2013 (12) TMI 1162 - HC - Income Tax

Whether the report of ADI (Investigation) may be the basis for initiating proceedings u/s 147 - Held that - The condition that the A.O. must be in possession of a definite and relevant information or material which may led him to have reasons to believe that income chargeable to tax has escaped assessment must be fulfilled - The Tribunal is a final fact finding authority - The Tribunal observed that the mandatory conditions for initiation of the proceedings u/s. 147 were not fulfilled in the case of the assessee. Also the tax effect in each appeal is less than prescribed limit - As per Board s Circular dated 24.10.2005 as well as limit prescribed under Section 268-A of the Income Tax Act, the Department is not expected to file the appeals - Decided against Revenue.

Summary

Issues:
Appeals filed by the Department under Section 260A of the Income Tax Act, 1961 against the consolidated judgment and order dated 16.04.2000 passed by the Income Tax Appellate Tribunal for the assessment years 1992-93; 1993-94; 1994-95; and 1995-96.

Analysis:
The appeals were admitted based on the substantial question of law regarding the initiation of proceedings under Section 147 of the Income Tax Act. The Income Tax Officer completed the assessment for the four years under consideration, but the validity of the proceedings under Section 147 was challenged. The CIT(A) rejected the objection, but the Tribunal accepted it, leading to the quashing of the assessment. The Tribunal highlighted the mandatory prerequisites for a valid reassessment or assessment under Section 147, emphasizing the need for the AO to have a reason to believe that income has escaped assessment. The Tribunal found that these conditions were not met in the present case, citing various legal precedents to support its decision. As the Tribunal is the final fact-finding authority, the High Court declined to interfere with its order.

The High Court noted that the tax effect in each appeal was below the prescribed limit, indicating that the Department was not expected to file the appeals as per the Board's Circular dated 24.10.2005 and Section 268-A of the Income Tax Act. Consequently, the substantial question of law was decided in favor of the assessee, leading to the dismissal of all appeals filed by the Department.