1995 (5) TMI 69 - AT - Income Tax

Assessing Officer, Assessment Order, Assessment Proceedings, Assessment Year, Company In Which Public Are Substantially Interested, Reassessment Proceedings, Revised Returns

Issues Involved:
1. Validity of reassessment orders.
2. Jurisdiction of Assessing Officer under Section 147(a) and Section 148.
3. Compliance with Section 149(1)(a)(ii) regarding escaped income.
4. Determination of the company's status as closely-held or widely-held.
5. Admission and use of new evidence by CIT (Appeals).

Issue-wise Detailed Analysis:

1. Validity of Reassessment Orders:
The primary issue was whether the reassessment orders passed by the IAC (A) were valid. The CIT (Appeals) had canceled these orders, which the revenue contested. The reassessment was based on the claim that the company was closely-held, a status that was admitted for the assessment year 1982-83 but was disputed for the years 1969-70 to 1981-82. The Tribunal upheld the CIT (Appeals)'s decision, finding that the reassessment orders were invalid because the escaped income did not meet the threshold required under Section 149(1)(a)(ii).

2. Jurisdiction of Assessing Officer under Section 147(a) and Section 148:
The Tribunal examined whether the Assessing Officer had the jurisdiction to issue notices under Section 147(a) read with Section 148. The Tribunal emphasized that the provisions of Sections 147 to 151 are mandatory and jurisdictional. The Tribunal referred to the case of P.V. Doshi v. CIT, which held that conditions laid down in these sections are mandatory and cannot be waived or conferred by consent. The Tribunal concluded that the Assessing Officer lacked jurisdiction because the primary condition under Section 149(1)(a)(ii) was not met.

3. Compliance with Section 149(1)(a)(ii) Regarding Escaped Income:
The Tribunal scrutinized whether the escaped income for the years 1969-70 to 1976-77 amounted to Rs. 50,000 or more, as required by Section 149(1)(a)(ii). It was found that the reassessment did not result in any change in the taxable income but only in the rate of tax. The Tribunal held that the provisions of Section 149(1)(a)(ii) are to be construed strictly, and since the escaped income did not meet the Rs. 50,000 threshold, the notice issued under Section 147(a) read with Section 148 was invalid.

4. Determination of the Company's Status as Closely-Held or Widely-Held:
For the assessment years 1977-78 to 1981-82, the issue was whether the company should be treated as closely-held or widely-held. The CIT (Appeals) had entertained new evidence regarding the shareholding and board of directors' constitution, concluding that the company was widely-held. The Tribunal decided to restore the matter to the Assessing Officer for a fresh determination of the company's status, allowing the Assessing Officer to examine the new evidence and provide an opportunity to the assessee.

5. Admission and Use of New Evidence by CIT (Appeals):
The Tribunal noted that the CIT (Appeals) had admitted new evidence regarding the company's status without giving the Assessing Officer an opportunity to examine it. Both the revenue and the assessee agreed that the matter should be remanded to the Assessing Officer for a thorough examination of the evidence. The Tribunal directed the Assessing Officer to reassess the company's status based on the new evidence and arguments presented.

Conclusion:
The Tribunal dismissed the revenue's appeals for the assessment years 1969-70 to 1976-77, upholding the CIT (Appeals)'s decision that the reassessment orders were invalid due to non-compliance with Section 149(1)(a)(ii). For the assessment years 1977-78 to 1981-82, the Tribunal allowed the appeals for statistical purposes, remanding the matter to the Assessing Officer to reassess the company's status as closely-held or widely-held based on new evidence.

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