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Issues Involved:
1. Validity of reopening the assessment u/s 147. 2. Requirement of recording reasons u/s 148(2). Summary: 1. Validity of Reopening the Assessment u/s 147: The case concerns the reopening of the assessment for the assessment year 1972-73. The original assessment was completed on February 28, 1974. An audit party noted certain mistakes regarding deductions u/s 35B and development rebate. The Income-tax Officer issued a notice u/s 148 on March 15, 1976, stating he had reason to believe that income had escaped assessment. The assessee objected, but the assessment was made in accordance with the audit note. The Appellate Assistant Commissioner upheld the assessee's claims on merits, restoring the original benefits. The Tribunal, however, focused on the validity of the reopening and upheld the assessee's contention, noting that the requirement of recording reasons u/s 148(2) was not satisfied. 2. Requirement of Recording Reasons u/s 148(2): The Tribunal noted that two conditions must be satisfied before an assessment can be reopened u/s 147: the Assessing Officer must have reason to believe that income had escaped assessment, and reasons must be recorded before issuing a notice u/s 148. The Tribunal found that while the first condition was met, the second was not. The Tribunal stated, "We do not find any material to warrant the inference even on combined reading of all the correspondence to which we have referred that the Income-tax Officer had recorded his reasons for issuing the notice." The Tribunal concluded that the reopening was without jurisdiction due to the lack of recorded reasons, as required by section 148(2). Court's Analysis: The court examined the notings in the order sheet and found no recording of reasons by the Income-tax Officer for reopening the assessment. The court emphasized that the recording of reasons is a mandatory requirement u/s 148(2) and an essential condition to vest jurisdiction in the Income-tax Officer. The court cited various precedents, including Johri-Lal (HUF) v. CIT and P. V. Doshi v. CIT, to support the mandatory nature of this requirement. The court concluded that the absence of recorded reasons nullified the entire proceedings as without jurisdiction. Conclusion: The Tribunal was justified in holding that the assessment proceedings were lacking in jurisdiction due to non-compliance with the mandatory requirement of recording reasons u/s 148(2). The question referred to the court was answered in the affirmative, in favor of the assessee and against the Revenue.
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