9911796707
TMI Blog1981 (12) TMI 101X X X X Extracts X X X X X X X X Extracts X X X X ..... the Act [Sec. 143 as amended by the Taxation Laws (Amendment) Act, 1970 w.e.f. 1st April, 1971]. The total incomes were Rs. 990 and Rs. 30,750 respectively. Thereafter on 24th Sept., 1979 the ITO sent a proposal to his IAC for action under s. 143(2)(b) as under: "In both the years the assessee has claimed interest payment of Rs. 20,926 and Rs. 23,550 respectively. The interest payments are all of loans raised for the purpose of construction of a property for the firm in the accounting years 1975-76 and 1976-77. There are no sufficient profits available for the partners to draw monies in the said asst. yrs. In spite of there being no profits partner Shri E.V. Subramanian has drawn fund and his account shows a debit for 1977-78 asst. yr. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... IAC (extracted above). The AAC held that the ITO has power to make a fresh assessment under s. 143(3)(b) if he is of opinion that the assessment made under s. 143(1) is incorrect, inadequate or incomplete, but such opinion of the ITO should be formed after (and not before) (i) hearing such evidence as the assessee may produce, (ii) having such other evidence as the ITO may require on specified points, and (iii) taking into account all relevant material which the ITO has gathered. The AAC concluded for the reasons stated by him that if the ITO's opinion is based on the material which was already on record at the time of making the assessment under s. 143(1), the ITO could not make a fresh assessment under s. 143(3)(b). The AAC was of the vi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r the assessee would argue that the ITO and the IAC had used the phrase 'to reopen the assessments' such reopening of the assessments by the ITO could be only under s. 147(b). Further for the asst. yr. 1979-80 the ITO had taken an adverse view regarding the allowability of the interest in the assessment made by him on 24th Sept., 1979 and on the same day the ITO had sent the proposal to the IAC under s. 143(2)(b) regarding the assessments under present appeal. Thus the ITO had resorted to reopening even before verifying the material. The counsel thus supported the AAC's order. 5. We have heard the parties and are of the view that there is substantial force in the Revenue's contention. The relevant provision of s. 143 read as under: "143 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the return: Provided that, in a case where an assessment has been made under sub-s. (1), the notice under this sub-section except where such notice is in pursuance of an application by the assessee under cl. (a) shall not be issued by the ITO unless the previous approval of the IAC has been obtained to the issue of such notice: (3) On the day specified in the notice issued under sub-s., (2), or as soon afterwards as may be, after hearing such other evidence as the ITO may require on specified points, and after taking into account all relevant material which he has gathered, (a) in a case where no assessment has been made under sub-s. (1), the ITO shall, by an order in writing, make an assessment of the total income or loss of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment thus made under s. 143(1) will be final unless proceedings are initiated under s. 143(2) for making a fresh assessment. Sec. 143(2)(b) empowers the ITO where he considers it necessary or expedient to verify the correctness and completeness of the return to issue a notice to the assessee for personal attendance or production of evidence on which the assessee might rely in support of the return. Under s. 143(3) (b) the ITO after hearing the assessee, may make a fresh assessment redetermining the assessee's total income or loss if he finds that the original assessment is incorrect, inadequate or incomplete. The original assessment is deemed to be incorrect, inadequate or incomplete, if, inter alia, the amount of total income or tax payabl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... esent case, however, the ITO in the view that he took has determined the total income at higher figures in the fresh assessments made for both the years. In the circumstances, we are of the view that the action of the ITO in resorting to s. 143(2)(b)(3) and making fresh assessment is valid in law subject to the adjudication on the merits of the addition. In the result the Revenue's appeals are allowed. 6. The assessee's contention in its cross objections is that the AAC should have also dealt with the merits of the ITO's addition. The AAC in his view that the assessments made by the ITO are invalid, had not gone into the merits of the addition. In the light of our finding above about the validity of the assessments, we would direct the AA ..... X X X X Extracts X X X X X X X X Extracts X X X X
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