1978 (7) TMI 191 - AT - Income Tax

Summary

Issues:
1. Sustainability of consolidated order passed by CIT Patna under s. 263(1) of the IT Act, 1961 for the Asst. yrs. 1968-69 to 1972-73.

Detailed Analysis:
The appeals involved a common question regarding the sustainability of a consolidated order passed by the CIT Patna under s. 263(1) of the IT Act, 1961 for the assessment years 1968-69 to 1972-73. The issue revolved around whether the assessments made by the ITO were erroneous and prejudicial to the interests of the Revenue, leading to the CIT setting aside the assessments and directing the ITO to reframe them after a close scrutiny. The CIT based his decision on the lack of evidence regarding the initial capital of the assessee and the existence of her business, as well as the suspicion that the income was declared to accommodate her husband to avoid higher tax rates.

The scheme launched by the CBDT under s. 119 of the IT Act, 1961, aimed to encourage new assesses in small income groups to voluntarily file returns of income. The scheme specified that no notice under s. 148 would be issued by the ITO for certain assessment years if the income did not exceed a certain threshold. The assessments were to be completed under s. 143(1) if specific conditions were met, and penalties under s. 271 were not to be initiated in such cases. The scheme was in force until February 28, 1973, and the assessee in question had filed returns under this scheme for the relevant assessment years.

The CIT issued a notice to the assessee under s. 263(1) of the IT Act, 1961, questioning the validity of the assessments made by the ITO. The CIT proceeded ex parte against the assessee, setting aside the assessments and directing a reexamination by the ITO. The assessee challenged this decision through appeals, arguing that she was not given a reasonable opportunity to be heard before the order was passed. The appellate tribunal found that the notice under s. 263(1) was served after the impugned order, thus ruling that the order was invalid due to the lack of a proper opportunity for the assessee to present her case.

In conclusion, the appellate tribunal allowed the appeals on the grounds that the impugned order was not valid as the assessee was not afforded a reasonable opportunity to be heard before the order under s. 263(1) was passed. The tribunal referenced a Supreme Court decision to support its ruling and canceled the CIT's order, thereby overturning the decision to set aside the assessments.