2010 (7) TMI 1033 - AT - Income Tax

Summary

Issues involved:
The judgment involves issues related to the initiation of proceedings under section 147, addition of unexplained cash credit under section 68, and the assessment under section 143(3)/147.

Initiation of proceedings under section 147:
The appeal was against the order confirming the Assessing Officer's action in making the assessment under section 143(3)/147. The AO initiated reassessment proceedings under section 147 by issuing notice under section 148 before the time limit for issuing notice under section 143(2) had expired. The argument was that income can be said to have escaped assessment only after the proceedings have been terminated by assessment under section 143(3) or when the time limit for issuing notice under section 143(2) has expired. Citing the case of Super Spinning Mills Ltd. Vs. Addl. CIT, it was concluded that the AO cannot initiate proceedings under section 147 when the time for issuing notice under section 143(2) has not expired. The Tribunal quashed the orders of the lower authorities and allowed the grounds of appeal of the assessee.

Addition of unexplained cash credit under section 68:
The Commissioner of Income-tax(Appeals) confirmed the action of the Assessing Officer in making an addition of Rs. 6,56,554 as alleged unexplained Cash Credit under section 68. The Commissioner held that the appellant had failed to explain the source for the Cash Credited in the Books. However, since the reassessment proceedings were quashed, there was no need to adjudicate this issue on merit.

Assessment under section 143(3)/147:
Ground Nos. 1 and 2 of the appeal were against the action of the Ld. CIT(A) in confirming the AO's action in making the assessment under section 143(3)/147 of the Income Tax Act. The AO had issued notices under sections 143(2) and 142(1) to the assessee and completed the assessment under section 143(3). The Ld. Counsel for the assessee argued that the AO cannot come to the conclusion of any escapement unless the return filed by the assessee is scrutinized. It was emphasized that income can be said to have escaped assessment only after the proceedings have been terminated by assessment under section 143(3) or when the time limit for issuing notice under section 143(2) has expired. The Tribunal, following the decision in the case of Super Spinning Mills Ltd. Vs. Addl. CIT, quashed the reassessment proceedings, thereby allowing the appeal of the assessee.

In conclusion, the Appellate Tribunal quashed the reassessment proceedings initiated under section 147 due to the premature issuance of notice before the expiration of the time limit for issuing notice under section 143(2). As a result, the appeal of the assessee was allowed, and there was no need to address the other grounds on merit.