1982 (5) TMI 88 - AT - Income Tax

Summary

Issues:
1. Validity of reassessment under section 147(b) of the Income-tax Act, 1961.
2. Interpretation of audit objection as information for invoking section 147(b).
3. Continuation of business and set off of losses under section 41(2) and Explanation thereof.

Detailed Analysis:
1. The appeal before the Appellate Tribunal ITAT COCHIN was regarding the validity of reassessment by the revenue against the order of the Commissioner (Appeals) for the assessment year 1975-76. The Commissioner (Appeals) had annulled the reassessment, stating that the assessment was not validly reopened under section 147(b) of the Income-tax Act, 1961. The original assessment was completed on 10-5-1976, and the reassessment was based on an audit objection. The Tribunal held that the reassessment was not validly initiated by the Income Tax Officer (ITO).

2. The key issue in the case was the interpretation of the audit objection as information for invoking section 147(b). The ITO reopened the assessment based on the audit objection, which stated that the assessee ceased to carry on the business during the previous year for the assessment year 1975-76. The Commissioner (Appeals) analyzed the audit objection and held that it did not constitute valid information for reopening the assessment. The Tribunal agreed with this analysis, stating that the audit objection had interpreted a legal position on whether the assessee carried on the business during the previous year, making it not valid for invoking section 147(b).

3. The Tribunal also delved into the issue of the continuation of business and set off of losses under section 41(2) and its Explanation. The revenue contended that there was no unabsorbed loss in the previous year when the business started, therefore no loss from earlier years could be set off against the income assessed under section 41(2). However, the Tribunal disagreed, stating that the business was not discontinued before the beginning of the previous year for the assessment year in question. The Tribunal concluded that the set off of losses from previous years was allowable, as the business was carried on during the relevant period.

In conclusion, the Appellate Tribunal ITAT COCHIN dismissed the appeal, upholding the decision that the reassessment was not validly initiated and allowing the set off of losses from previous years against the income assessed under section 41(2).