1981 (12) TMI 101 - AT - Income Tax

Summary

Issues:
Validity of assessments made by the ITO under section 143(3)(b) of the IT Act, 1961.

Detailed Analysis:
The Revenue contended that the Assessing Officer (AO) was wrong in canceling the assessments made under section 143(3)(b) of the IT Act. The AO initially made summary assessments for two years under section 143(1)(a) of the Act. Subsequently, the AO proposed to the Income Tax Officer (ITO) for action under section 143(2)(b) due to certain discrepancies in interest payments claimed by the assessee. The ITO then made disallowances and recomputations in fresh assessments for both years. The assessee challenged these assessments before the Appellate Authority (AAC).

The AAC held that the ITO can only make a fresh assessment under section 143(3)(b) if he finds the original assessment to be incorrect, inadequate, or incomplete after considering all relevant material. The AAC concluded that the ITO's opinion should be based on new evidence or facts, not just a reappraisal of existing material. Therefore, the AAC canceled the assessments, stating that the Department's remedy would lie under section 263, not 143(2)(b).

The Departmental Representative argued that the ITO's actions were in line with statutory provisions and there was no infirmity in the assessments. On the other hand, the assessee's counsel argued that the ITO and the IAC had used the phrase 'to reopen the assessments,' suggesting a need for action under section 147(b). The counsel supported the AAC's decision.

The Tribunal found merit in the Revenue's argument. It analyzed the provisions of section 143, emphasizing that under section 143(1), the ITO can make a summary assessment without requiring the assessee's presence. However, under section 143(2)(b) and 143(3)(b), the ITO can issue notices and make fresh assessments if necessary. The Tribunal held that the ITO's actions were valid as he had obtained the required approvals and had reasons to believe that certain deductions needed to be disallowed.

Regarding the cross-objections by the assessee, the Tribunal directed the AAC to consider the merits of the additions made by the ITO since the assessments were deemed valid. The matter was sent back to the AAC for further review and decision on the merits of the additions.

In conclusion, the Tribunal allowed the Revenue's appeals, upholding the validity of the assessments made by the ITO under section 143(3)(b) of the IT Act. The cross-objections by the assessee were treated as allowed, and the case was remanded to the AAC for a decision on the merits of the additions made by the ITO.