2002 (9) TMI 270 - AT - Income Tax

Summary

Issues Involved:
1. Charging of interest u/s 234A and 234B.
2. Validity of orders of the AO and CIT(A).
3. Issuance and service of notice u/s 148.
4. Maintenance of books of accounts for construction.
5. Ownership and investment in the residential house.
6. Alleged surrender and addition to income.
7. Reference to DVO and application of CPWD rates.
8. Benami transactions.
9. Prosecution angle.

Summary:

Charging of Interest u/s 234A and 234B:
The appellant raised an additional ground against the levy of interest u/s 234A and 234B, citing various judicial pronouncements. However, the Tribunal did not admit this additional ground, referencing the case of Indian Steel & Wire Products Ltd. and the time-limit under s. 253.

Validity of Orders of AO and CIT(A):
The appellant contended that the orders of the AO and CIT(A) contained factual errors and failed to appreciate the facts of the case. The Tribunal decided to consider the correct facts while addressing the relevant grounds of appeal.

Issuance and Service of Notice u/s 148:
- Ground No. 3(a) and 3(b): The appellant argued that the AO had sufficient time to issue a notice u/s 143(2) and should not have proceeded u/s 147/148. The Tribunal concluded that notice u/s 148 is valid for escapement of income and is not an extension of power under s. 143(2).
- Ground No. 3(c): Not pressed and dismissed.
- Ground No. 3(d): The appellant argued that the reasons recorded for issuing notice u/s 148 were vague and non-specific. The Tribunal found the reasons recorded by the AO to be inadequate and quashed the reassessment proceedings.
- Ground No. 3(e): The appellant contended that the notice was not properly served. The Tribunal found that the second notice was properly served, but the AO had initiated second proceedings without dropping the original proceedings, making the second notice invalid.

Maintenance of Books of Accounts for Construction:
The appellant argued that the AO incorrectly stated that books of accounts were not maintained. The Tribunal found that the appellant had maintained books of accounts and that the AO's reference to the valuation cell without rejecting the books was unjustified.

Ownership and Investment in the Residential House:
The appellant provided evidence that the house was owned by four co-owners. The Tribunal found that the AO's finding of Benami transactions was not supported by evidence and held that the residential house was owned by the four co-owners.

Alleged Surrender and Addition to Income:
The appellant argued that the alleged surrender of Rs. 5,00,000 was not confirmed in writing and was for both buildings over five years. The Tribunal found that the addition based on the alleged surrender was unsustainable.

Reference to DVO and Application of CPWD Rates:
The appellant contended that the reference to the DVO was unauthorized as books of accounts were maintained. The Tribunal found that the AO had made a valid reference to the Valuation Officer but directed the AO to adopt PWD rates instead of CPWD rates.

Benami Transactions:
The Tribunal held that the AO failed to prove that the co-owners were Benamidars of the appellant. The residential house was owned by the four co-owners, and the AO could have taken necessary action in the hands of other co-owners.

Prosecution Angle:
The Tribunal declined to express an opinion on the issue of prosecution as no prosecution had been launched.

Conclusion:
The assessment was annulled, and the appeal was allowed.