1998 (9) TMI 119 - AT - Income Tax

Summary

Issues Involved:
1. Restriction of suppressed profit.
2. Deletion of addition on account of unexplained investment.
3. Validity and jurisdiction of the assessment order.
4. Pertinence of transactions recorded in a seized document.
5. Consideration of disclosure made during search and seizure proceedings.

Detailed Analysis:

1. Restriction of Suppressed Profit:
The revenue challenged the CIT(A)'s decision to restrict the profit under the head "suppressed profit" from Rs. 1,91,260 to Rs. 5,240. The tribunal did not adjudicate on this issue as the assessment order was quashed on legal grounds.

2. Deletion of Addition on Account of Unexplained Investment:
The revenue also contested the deletion of Rs. 4,69,360 on account of unexplained investment by the CIT(A). Again, this issue was not adjudicated upon due to the quashing of the assessment order.

3. Validity and Jurisdiction of the Assessment Order:
The assessee's cross objection challenged the validity of the assessment order, arguing it was illegal and against the provisions of law. The CIT(A) had held that the order was neither invalid nor without jurisdiction and that the time limit prescribed under the proviso to section 143(2) of the I.T. Act, 1961, should be considered from 3-1-1992, ignoring the return filed on 30-3-1990. The tribunal found that the return filed on 30-3-1990, although defective, was valid from the date of filing. The defects were removed on 3-1-1992, but the tribunal held that the limitation period for issuing a notice under section 143(2) should commence from the original filing date, 30-3-1990. Consequently, the notice issued on 6-1-1992 was deemed void ab initio, and the assessment order was quashed.

4. Pertinence of Transactions Recorded in a Seized Document:
The CIT(A) agreed with the Assessing Officer that transactions recorded in a seized document pertained to the assessee firm and not to an individual named Chander Prakash, leading to an addition of Rs. 5,240 in the income of the assessee firm. This issue was not further adjudicated due to the quashing of the assessment order.

5. Consideration of Disclosure Made During Search and Seizure Proceedings:
The assessee argued that the CIT(A) erred in not taking cognizance of a disclosure of Rs. 50,000 made during search and seizure proceedings under section 132(4) read with Explanation 5 to section 271(1)(c) of the I.T. Act, 1961. The CIT(A) held that the acceptance of disclosure was an administrative matter and did not consider it in the appellate proceedings. This issue was also not adjudicated upon due to the quashing of the assessment order.

Conclusion:
The tribunal quashed the assessment order on legal grounds, specifically regarding the validity of the notice under section 143(2). As a result, the revenue's appeal was dismissed, and the assessee's cross objection was accepted. Other issues raised in the appeal and cross objection were not adjudicated.