1996 (10) TMI 134 - AT - Income Tax

Assessing Officer, Assessment Order, Assessment Proceedings, Assessment Year, Original Assessment, Reassessment Proceedings

Summary

Issues Involved:
1. Validity of the notice issued under section 148 and the reassessment order.
2. Whether the assessment orders were served on the assessee before the issuance of notice under section 148.
3. The legality of reassessment proceedings initiated under section 148.

Comprehensive, Issue-wise Detailed Analysis:

1. Validity of the notice issued under section 148 and the reassessment order:
The revenue contended that the CIT(A) erred in annulling the assessment order by holding that the notice issued under section 148 and the reassessment order were not valid in law. The Assessing Officer had issued notices under section 148 based on material found during a search conducted under section 132(1). The CIT(A) held that the reassessment orders were invalid because the original assessment orders were not served on the assessee. However, the Appellate Tribunal found that the assessments for the relevant years had been completed under section 143(1) and the notices under section 148 were validly issued. The Tribunal observed that the lack of proof of service of the original assessment orders did not invalidate the reassessment proceedings, especially when there was overwhelming evidence of the completion of the assessments.

2. Whether the assessment orders were served on the assessee before the issuance of notice under section 148:
The CIT(A) annulled the reassessment orders on the grounds that the assessment orders were not served on the assessee until the issuance of notices under section 148. The Tribunal noted that although the revenue admitted there was no proof of service of the original assessment orders, the assessments had indeed been completed, as evidenced by the issuance of refunds based on those assessments. The Tribunal held that the completion of assessments was established by the records, such as ITNS-150 Forms and refund vouchers, which indicated that the assessments were completed and refunds were issued to the assessee.

3. The legality of reassessment proceedings initiated under section 148:
The Tribunal considered whether the reassessment proceedings under section 148 were validly initiated. The revenue argued that the original assessments were completed and there was no prejudice to the assessee as the income returned was accepted. The Tribunal referred to judicial precedents, including the Supreme Court's decision in Esthuri Aswathiah v. ITO and the Mysore High Court's decision in C.M. Jaffar Khan v. CIT, which held that an order allowing a refund based on a return amounts to an order of assessment. The Tribunal concluded that even if the assessment orders were not communicated to the assessee, it did not mean the assessments were pending. The Tribunal held that the reassessment proceedings were validly initiated based on the incriminating material found during the search, and the CIT(A)'s decision to annul the reassessment orders was not sustainable.

Conclusion:
The Appellate Tribunal set aside the orders of the CIT(A) and directed the CIT(A) to decide the appeals on merit after allowing an opportunity of being heard to the parties. The Tribunal allowed the revenue's appeals, holding that the reassessment proceedings under section 148 were validly initiated and the lack of proof of service of the original assessment orders did not invalidate the reassessment orders.