2006 (9) TMI 234 - AT - Income Tax

Summary

Issues involved:
The issues involved in this case are related to the validity of reassessment proceedings initiated under section 147, failure to provide reasons for reopening, and the authority of the Assessing Officer (AO) to issue notice under section 148 of the Income Tax Act.

Reassessment Proceedings under Section 147:
The assessee, an individual deriving income from various sources, including the sale of gold and silver ornaments, filed a return for the assessment year 1996-97. Subsequently, a search was conducted under section 132(1) of the Act, leading to the declaration of undisclosed income for the block period. The AO passed an order under section 158BC(c), which was challenged by the assessee. The CIT(A) and the Tribunal held that the order was barred by limitation under section 158BE. Later, the AO initiated action under section 147, leading to the present appeal by the Revenue.

Failure to Provide Reasons for Reopening:
Upon the initiation of action under section 147, the assessee requested the reasons recorded for reassessment, as required by law. However, the reasons were not provided until a significant delay, leading the assessee to request dropping the proceedings. The AO proceeded with the reassessment despite objections raised by the assessee regarding the legality of the action and the lack of proper reasons recorded. The CIT(A) found that the AO failed to dispose of the objections raised by the assessee, as mandated by legal precedents, and subsequently quashed the notice issued under section 148 of the Act.

Authority to Issue Notice under Section 148:
The reasons for reopening the assessment included various sources of income that were already subject to block assessment. The AO's actions were found to be unauthorized under the provisions of Chapter XIV-B of the Act, as the issue of notice under section 148 was precluded by the first proviso to sub-clause (iii) of clause (a) of section 158BC. The AO's failure to address the objections raised by the assessee and to pass a speaking order before proceeding with the reassessment was deemed a violation of legal requirements. The CIT(A) correctly quashed the notice under section 148 and the subsequent assessment order, deleting all additions made on the grounds of reasons for reopening.

In conclusion, the ITAT Jodhpur upheld the CIT(A)'s decision to quash the reassessment proceedings initiated under section 147, citing the failure to provide reasons for reopening and the unauthorized nature of the AO's actions under section 148. The appeal of the Revenue was dismissed, affirming the order of the CIT(A).