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Issues Involved:
1. Delay in filing the appeal. 2. Validity of reopening the assessment under Section 147. 3. Addition of Rs. 1,54,980 on account of estimation of goodwill. Detailed Analysis: 1. Delay in Filing the Appeal: The assessee filed an appeal with an 18-day delay, attributing it to an application under Section 154 of the IT Act, 1961, for rectification of errors in the CIT(A)'s order dated 10th May 2001. The Tribunal condoned the delay, noting that the delay was not willful or inordinate, and emphasized the importance of providing the assessee an opportunity for remedy. 2. Validity of Reopening the Assessment under Section 147: The assessee, a firm trading in Tendu leaves, was dissolved on 31st March 1990, with one partner taking over the business. The original assessment under Section 143(3) acknowledged the dissolution. However, an audit objection later suggested that the transfer of goodwill on dissolution should be taxed under Section 45(4). The AO issued a notice under Section 147 to reassess, which the assessee challenged, arguing that the AO had full knowledge of the dissolution during the original assessment and that the reassessment was based on a change of opinion. The Tribunal analyzed the amended provisions of Section 147, effective from 1st April 1989, which state that the AO only needs "reason to believe" that income has escaped assessment. It was noted that the reopening was based on an audit party's note, which is not a valid basis for reassessment. Furthermore, the reopening was beyond the four-year limit, and there was no failure on the assessee's part to disclose fully and truly all material facts. The Tribunal cited various judicial pronouncements, concluding that the reopening was invalid as it was barred by limitation and lacked proper grounds. 3. Addition of Rs. 1,54,980 on Account of Estimation of Goodwill: The AO added Rs. 1,54,980, estimating the goodwill of the dissolved firm. The assessee argued that their business, trading in Tendu leaves, did not possess goodwill due to the nature of the business, which depended on the quality of leaves allotted by the State Government. The Tribunal referred to judicial definitions of goodwill, emphasizing that goodwill is linked to the reputation and customer attraction, which was not applicable in the assessee's case. The Tribunal noted that the firm did not receive any consideration for the alleged transfer of goodwill, making the levy of capital gains tax on this basis unsustainable. Conclusion: The Tribunal allowed the appeal in part, condoning the delay in filing, quashing the reassessment under Section 147 as invalid, and ruling that the addition of Rs. 1,54,980 for goodwill was legally unsustainable. The remaining grounds of appeal were dismissed as not pressed.
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