1990 (8) TMI 182 - AT - Income Tax

Assessment Proceedings, High Court, Immovable Property, Movable Property, Reassessment Proceedings

Issues Involved:
1. Legality of assessments under Section 147.
2. Validity of notices under Section 148.
3. Applicability of Section 150(1) to lift the bar of limitation.
4. Assessments on a defunct Hindu Undivided Family (HUF).
5. Income assessment for specific years.

Detailed Analysis:

1. Legality of Assessments under Section 147:
The assessee challenged the legality of the assessments under Section 147, contending that the assumption of jurisdiction was not justified. The Tribunal held that the Income Tax Officer (ITO) had "reason to believe" that income had escaped assessment based on the Karnataka High Court's decision upholding the validity of the re-union of the family. Thus, the ITO was justified in proceeding under Section 147.

2. Validity of Notices under Section 148:
The assessee argued that the notices under Section 148 were invalid as they were issued after the expiry of the prescribed time limit. The Tribunal examined whether the notices were issued within the time limits under Section 149. It was found that for assessment years 1971-72, 1978-79, and 1979-80, the notices were valid as they fell under Section 147(a) and the escaped income exceeded Rs. 50,000, allowing a 16-year time limit. However, for assessment years 1972-73 to 1976-77, the notices were issued beyond the four-year limit under Section 147(b) and were invalid unless saved by Section 150(1).

3. Applicability of Section 150(1) to Lift the Bar of Limitation:
The department argued that the notices were saved by Section 150(1) as they were issued to give effect to the High Court's finding. The Tribunal held that the High Court did not give a "direction" but a "finding" that the re-union was valid. However, only the assessment for the year 1972-73 fell within the purview of Section 150(1) as it involved income excluded from Paramanand L. Bajaj's assessment. The assessments for 1973-74 to 1976-77 were struck down as the notices were not issued within the prescribed time.

4. Assessments on a Defunct Hindu Undivided Family (HUF):
The assessee contended that the HUF had ceased to exist by the time the assessments were made, making them invalid. The Tribunal found that no finding of total partition under Section 171 had been recorded, and the HUF continued to exist for tax purposes. Thus, the assessments were not invalid on this ground.

5. Income Assessment for Specific Years:
- 1971-72: The ITO failed to obtain prior sanction of the Board before issuing the notice under Section 148. The Tribunal directed the ITO to assess only the income of properties thrown into the hotch-pot by Paramanand L. Bajaj.
- 1972-73: The re-assessment was upheld, but the ITO was directed to assess only the income of properties thrown into the hotch-pot by Paramanand L. Bajaj.
- 1977-78, 1978-79, 1979-80: The assessments were upheld as valid. However, the ITO was instructed to exclude the income of properties partitioned on 8-5-1972 from the total income of the assessee.

Conclusion:
- Appeals for assessment years 1973-74 to 1976-77 were allowed, striking down the assessments.
- Appeals for assessment years 1971-72, 1972-73, 1977-78, 1978-79, and 1979-80 were partly allowed, directing the ITO to reassess based on the specified guidelines.

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