2013 (12) TMI 1423 - HC - Income Tax

Validity of reassessment u/s 147 - service of notice - Held that - The assessment proceedings were reopened after giving notice in terms of Section 148(1) of the Act - The assessee s accountant had received the notice and the assessee has subsequently attended the proceedings - A perusal of assessment records goes to reveal that Shri Tarsem Pal Accountant was duly authorised to receive the notices and the services were rightly effected u/s 282 of the I.T. Act - Action of the AO in reopening the case under Section 147 of the Act as also of service of notice under Section 148(1) of the Act on the assessee through its representative to be valid and legal - Decided against assessee. Undisclosed octroi income - Held that - The assessee has failed to show supporting entries showing payment of octroi - Decided against assessee. Reserves on account of Sundry World Bank Account - Held that - It was entire sale price charged in advance - The assessee did not refund the balance amount immediately at the time of delivery of tractor - The amount received as sale price in advance was clearly in the nature of trading receipt and the entire amount is clearly assessable as income of the assessee - The adjustment on account of refunds should be made in the year in which the deposits was actually received between the assessment year 75-76 to 77-78 - Decided against assessee.

Summary

Issues Involved:
1. Legal sustainability of orders Annexures P-1, P-2, and P-3.
2. Validity of the reopening of assessment under Section 148 of the Income Tax Act, 1961.
3. Addition on account of reserves in the Sundry World Bank Account.
4. Addition of Rs.5,000/- on account of undisclosed income on octroi estimates.
5. Absence of a show cause notice prior to reassessment.

Detailed Analysis:

1. Legal Sustainability of Orders Annexures P-1, P-2, and P-3:
The appellant-assessee challenged the legal sustainability of the orders passed by the Tribunal, CIT(A), and AO. The Court focused on the spirit behind the questions rather than their language and text. The Tribunal had affirmed the orders of the CIT(A) with directions to verify details of refunds and make necessary adjustments against income assessed under the Sundry World Bank Account.

2. Validity of Reopening of Assessment under Section 148 of the Income Tax Act, 1961:
The assessee contended that the proceedings under Sections 147 and 148 were invalid due to the non-receipt of statutory notice under Section 148. The revenue argued that the reopening was preceded by disclosure of reasons recorded in terms of Section 148(2), and notice was duly given under Section 148(1). The AO's order indicated that the notice was received by the assessee's authorized representative, satisfying the legal requirement. The Tribunal upheld this view, validating the reopening of the case.

3. Addition on Account of Reserves in the Sundry World Bank Account:
The assessee argued that the amount in the Sundry World Bank Account was shown as a liability and not income. However, the AO treated the advance payments for imported tractors as trading receipts, leading to additions. The CIT(A) and Tribunal affirmed this, directing adjustments for refunds in the year deposits were received. The Court found the CIT(A)'s findings realistic, stating the entire sale price charged in advance was assessable as income.

4. Addition of Rs.5,000/- on Account of Undisclosed Income on Octroi Estimates:
The AO made additions due to the absence of supporting entries for octroi payments. The Tribunal affirmed these additions, and the Court found no evidence to support the assessee's claim of actual octroi payments, validating the additions made by the AO.

5. Absence of a Show Cause Notice Prior to Reassessment:
The assessee claimed the absence of a show cause notice before reassessment. The revenue maintained that reasons were disclosed, and notice under Section 148(1) was duly served. The Tribunal and the Court upheld this, stating the service of notice was legally valid.

Conclusion:
The Court dismissed the appeals, holding that the reopening of assessment conformed to Sections 147 and 148 read with Section 282 of the Act. The additions on account of reserves in the Sundry World Bank Account and undisclosed income on octroi estimates were found to be factually and legally correct. All substantial questions of law were answered in favor of the revenue and against the assessee.