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Issues involved: The judgment involves issues related to assessment orders passed by the ACIT, disallowance of undisclosed income and expenditure, claim of depreciation, reopening of assessment u/s 147, block assessment proceedings, directions by the appellate authority, and validity of notice u/s 148.
Assessment Year 1997-98: The assessee, engaged in the business of steels and metals, filed a return of income declaring Nil income after a search and seizure action. The ACIT disallowed undisclosed income and expenditure, leading to a total income of Rs.2,31,35,634. The Tribunal later held that this income cannot be termed as undisclosed and directed the Assessing Officer to consider it in regular assessments. The Assessing Officer issued a notice u/s 148, but the assessee did not comply. The CIT(A) confirmed the assessment, citing relevant case laws. However, the ITAT quashed the assessment orders, stating that the Tribunal's observation did not constitute a valid direction under section 153(3)(ii). Assessment Year 1998-99: Similar issues arose for this assessment year, with the ACIT disallowing income and expenditure, resulting in a total income of Rs.2,22,01,742. The CIT(A) upheld the assessment based on precedents. The ITAT, after considering relevant judgments, quashed the assessment orders for both years, emphasizing that the Tribunal's observation did not amount to a valid direction under the law. Conclusion: The ITAT Hyderabad quashed the assessment orders for both assessment years 1997-98 and 1998-99, as the Tribunal's observation did not constitute a valid direction under section 153(3)(ii). The appeals of the assessee were allowed, and the assessment orders were set aside.
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