2011 (9) TMI 517 - HC - Income Tax

Validity of 144 after dropping proceedings under 158BC - Search Conducted - Block Assessment Initiated - Books, accounts produced were not proper and incomplete - Ultimately proceedings were dropped and 148 issued - Finally order of Best Judgement passed under 144 - Held That - It is evident that the assessment proceeding had not taken place on merits and proceeding was terminated. Such a situation was brought about by the conduct and complete lack of cooperation attributable to the assessee. Since assessing officer had not disposed of the block-period assessment on merits had decided to drop the same and resorted to best-judgment assessment which is warranted in law.

Issues Involved:
1. Validity of initiating proceedings for best-judgment assessment under section 144 after dropping block-period assessment.
2. Permissibility of simultaneous re-opening of assessment under section 147/148.
3. Validity of simultaneous action for re-assessment.
4. Impact of dropping proceedings under section 158BD on income escapement.
5. Whether the reassessment was based on a change of opinion.
6. Validity of best-judgment assessment without specifying defects in books of accounts.

Issue-wise Detailed Analysis:

1. Validity of initiating proceedings for best-judgment assessment under section 144 after dropping block-period assessment:
The court examined the appellant's contention that the assessing officer could not initiate best-judgment assessment under section 144 after dropping block-period assessment. The court found that the assessing officer had not disposed of the block-period assessment on merits due to the assessee's non-cooperation. It was concluded that the course adopted by the assessing officer was permissible under the scheme of the Act, as the officer resorted to best-judgment assessment due to the constraints presented by the assessee.

2. Permissibility of simultaneous re-opening of assessment under section 147/148:
The appellant argued that re-opening the assessment under section 147/148 after dropping block-period assessment was impermissible. The court held that the assessing officer's actions were justified and permissible under the Act. The officer had recorded reasons for re-opening the case and issued notice under section 148, which was in line with the legal requirements.

3. Validity of simultaneous action for re-assessment:
The appellant contended that re-assessment proceedings should only start after completing earlier proceedings. The court found that the assessing officer had not completed the block-period assessment on merits and had validly initiated re-assessment proceedings. The court noted that the appellant had submitted to the jurisdiction of the authorities and raised the issue for the first time before the court.

4. Impact of dropping proceedings under section 158BD on income escapement:
The court examined whether dropping proceedings under section 158BD resulted in income escapement. The court concluded that the assessing officer had valid reasons to believe that income had escaped assessment and had followed the appropriate procedure under section 148. The lack of cooperation from the assessee justified the officer's actions.

5. Whether the reassessment was based on a change of opinion:
The appellant argued that the reassessment was based on a mere change of opinion. The court disagreed, stating that the block-period assessment had not been concluded on merits. The assessing officer's decision to drop the block-period assessment and resort to best-judgment assessment was not a change of opinion but a necessary step due to the assessee's non-cooperation.

6. Validity of best-judgment assessment without specifying defects in books of accounts:
The appellant contended that the best-judgment assessment was arbitrary as the assessing officer did not specify defects in the books of accounts. The court found that the assessing officer had provided detailed reasons for the best-judgment assessment, including the assessee's failure to produce proper books of accounts and supporting documents. The court upheld the assessing officer's decision, noting that the procedure and liability under block-period assessment were more stringent.

Conclusion:
The court dismissed the appeals, concluding that the issues were concluded by findings of facts and did not raise substantial questions of law. The assessing officer's actions were found to be justified and permissible under the Act. The appeals were dismissed, and the substantial questions of law were answered against the appellant and in favor of the Revenue.

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