1982 (8) TMI 115 - AT - Income Tax

Summary

Issues Involved:
1. Validity of reassessment proceedings.
2. Service of notice under section 148.
3. Approval by the CBDT for reopening assessments.
4. Pendency of assessment proceedings.

Issue-wise Detailed Analysis:

1. Validity of reassessment proceedings:
The primary issue was whether the reassessment proceedings initiated by the Income Tax Officer (ITO) were valid. The original assessments for the years 1957-58 to 1960-61 were made under section 23(4) of the 1922 Act and later reopened under section 144 due to non-compliance by the assessee. The ITO, after reconsidering the application under section 146, found that the notices under section 148 were not served, leading to the reopening of assessments. The Appellate Assistant Commissioner (AAC) annulled the reassessments, holding that the proceedings were pending, and fresh notices under section 148 could not be issued. The Tribunal upheld the AAC's decision, agreeing that the reassessments were invalid as the earlier proceedings were still pending.

2. Service of notice under section 148:
The Tribunal emphasized that proper service of notice under section 148 is a condition precedent for initiating reassessment proceedings. The ITO admitted that the first notice under section 148 was never served on the assessee or her power of attorney holder. Consequently, the reassessment for the year 1960-61 was deemed invalid. For the years 1957-58 to 1959-60, the Tribunal noted that the ITO failed to serve fresh notices on the assessee's agent, rendering the reassessments invalid.

3. Approval by the CBDT for reopening assessments:
The ITO sought approval from the Central Board of Direct Taxes (CBDT) to reopen assessments for the years 1957-58 to 1959-60, claiming that income exceeding Rs. 50,000 had escaped assessment. The Tribunal found that the approval was given mechanically without proper scrutiny, as the earlier proceedings were still pending. This mechanical approval without proper examination rendered the reassessments invalid. The Tribunal upheld the AAC's decision to annul the reassessments on this ground.

4. Pendency of assessment proceedings:
The Tribunal examined whether the assessment proceedings were pending when the ITO initiated fresh proceedings under section 148. The ITO had reopened the assessments under section 146, but later sought fresh approval from the CBDT and issued new notices under section 148. The Tribunal held that the earlier proceedings were still pending, and fresh notices under section 148 could not be issued. The Tribunal concluded that the reassessments were invalid as the proceedings initiated by the ITO were still pending.

Separate Judgment by Accountant Member:
The Accountant Member disagreed with the conclusions of the Judicial Member, arguing that the reassessments were valid. He emphasized that the reassessments made under section 144 were reopened due to non-service of notices under section 148. He argued that the ITO was justified in issuing fresh notices under section 148 after obtaining approval from the CBDT. He concluded that the reassessments for the years 1957-58 to 1959-60 were valid and should be sustained.

Third Member Order:
The President, acting as the third member, resolved the difference of opinion. He concluded that the assessment proceedings were not pending when the ITO initiated fresh proceedings under section 148. The President held that the ITO's conduct amounted to termination of the earlier proceedings, and the fresh proceedings under section 148 were valid. He upheld the reassessments for the years 1957-58 to 1959-60, agreeing with the Accountant Member's view that the Board's approval was not mechanical and the reassessments were valid.

Conclusion:
The Tribunal, by majority view, upheld the reassessments for the years 1957-58 to 1959-60, concluding that the proceedings initiated by the ITO under section 148 were valid. The reassessment for the year 1960-61 was annulled due to the non-service of notice under section 148. The departmental appeals were dismissed for the year 1960-61, and the reassessments for the years 1957-58 to 1959-60 were sustained.