2002 (10) TMI 244 - AT - Income Tax

Summary

Issues Involved:
1. Violation of principles of natural justice.
2. Applicability of sections 158BC and 158BD.
3. Service of notice u/s 142(1).
4. Reference for special audit u/s 142(2A).
5. Limitation of time for assessment.
6. Basis for addition of undisclosed income.
7. Use of statements recorded from third parties.
8. Computation of income under section 158BC vs. 158BD.
9. Exemption of income of co-operative society.

Summary:

1. Violation of Principles of Natural Justice:
The assessee argued that the assessment was completed without providing a reasonable opportunity, violating the principles of natural justice. The Tribunal found that the assessment was made mechanically using the same material as in other cases without independent application of mind by the Assessing Officer.

2. Applicability of Sections 158BC and 158BD:
The assessee contended that the provisions of section 158BC were invoked without a search at their premises and that subsequent proceedings under section 158BD were also invalid. The Tribunal noted that no satisfaction was recorded by the Assessing Officer before taking action under section 158BD, making the proceedings invalid.

3. Service of Notice u/s 142(1):
The assessee claimed that no notice u/s 142(1) was served on them. The Tribunal found that the notice was not served at the correct address and that the affidavit filed by the President of the Society did not inspire confidence.

4. Reference for Special Audit u/s 142(2A):
The assessee argued that the reference for special audit u/s 142(2A) was erroneous as the provisions of section 158BC were not applicable. The Tribunal did not specifically address this issue in detail.

5. Limitation of Time for Assessment:
The assessee claimed that the order passed u/s 158BD/144 was barred by the limitation of time. The Tribunal did not specifically address this issue in detail.

6. Basis for Addition of Undisclosed Income:
The assessee argued that the addition of Rs. 12,62,515 was based on wrong assumptions and presumptions. The Tribunal found that no specific instances of undisclosed income were shown, and the assessment was based on mere suspicion without any material evidence.

7. Use of Statements Recorded from Third Parties:
The assessee contended that the statements of Shri P.C. Kedia and Shri Chandra Kant Ruia were used without confronting the assessee. The Tribunal agreed that no adverse view could be drawn from statements recorded behind the back of the assessee.

8. Computation of Income under Section 158BC vs. 158BD:
The assessee argued that the income for the block period was computed under section 158BC when the order was passed under section 158BD. The Tribunal found that the assessment was invalid as no satisfaction was recorded before taking action under section 158BD.

9. Exemption of Income of Co-operative Society:
The assessee claimed that their income was exempt due to the principle of mutuality. The Tribunal noted that the Assessing Officer did not deny this aspect, and the income was indeed exempt.

Conclusion:
The Tribunal allowed the appeal of the assessee, finding that the assessment was made without proper application of mind, based on assumptions and without any material evidence. The Tribunal followed the decisions in the cases of Vikas Bhawan Nirman Sahkari Samiti Ltd. and Topkhana Desh Grah Nirman Sahkari Samiti Ltd., where similar issues were decided in favor of the assessee.