2013 (10) TMI 1183 - HC - Income Tax

Reasons to be recorded for issuance of notice u/s 148 of the Income Tax Act Income of the Trust belongs to the Assessee or not Held that - Trust was assessed for the year 1980-81 to 1983-84 and in respect of which assessment were set aside and were thereafter restored against which an application for reference was rejected. The additions, if any, could have been made in the hands of the Trust by way of rectification. The material available with the Income Tax Officer was not sufficient for initiating action under Section 148 on the ground that income of the assessee has escaped assessment. There was no findings in the case of the Trust that same was not genuine and that income belongs to the assessee - Income Tax Officer could not have assessed income in the hands of the assessee unless the Trust, which was assessed to which income was not found to be genuine. Once the Trust was assessed and that the order setting aside the assessment was restored and the application was also dismissed, the income could not have been assessed in the hands of the assessee and in this regard notice, which did not spell out whether it was issued under Section 147 (a) or 147 (a) (b) was not valid Decided against the Revenue.

Summary

Issues:
1. Defective application due to missing affidavit of service.
2. Reopening of assessment under Section 148 based on unexplained income.
3. Validity of notice issued under Section 148 and subsequent reassessment proceedings.
4. Questions of law raised by the Commissioner of Income Tax for reference.
5. Trust assessment and its impact on individual assessee's income assessment.
6. Dispute over the genuineness of the Trust and its implications on income assessment.

Analysis:
1. The judgment addressed the issue of a defective application due to the absence of an affidavit of service, which was rectified during the proceedings. The office provided a regular number to the application after the defect was removed.

2. The case involved the reopening of assessment under Section 148 of the Income Tax Act based on unexplained income deposited with a firm by the assessee as a trustee of a family trust. The Assessing Officer added the unexplained income to the individual assessee's personal income under Section 69A of the Act.

3. The validity of the notice issued under Section 148 and subsequent reassessment proceedings was challenged. The Commissioner of Income Tax sought reference on questions of law regarding the correctness of the ITAT's decision to dismiss the revenue's appeal and confirm the CIT's order quashing the reassessment proceedings.

4. The questions of law raised by the Commissioner for reference focused on the correctness of the ITAT's decision, the availability of reasons for initiating action under Section 148, and the justification for reopening the case under Section 148 based on legal precedents.

5. The judgment emphasized the impact of the Trust's assessment for previous years on the individual assessee's income assessment. It was highlighted that any additions should have been made in the hands of the Trust by way of rectification based on the available material with the Income Tax Officer.

6. The dispute over the genuineness of the Trust and its implications on the income assessment of the individual assessee were thoroughly examined. The Tribunal concluded that the Trust's assessment and subsequent rejection of the application for reference indicated that the income could not be assessed in the hands of the individual assessee.

Overall, the judgment rejected the income tax application under Section 256(2) of the Income Tax Act, emphasizing the importance of proper assessment procedures and the impact of Trust assessments on individual income assessments.