2008 (4) TMI 725 - AT - Income Tax

Summary

Issues involved:
The issues involved in this case are the validity of the assessment order passed under section 143(3)/148, compliance with the provisions of section 151(2) for reopening the assessment, shifting of burden of proof onto the assessee, violation of principles of natural justice due to lack of opportunity for cross-examination, and the reliance on material without providing a copy to the assessee.

Validity of assessment order u/s 143(3)/148:
The cross-objection of the assessee challenged the validity of the assessment order passed under section 143(3)/148. The contention was that the approval for reopening the assessment was obtained from the CIT instead of the Joint CIT as required by section 151(2). The Tribunal held that satisfaction of the prescribed authority, i.e., Joint CIT, is mandatory and cannot be substituted by any other officer, even if senior to the Joint CIT. Relying on previous Tribunal judgments, the Tribunal found that the notice issued by the Assessing Officer under section 148 was bad in law due to the non-obtaining of the mandatory requisite approval of the Joint CIT. Consequently, ground No. 1(a) of the assessee's cross-objection was allowed.

Violation of principles of natural justice:
The cross-objection also raised concerns about the violation of principles of natural justice in the assessment proceedings. It was noted that the assessee was not provided with a copy of crucial material used by the Assessing Officer against them, such as the statement of a key individual and other gathered material. The Tribunal emphasized that the AO must confront the assessee with any material he intends to use in the assessment, as failing to do so violates the fundamental proposition of tax law. Citing relevant case law, the Tribunal concluded that the AO's heavy reliance on undisclosed material without providing a copy to the assessee violated the principle of natural justice, rendering the assessment proceedings invalid. Therefore, the cross-objection of the assessee was allowed on this ground as well.

Outcome:
As a result of finding the notice under section 148 to be invalid and the assessment proceedings to be in violation of natural justice, the Tribunal dismissed the appeal of the Revenue and allowed the cross-objection of the assessee. The assessment order was deemed not valid, and no separate adjudication on the Revenue's ground was necessary as the reassessment itself did not survive.