1983 (3) TMI 113 - AT - Income Tax

Issues Involved:
1. Validity of reassessment under section 143(3) read with section 147(a) of the Income-tax Act.
2. Justification of the AAC's order canceling the assessment.
3. Applicability of section 144B to reassessment proceedings under section 147.
4. Procedural correctness in combining assessments for the same year.
5. Direction to the ITO for completing pending proceedings under section 23(3).

Issue-Wise Detailed Analysis:

1. Validity of reassessment under section 143(3) read with section 147(a):
The revenue contended that the AAC erred in canceling the reassessment without properly appreciating that the ITO had rightly finalized the assessment under section 143(3) read with section 147(a) to include escaped income from under-invoicing. The AAC had canceled the assessment on the grounds that the reassessment was invalid as the original assessment was still pending. The Tribunal found that the ITO's action of reopening the assessment under section 147(a) and issuing a notice under section 148 was justified because the ITO had already disposed of the original return by making an assessment under section 23(3) on March 28, 1964. The Tribunal held that the course adopted by the ITO in combining both the proceedings under section 23(3) and section 147 was legal and did not commit any legal infirmity.

2. Justification of the AAC's order canceling the assessment:
The AAC had canceled the reassessment on the grounds that the ITO could not make an assessment under section 143(3)/147(a) while the assessment under section 23(3) was pending. The AAC directed the ITO to complete the assessment under section 23(3) at the earliest. The Tribunal disagreed with the AAC's view, stating that the Ranchhoddas Karsondas case, which the AAC relied on, did not apply to the facts of this case because the original return had already been disposed of. The Tribunal held that the ITO's approach of combining the proceedings was valid and set aside the AAC's order.

3. Applicability of section 144B to reassessment proceedings under section 147:
The assessee argued that section 144B, which was inserted by the Taxation Laws (Amendment) Act, 1975, with effect from April 1, 1976, did not apply to reassessment proceedings under section 147. The assessee relied on the judgment in Gammon (India) Ltd.'s case to support this argument. However, the Tribunal referred to the Special Bench order in Bela Singh Pabla's case, which held that the provisions of section 144B applied to assessments under section 147. The Tribunal found no reason to deviate from this judgment and held that section 144B did apply to reassessment proceedings under section 147.

4. Procedural correctness in combining assessments for the same year:
The Tribunal noted that the ITO could have made two separate assessments: one under section 23(3) and another under section 147. However, the ITO chose to make one combined assessment for the same year, which the Tribunal found to be legally permissible. The Tribunal emphasized that the ITO's approach did not involve any procedural default and was in accordance with the directions of the AAC and the provisions of the Income-tax Act.

5. Direction to the ITO for completing pending proceedings under section 23(3):
The AAC had directed the ITO to complete the assessment under section 23(3) at the earliest. The Tribunal, however, set aside the AAC's order and restored the appeal to the AAC's file with a direction to decide all the grounds raised by the assessee on merits and according to law. The Tribunal's decision effectively nullified the AAC's direction to the ITO, emphasizing the need for a comprehensive examination of all issues raised in the appeal.

Conclusion:
The Tribunal set aside the AAC's order canceling the reassessment and restored the appeal to the AAC's file for a decision on all grounds raised by the assessee. The Tribunal held that the ITO's approach of combining the proceedings under section 23(3) and section 147 was valid and that section 144B applied to reassessment proceedings under section 147. The appeal and cross-objection were treated as partly allowed for statistical purposes.

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