1996 (3) TMI 177 - AT - Income Tax

Account Books, Assessing Officer, Assessment Order, Assessment Proceedings, Assessment Year, Best Judgment Assessment, Estimated Income, Settlement Commission

Summary

Issues Involved:
1. Legality of the order made under section 144 of the Income-tax Act, 1961.
2. Legality of the impounding of books.
3. Adequacy of the opportunity provided to the assessee.
4. Consideration of the return filed by the assessee.
5. Jurisdiction of the Settlement Commission.
6. Merits of the various additions made by the Assessing Officer.
7. Conduct of the assessee during the assessment proceedings.

Issue-wise Detailed Analysis:

1. Legality of the order made under section 144 of the Income-tax Act, 1961:
The assessee contended that the Assessing Officer (AO) acted with undue haste and committed several illegalities, including issuing a notice under section 142(1) without giving adequate time for compliance. The Tribunal observed that the AO was within his rights to issue the notice under section 142(1) once the assessee failed to furnish the return by the due date mentioned in section 139(1). However, the AO failed to consider the return filed by the assessee on 14-2-1995, which was within the time allowed under section 139(4). The Tribunal held that the AO was bound to consider the said return and that the ex parte order under section 144 was not in order.

2. Legality of the impounding of books:
The assessee argued that the AO had no power to impound the books of account during the survey under section 133A, as it was strictly prohibited by sub-section (4) of section 133A. The Tribunal agreed, noting that the AO could not have usurped the powers under section 131(1) during the survey without the circumstances mentioned in section 133A(6). The impounding of books was deemed absolutely illegal.

3. Adequacy of the opportunity provided to the assessee:
The Tribunal found that the AO did not afford adequate opportunity for inspection or allowing photocopies of the impounded books, despite repeated requests from the assessee. The AO's decision to frame the assessment under section 144 without providing sufficient opportunity for inspection was deemed arbitrary and capricious.

4. Consideration of the return filed by the assessee:
The Tribunal rejected the contention that the return filed by the assessee on 14-2-1995 was a conditional return. It was merely an information that the assessee had approached the Settlement Commission. The AO was obligated to consider the return filed before finalizing the assessment.

5. Jurisdiction of the Settlement Commission:
The Tribunal noted that while mere filing of a petition before the Settlement Commission does not wrest the jurisdiction of the income-tax authority, it is expected that the authority shall not proceed with the case till the Commission rejects the application. The period of limitation would be extended accordingly.

6. Merits of the various additions made by the Assessing Officer:
The Tribunal did not delve into the merits of the various additions, as the entire assessment was set aside. However, it was noted that the ld. CIT(Appeals) had summarily dealt with the additions and confirmed them without proper examination.

7. Conduct of the assessee during the assessment proceedings:
The Tribunal found no evidence to support the observation that the assessee was running away from the department. The conduct of the assessee should have been viewed in totality before making such an observation.

Conclusion:
The Tribunal set aside the entire assessment to the file of the Assessing Officer for fresh assessment, directing the AO to release the impounded material within fifteen days and to make the assessment only after affording adequate opportunity of being heard to the assessee. The appeal was treated as allowed for statistical purposes only.