2002 (4) TMI 250 - AT - Income Tax

Summary

Issues Involved:
1. Validity of notices issued under section 148.
2. Status of the assessee as 'Oral Trust'.
3. Limitation period for issuing notices.
4. Authority of the Revenue to question the source of funds and expenditures.

Issue-wise Detailed Analysis:

1. Validity of notices issued under section 148:
The assessee challenged the validity of the assessment proceedings on the grounds that the notices under section 148 were issued beyond the period of limitation and were ambiguous. The notices did not specify the status of the assessee, which was later clarified by the Assessing Officer as 'Oral Trust' after the assessee's approach. The Tribunal found that the notices issued without specifying the status were illegal and invalid. The subsequent clarification could not validate the notices, and the assessments made pursuant to such invalid notices were liable to be quashed. The Tribunal relied on various High Court decisions, including CIT v. K. Adinaravana Murty, Shyam Sunder Bajaj v. ITO, and others, which held that notices must specify the status of the assessee to be valid.

2. Status of the assessee as 'Oral Trust':
The assessee was initially assessed in his individual capacity and later reassessed as 'Oral Trust' without proper indication in the notices. The Tribunal observed that the Department was aware of the assessee's status as an individual, having assessed him in that capacity earlier. The reassessment in a different status without proper notice was deemed invalid. The Tribunal referred to the Supreme Court and High Court rulings, emphasizing that incorrect or unspecified status in the notices renders the proceedings ultra vires and without jurisdiction.

3. Limitation period for issuing notices:
The Tribunal noted that the notice for the assessment year 1981-82 was barred by limitation under section 149(1)(a)(ii). The service of notice within the statutory period is indispensable for initiating assessment proceedings under section 148. The Tribunal rejected the Department's contention that the assessee's participation in the proceedings could remedy the defect of the time-barred notice. The assessment order for the year 1981-82 was quashed due to the time-barred notice.

4. Authority of the Revenue to question the source of funds and expenditures:
The assessee argued that the Revenue could not question the source of funds and expenditures as the trust was created for evangelic purposes with funds from abroad. The Tribunal disagreed, stating that regardless of the noble purpose of the trust, accountability before the Revenue is mandatory. The primary onus to furnish accounts to the Income-tax Department lies with the assessee, and the Department has the authority to scrutinize the funds received and expenditures made.

Conclusion:
The Tribunal quashed the assessments for all the years under consideration due to invalid notices and improper specification of the assessee's status. The appeals were allowed, emphasizing the necessity for proper and timely notices specifying the correct status of the assessee for valid assessment proceedings. The Tribunal also reinforced the Revenue's authority to scrutinize the funds and expenditures of any trust, irrespective of its purpose.