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2005 (11) TMI 173 - AT - Income TaxCash credits - Income Escaping Assessment - Validity of notice issued u/s 148 - time barred - Whether, the re-assessment proceedings intimated by the Assessing Officer and confirmed by the CIT(A) are valid? - HELD THAT - In the present appeals, we are concerned with the unamended provisions. The relevant provision of clause (a) of section 147 empowers the Assessing Officer to assess or reassess any income, where he has reason to believe that by reason of the omission or failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment, any income chargeable to tax has escaped assessment. It shows that proceeding u/s 147(a) read with section 148 can be initiated if two conditions are specified, namely, (i) the Assessing Officer must have reason to believe that income chargeable to tax has escaped assessment and (ii) he must have reason to believe that such income has escaped assessment by reason of the omission or failure on the part of the assessee to disclose fully and truly material facts necessary for his assessment for that year or to make a return u/s 139 for the assessment year to the Assessing Officer. Both the conditions should be cumulatively satisfied to confer jurisdiction to the Assessing Officer to initiate the proceedings. So long as the disclosure made by the assessee is full and true of all the material facts, the intention of the assessee cannot be questioned. If however, the subsequent events, after completion of the assessment, belie the claim of the assessee made at the assessment stage, it cannot be said that the disclosure earlier made was full and true. On consideration of the facts, we are of the view that Assessing Officer did not validly assumed jurisdiction in initiating proceedings u/s 147 of the Income-tax Act. Considering the discussion and relying on earlier order of ITAT Amritsar Special Bench in case of Assam Tea Co. 2004 (1) TMI 296 - ITAT AMRITSAR , we are of the view that cases of assessees are squarely covered by order of Special Bench in case of Assam Tea Co. therefore, initiation of the reassessment proceedings are not in accordance with law. We, accordingly, quash the same. We, therefore, answer the first question in negative i.e., in favour of the assessee and against the Revenue. Since question No. 1 is decided in favour of the assessee, therefore, there is no need to decide question No. 2 on merits as it is of academic interest only. No other point is argued or pressed nor there is any need to go in those points in view of our above finding. As a result, we cancel the orders of the authorities below and allow all the appeals of the assessee.
Issues Involved:
1. Validity of the re-assessment proceedings initiated by the Assessing Officer and confirmed by the CIT(A). 2. Genuineness of the cash credits introduced by the assessee(s). Detailed Analysis: 1. Validity of the Re-assessment Proceedings: The primary issue was whether the re-assessment proceedings initiated by the Assessing Officer (AO) and confirmed by the Commissioner of Income Tax (Appeals) [CIT(A)] were valid. The Tribunal considered the legality and initiation of proceedings under section 147 of the Income-tax Act. The assessee argued that the notice under section 148 was invalid, barred by time, and issued without recording valid reasons for reopening the assessment. The Department contended that section 148 is meant to unearth undisclosed income and should not be stopped midway. The Tribunal admitted the additional ground of appeal, citing the Supreme Court's decision in National Thermal Power Co. Ltd. v. CIT, which allows the Tribunal to consider legal questions arising from facts on record. The original assessments were reopened based on information indicating that the assessee had received/introduced bogus credits from a non-genuine money lender, Shri Parshotam Dass. The Tribunal found that the AO had no material or reason to believe that income chargeable to tax had escaped assessment due to the omission or failure of the assessee to disclose fully and truly all material facts. The AO acted on general information from the ACIT, Investigation Circle, without specific, reliable, and relevant material. The Tribunal referred to the ITAT Amritsar Special Bench decision in the case of Assam Tea Co., which quashed similar reassessment proceedings due to lack of specific material and evidence. The Tribunal concluded that the AO did not validly assume jurisdiction in initiating proceedings under section 147, as the reasons recorded were incorrect and not based on any material or fact. The belief of the AO had no rational connection with the reasons, and the initiation of reassessment proceedings was based on suspicion and assumption. Therefore, the reassessment proceedings were quashed, and the first question was answered in favor of the assessee. 2. Genuineness of the Cash Credits: Since the first question regarding the validity of the reassessment proceedings was decided in favor of the assessee, the second question on the genuineness of the cash credits became academic and was not addressed on merits. The Tribunal noted that the reassessment proceedings were not in accordance with the law, rendering the examination of the cash credits' genuineness unnecessary. Conclusion: The Tribunal quashed the reassessment proceedings, canceled the orders of the authorities below, and allowed all the appeals of the assessee. The decision was pronounced in the open court on December 30, 2005.
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