2002 (7) TMI 243 - AT - Income Tax

Summary

Issues:
1. Validity of assessment made under section 147 for asst. yr. 1981-82.

Analysis:
The Revenue appealed against the order of Dy. CIT(A) canceling the assessment made under section 147 for the assessment year 1981-82. The Revenue argued that even though the income assessed in reassessment was less than Rs. 50,000, the AO had estimated the escaped income to be more than Rs. 50,000 at the time of recording reasons, justifying the initiation of proceedings under sections 148 and 147. On the other hand, the authorized representative of the assessee contended that the original assessment was completed at an income of Rs. 16,000, and no new material or evidence was available for reassessment, indicating that the initiation was based on suspicion rather than belief. The assessee also argued that the additions made by the AO were on an estimate basis without any new facts coming to light post the original assessment.

The Tribunal considered the arguments presented by both sides along with relevant case laws. It was noted that for the initiation of proceedings under section 147, the AO must have a reason to believe that there was an escapement of income due to the assessee's failure to disclose all material facts necessary for assessment. The Tribunal referred to previous judgments emphasizing the importance of supplying reasons to the assessee and the need for concrete material or evidence to support the belief of income escapement. In this case, the Tribunal found that the AO did not have sufficient reasons to believe that there was an escapement of income of Rs. 50,000 or more, especially considering that the income assessed in reassessment was less than Rs. 50,000. Consequently, the Tribunal upheld the decision of the CIT(A) that the notice for reopening the assessment was time-barred under section 149(1)(a)(ii) due to the lapse of seven years from the end of the assessment year 1981-82. Therefore, the Tribunal dismissed the Revenue's appeal, affirming the validity of the CIT(A)'s order canceling the assessment made under section 147.

In conclusion, the Tribunal's detailed analysis focused on the necessity of concrete reasons and evidence to support the reopening of assessments under section 147, highlighting the importance of adhering to legal procedures and limitations in such cases.