1978 (4) TMI 111 - AT - Income Tax

Summary

Issues:
1. Validity of reopening assessment under section 147(a).
2. Determination of unexplained investment belonging to HUF.
3. Burden of proof on the department to establish ownership of investment.

Detailed Analysis:
1. The appeal challenged the order of the AAC in Appeal No. M. 130/74-75, questioning the validity of reopening the assessment under section 147(a). The ITO initiated proceedings under section 147(a) upon receiving information about an unexplained investment made by Smt. Bhagwanti, a member of the HUF, in a property. The notice under section 148 was issued, and the return was filed by the assessee under protest, denying any cause for action under section 147. The ITO determined the unexplained investment of Rs. 13,560 as belonging to the HUF, resulting in a total income of Rs. 25,540. The appeal to the AAC raised objections to the assessment, contending that the action under section 147(a) was not justified.

2. The AAC upheld the assessment, stating that the action under section 147(a) was justified as the property in Smt. Bhagwanti's name was not disclosed during the original assessment. The appeal also challenged the inclusion of the investment as the assessee's income without sufficient evidence of funds advanced by the HUF. The AAC dismissed this ground, emphasizing the lack of an ostensible source of income for Smt. Bhagwanti and the absence of evidence proving the source of the investment. The appeal was consequently dismissed by the AAC.

3. Upon careful examination, the ITAT Chandigarh analyzed the reasons recorded for reopening the assessment under section 147(a). The ITAT noted that the reasons provided were insufficient, as they did not meet the mandatory requirement of recording specific reasons under section 148(2). The correspondence between the ITO, IAC, and CIT did not constitute valid reasons for reopening the assessment. Additionally, the burden of proof lay on the department to establish that the investment belonged to the HUF. However, the lack of material on record indicating the source of the investment led to the quashing of the reassessment dated 30th Nov., 1974.

In conclusion, the ITAT Chandigarh allowed the appeal, quashing the reassessment due to insufficient reasons for reopening the assessment and the absence of evidence proving the ownership of the investment.