysis of the judgment highlights the key issues addressed by the Court regarding the validity of reassessment under section 147, the interpretation of the order under section 143(1), the importance of disclosing material facts by the assessee, and the justifiability of reassessment based on new information.