1991 (8) TMI 152 - AT - Income Tax

Summary

Issues Involved:
1. Validity of reopening the assessment under Section 148 of the IT Act.
2. Validity of service of notice on the assessee's husband.
3. Basis of initiation of proceedings under Section 148/147(a) of the IT Act.
4. Sufficiency of opportunity given to the assessee to explain the sources of assets.
5. Validity of the explanation provided by the assessee regarding the assets.
6. Alleged double counting of Rs. 25,000 by the ITO.

Issue-wise Detailed Analysis:

1. Validity of Reopening the Assessment under Section 148 of the IT Act:
The main objection in this appeal concerns the reopening of the assessment. The learned counsel for the assessee argued that the ITO had no material or reason to believe that the assessee's income had escaped assessment when the notice under Section 148 of the IT Act was issued on 27th Feb., 1982. The ITO's basis for reopening the assessment was the information collected during the wealth-tax proceedings, which were completed on 10th Feb., 1986, nearly four years after the notice was issued. The Tribunal found that as of 27th Feb., 1982, there was no material available with the ITO that could have led him to believe that the income liable to assessment had escaped assessment. The Tribunal concluded that the notice under Section 148 was issued without proper jurisdiction and quashed the proceedings initiated based on that notice.

2. Validity of Service of Notice on the Assessee's Husband:
The learned counsel for the assessee argued that the service of notices on the assessee's husband was not valid. However, the Tribunal found no merit in this objection as the assessee accepted the service as valid and complied with the notices.

3. Basis of Initiation of Proceedings under Section 148/147(a) of the IT Act:
The ITO mentioned in the assessment order that the wealth-tax assessment for the assessment year 1977-78 revealed that the assessee owned money, bullion, jewellery, and other valuable articles, and failed to establish the sources of acquisition. The learned counsel for the assessee argued that the ITO had no material or reason to believe that the income had escaped assessment at the time of issuing the notice under Section 148. The Tribunal agreed, noting that the ITO had no basis or enquiry report in his possession leading him to believe that the assessee's income had escaped assessment.

4. Sufficiency of Opportunity Given to the Assessee to Explain the Sources of Assets:
The learned counsel argued that the assessee was not given sufficient opportunity to explain the sources of assets. The Tribunal noted that the assessee was asked to explain the sources of assets during the wealth-tax proceedings and that the ITO completed the assessment on 17th March, 1986, without giving sufficient time to the assessee, who had asked for more time.

5. Validity of the Explanation Provided by the Assessee Regarding the Assets:
The learned counsel argued that the assessee had filed an affidavit affirming that the assets were received at the time of her marriage. The Tribunal noted that the ITO did not bring any material on record to indicate that the affidavit could not be believed. The learned CIT(A) had not admitted the affidavits in the appellate order, which the learned counsel argued was not permissible.

6. Alleged Double Counting of Rs. 25,000 by the ITO:
The learned counsel claimed that the ITO had incorrectly considered the figure of Rs. 25,000 twice, resulting in an addition of Rs. 50,500. The Tribunal noted that this point had been considered by the learned CIT(A) and found no confusion in the matter.

Conclusion:
The Tribunal concluded that the ITO had no material or reason to believe that the assessee's income had escaped assessment when the notice under Section 148 was issued. The notice was issued without proper jurisdiction, and the proceedings initiated based on that notice were quashed. The Tribunal dismissed the objections of the learned Departmental Representative and annulled the assessment framed by the ITO under Section 148 dated 17th March, 1986. The appeal filed by the assessee was allowed.