1982 (5) TMI 95 - AT - Income Tax

Summary

Issues Involved:
1. Legality of assessment under section 143(3)/147 of the Income-tax Act, 1961.
2. Applicability of section 144B to reassessments under section 147.
3. Distinction between assessments under sections 143(3) and 147.
4. Validity of reopening the assessment under section 147(a).
5. Merits of specific additions made by the ITO.

Detailed Analysis:

1. Legality of Assessment under Section 143(3)/147:
The assessee challenged the legality of the assessment made by the ITO under section 143(3)/147, arguing that the provisions of section 144B do not apply to assessments made under section 147. The Tribunal recognized the controversial nature of this contention and referred the matter to a Special Bench for a decision on whether section 144B applies to reassessments under section 147.

2. Applicability of Section 144B to Reassessments under Section 147:
The Tribunal examined detailed arguments from both sides. The assessee contended that section 144B, which involves the preparation of a draft assessment order and inviting objections from the assessee, applies only to assessments under section 143(3) and not to reassessments under section 147. The Tribunal noted that section 147 is not a self-contained section and that the provisions of sections 148 to 153 lay down the procedure and machinery for making such assessments. The Tribunal held that the provisions of section 144B are procedural and beneficial to the assessee, intended to reduce harassment and vexatious litigation. Consequently, section 144B applies to all assessments made under section 143(3), including those resulting from a reopening under section 147.

3. Distinction between Assessments under Sections 143(3) and 147:
The Tribunal acknowledged that assessments under sections 143(3) and 147 operate in different fields. Section 143(3) pertains to normal assessments based on returns filed under section 139, while section 147 deals with income that has escaped assessment. Despite these differences, the Tribunal concluded that an assessment initiated under section 147 is completed under section 143(3) or 144, and the procedural provisions of section 144B apply accordingly.

4. Validity of Reopening the Assessment under Section 147(a):
The assessee argued that there was no failure to disclose material particulars for the assessment year 1967-68, and the reopening should be under section 147(b) instead of 147(a). The Tribunal found that the ITO had justification for invoking section 147(a) as the assessee had not disclosed material particulars related to the construction of a property and the sources of funds in the original assessment.

5. Merits of Specific Additions Made by the ITO:
The Tribunal addressed specific additions made by the ITO, including unexplained investments in property construction and acquisition of plots of land. The Tribunal directed the ITO to verify the correctness of the assessee's claim regarding the sale proceeds of agricultural land. For other items, such as amounts allegedly received from individuals and agricultural income, the Tribunal upheld the findings of the authorities below, as the assessee failed to provide satisfactory evidence. The Tribunal also confirmed the inclusion of investments in the names of the assessee's wives, as the assessee could not satisfactorily explain the sources of funds.

Conclusion:
The Tribunal concluded that the provisions of section 144B were rightly invoked in the present case. The assessee's appeal was partly allowed to the extent of further inquiry regarding the sale proceeds of agricultural land, while other additions made by the ITO were confirmed. For statistical purposes, the appeal was treated as partly allowed.