1981 (3) TMI 111 - AT - Income Tax

Summary

Issues:
1. Validity of re-assessment made by the ITO for the assessment year 1969-70.
2. Jurisdiction of the ITO to issue notice under section 148.
3. Application of judicial precedents in cancelling the re-assessment.

Analysis:

Issue 1: Validity of re-assessment
The appeal by the revenue challenged the order of the AAC cancelling the re-assessment made by the ITO for the assessment year 1969-70. The original assessment was completed under section 143(1) of the IT Act, 1961, and later reopened by the ITO. The AAC annulled the re-assessment citing lack of proper reasons and jurisdictional issues, which was accepted by the Revenue. The ITO proceeded to make a fresh re-assessment, which was again challenged before the AAC.

Issue 2: Jurisdiction of the ITO
The AAC, in her order, emphasized that the ITO lacked a bonafide belief based on definite information that income had escaped assessment when issuing the notice under section 148. The ITO, in the subsequent re-assessment, claimed to have obtained proper reasons and approval from the Commissioner. However, the AAC found that the same issues and computations were repeated from the earlier annulled re-assessment, indicating a lack of new findings or justification for the re-assessment.

Issue 3: Application of judicial precedents
The Revenue contended that the AAC erred in applying the Allahabad High Court judgment to the case, arguing that the Delhi High Court judgment was more applicable. The assessee, on the other hand, relied on the Allahabad High Court judgment and the Supreme Court decision in a related case. The Tribunal found that the AAC's decision to cancel the re-assessment was justified, as the ITO failed to provide new grounds and the Commissioner did not properly assess the situation before approving the re-assessment.

In conclusion, the Tribunal dismissed the appeal, upholding the AAC's order to cancel the re-assessment. The Tribunal found that the re-assessment proceedings were flawed and lacked proper justification, aligning with the judicial precedents cited by the assessee. The decision emphasized the importance of a genuine belief and proper assessment before initiating re-assessment proceedings, ultimately affirming the cancellation of the re-assessment.