2007 (2) TMI 282 - AT - Income Tax

Summary

Issues involved:
Department's appeal against CIT(A) order for assessment years 1988-89 and 1989-90.

Issue 1: Validity of assessment orders under IT Act
- Department raised grounds challenging CIT(A)'s annulment of assessment orders under s. 143(3) r/w s. 147 for the mentioned assessment years.
- CIT(A) held that additional income offered by assessee was not considered by AO, questioning the validity of notice issued under s. 148.
- CIT(A) erred in ignoring that income had escaped assessment, leading to valid reopening of assessments by AO u/s 147 with Jt. CIT's approval.

Issue 2: Background and actions taken
- Assessee, engaged in jewellery business and money-lending, faced search and seizure by Police Department.
- Assessee's suicide noted during search, with subsequent actions under s. 132/132A of IT Act.
- Assessee's widow offered additional income for tax in response to proceedings.

Issue 3: Assessment proceedings and challenges
- AO accepted returns under s. 143(1) without showing offered income.
- CIT set aside assessments under s. 263, later challenged by Department.
- AO initiated proceedings under s. 147, leading to annulment by CIT(A) due to jurisdictional issues.

Judgment and Legal Analysis:
- Tribunal found CIT(A)'s conclusions valid, citing changes in s. 147 post-1989 amendments.
- AO's failure to establish non-disclosure of material facts by assessee led to invalid initiation of proceedings under s. 147.
- Tribunal emphasized the importance of disclosing material facts for assessment validity.
- Case law highlighted the obligation of AO to draw correct inferences from disclosed primary facts.
- Lack of precise disclosure failure by assessee rendered s. 147 proceedings invalid.
- Tribunal quashed assessment orders for both assessment years, dismissing Department's appeals.