9911796707
TMI Blog1995 (4) TMI 100X X X X Extracts X X X X X X X X Extracts X X X X ..... onse to that notice also no returns were filed. The assessee also failed to comply with the notices issued under sections 142(1) and 143(2) of the Income-tax Act. Hence the assessments were completed ex parte on 27th March, 1985. 4. The assessee appealed before the CIT(A). It was pleaded, inter alia, that reopening of the reassessment is illegal, inasmuch as the Assessing Officer has failed to mention the formation of the required opinion leading him to believe that any income has escaped assessment. In that connection, reference was made to the order sheet entry dated 22nd May, 1980, made by the Assessing Officer. In support of this stand, reference was made to the decision of the Supreme Court in the case of Johri Lal (HUF) v. CIT [1973] 88 ITR 439 and certain other decisions. The CIT(A) was of the opinion that the cited decisions cannot be applied in the instant case, inasmuch as the assessee had been declaring positive income in the earlier years. He rejected the contention of the assessee with the following observations : --- " But the same ratio does not apply to a case where positive total income was being returned year after year and suddenly the assessee stops filing r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt years 1974-75 to 1976-77 and has submitted that these orders go to indicate that in the earlier years the assessee had income above the exempted limit. Thus, according to him, the Assessing Officer had reason to believe that the income chargeable to tax has escaped assessment and this fact is evident from the assessment completed after the issue of notice under section 148. He has also referred to clause (a) of Explanation 2 to section 147, which reads as under :--- " Explanation 2. For the purposes of this section, the following shall also be deemed to be cases where income chargeable to tax has escaped assessment, namely :--- (a) where no return of income has been furnished by the assessee although his total income or the total income of any other person in respect of which he is assessable under this Act during the previous year exceeded the maximum amount which is not chargeable to income-tax." 9. Placing strong reliance on the aforesaid explanation, it was argued that since no return of income was filed and the income exceeded the maximum amount which is not chargeable to income-tax, it has to be deemed that the income chargeable to tax has escaped assessment and for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roduction before the ITO of account books or other evidence from which material evidence could with due diligence have been discovered by the ITO will not necessarily amount to disclosure within the meaning of this section. " 11. Section 147 as it now stands was substituted for the then existing section with effect from 1st April, 1989. In order to explain the scope and effect of the newly substituted section 147, the Central Board of Direct Taxes had issued Circular No. 549 dated 31st October, 1989. Paragraph 7.3 of the said circular deals with the deemed cases of income escaping assessment for the purpose of which Explanation 2 to section 147 was brought on the statute book. The said paragraph reads as under : " Under the old provisions of Explanation 1 to section 147, income chargeable to tax was deemed to have escaped assessment if it has been under-assessed or assessed at too low a rate or if any excessive relief or loss or depreciation allowance had been allowed. The new provisions in this respect, as contained in Explanation 2 to new section 147, are more elaborate and cover those cases where assessments have been completed (called as scrutiny cases) as well as those cas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h of imagination, lead to the belief that income assessable to tax has escaped assessment. For the formation of that belief, you require something more than the mere fact of non filing of return or non-disclosure of what is considered by the Income tax Officer to be full particulars. Indirect support for the view is available in the decisions of the Supreme Court in the case of ITO v. Lakhmani Mewal Das [1976] 103 ITR 437 and in the case of ITO v. Madnani Engg. Works Ltd. [1979] 118 ITR 1." 14. In view of the reasons already discussed above, we are of the considered opinion that reopening of the assessments for the two years under consideration is bad and as such the proceedings taken in pursuance of the notice under section 148 stands vitiated. That being so, the assessments are hereby quashed. 15. The next objection is taken to the setting aside of the order to the Assessing Officer for a fresh decision. It is the case of the assessee that after holding that the notice issued under section 142 of the Act was void and bad in law, the CIT(A) should have cancelled/annulled the assessment order. The issue involved has been dealt with by the CIT(A) in, paragraph 1.4 of his order a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n prevented with a reasonable opportunity as required under the law and assessment has been made hurriedly since it was going to be time-barred shortly. In this background the assessment order of the two years is found to suffer from procedural irregularities and for this reason alone the two assessment orders are held to be worth being set aside. " 16. The ld. counsel for the assessee has submitted that since overlapping notices were issued, the assessee was mis-led and as such he has been deprived of a proper opportunity in the matter. On the other hand, the ld. Departmental Representative supported the order of the CIT(A). 17. We have considered the rival submissions. Since the assessment orders have been quashed by us, it is not at all necessary to decide the aforesaid ground of appeal. However, we are of the opinion that in case the reopening of the assessment is held to be valid, then the CIT(A) would be justified in setting aside the matter to the Assessing Officer for the fresh decision, inasmuch as the proper opportunity of hearing was not provided to the assessee. That being so, we find no merit in ground No. 3 of the appeal. 18. In the result, the appeals will be t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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