2010 (12) TMI 56 - HC - Income Tax

Search - took place in the premises of the assessee - assessee filed his return showing nil income - Assessing Officer (the AO) assessed the income of the assessee at Rs. 30,31,226/ - Held that - appeal of the Department was in the proceedings arising of the assessment made in pursuance of the order of the CIT (A) dated 1.4.2003 under section 263 of the Act. It is not disputed that this order under section 263 of the Act has been set aside by the Tribunal - No appeal has been filed against this order. In view of the this the entire proceedings in pursuance of this order had become void - Tribunal rightly dismissed the appeal of the Department as infructuous and allowed the appeal of the assessee and remanded the case to the Commissioner(Appeals) to decide his appeal against the order - Appeal is dismissed

Summary

Issues:
1. Validity of assessment under section 132 and 158 BC of the Income Tax Act 1961.
2. Setting aside of assessment order by the Commissioner of Income Tax under section 263.
3. Appeal against assessment order dated 28.2.2002.
4. Appeal against order dated 1.4.2003 by the CIT.
5. Fresh assessment order passed by AO on 31.3.2005.
6. Appeal against the order dated 31.3.2005.
7. Appeal against the order dated 22.7.2005 by Commissioner (Appeals).
8. Appeal by the Department against the order dated 22.7.2005.
9. Decision on the appeals of the assessee and the Department.

Analysis:

1. The judgment concerns a search conducted under section 132 of the Income Tax Act 1961 at the assessee's premises, followed by a notice under section 158 BC for the block period. The Assessing Officer assessed the income at Rs. 30,31,226 on 28.2.2002, which was later set aside by the Commissioner of Income Tax under section 263 on 1.4.2003, deeming it erroneous and prejudicial to revenue.

2. Subsequently, the assessee's appeal against the initial assessment order dated 28.2.2002 was dismissed as infructuous on 1.10.2003, as it had been set aside by the CIT under section 263. A fresh assessment order was then passed on 31.3.2005, assessing the income at Rs. 58,58,724 for the block period.

3. The assessee appealed against the order dated 31.3.2005, and during the appeal process, the Tribunal set aside the CIT's order dated 1.4.2003 under section 263 on 16.5.2005. Following this, the Commissioner (Appeals) set aside the order dated 31.3.2005 on 22.7.2005.

4. Appeals were filed by both the assessee and the Income Tax Department against various orders. The Tribunal allowed the assessee's appeal, remanding the matter for decision on merits, while dismissing the Department's appeal as infructuous. The Department then filed the present appeal, challenging the Tribunal's decision.

5. The Court noted that the Tribunal rightly dismissed the Department's appeal as the order under section 263 had been set aside earlier, rendering the subsequent proceedings void. The appeal of the Department was found to lack merit, leading to its dismissal by the Court.