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TMI Blog2011 (2) TMI 1566X X X X Extracts X X X X X X X X Extracts X X X X ..... T Act, 1961. 2. Rival contentions have been heard and records perused. 3. Facts in brief are that the assessee is engaged in the business of trading in cloth. There was survey under s. 133A at the business premises of the assessee on 29th March, 2000. During the course of survey, excess cash of ₹ 6 lakhs was found and the same was declared by the assessee as his additional income. In the return of income for asst. yr. 2000-01, which was filed on 30th Oct., 2000, the assessee did not offer the income surrendered during the year. This return was processed under s. 143(1)(a) on 28th March, 2001. Thereafter, it was noticed that additional income of ₹ 6 lakhs declared during the course of survey was not off ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the assessment order under s. 143(3) based on s. 154/143(1) (a) was bad in law. The order was also alleged to be illegal as the proceedings, which are wrong and illegal from beginning cannot be legalized by subsequent proceedings and the assessment order needs to be quashed. However, the learned CIT(A) did not consider the legal ground raised before him with the observation that the Tribunal has restored the matter to his file to decide ground Nos. 2 to 7 taken by the assessee in his appeal against the order of the AO before the learned CIT(A) in its first round of proceedings. Thus, the request of the assessee to entertain the additional ground was rejected. On merits, the learned CIT(A) deleted the addition of ₹ 25,000 made in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s processed under s. 143(1)(a) of the Act at the returned income on 28th March, 2001. Thereafter, notice under s. 143(2) was issued on 16th July, 2001. As per learned Authorized Representative, the AO passed order under s. 154 to rectify the intimation issued under s. 143(1)(a) on 23rd July, 2001, wherein addition of ₹ 6 lakhs was made in respect of income surrendered during the course of survey. As per learned Authorized Representative, after issue of notice under s. 143(2), no proceedings can be initiated under s. 154 to rectify the intimation passed under s. 143(1)(a). For this purpose, reliance was placed on the decision of Hon'ble Calcutta High Court in the case of CIT v. Coventry Spring Co. Ltd. [2002] 177 CTR (Cal) 579/[2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sue raised before the CIT(A) with regard to the validity of the assessment order passed under s. 143(3) passed on s. 154/143 (1)(a) was bad in law. This was a purely legal issue, which was not decided by the learned CIT(A). He submitted that legal ground not raised earlier in the appellate proceedings can be raised in fresh proceedings and for this purpose, reliance was placed on the decision of Calcutta High Court in the case of CIT v. Shree Ganesh Jute Mills Ltd. [1977] 109 ITR 562 (Cal). The decision of Hon'ble Supreme Court in the case of National Thermal Power Co. Ltd. v. CIT [1999] 157 CTR (SC) 249/[1998] 229 ITR 383 (SC) was also relied on in support of the proposition that legal ground can be raised at any stage, which goes to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... proceedings undertaken under s. 154 after issue of notice under s. 143(2) is a purely legal issue which can be raised at any stage. This issue was not raised by the assessee in the first round of appeal either before the CIT(A) or before the Tribunal. On the ground of notice under s. 143(2) having not been issued, the learned CIT(A) in the first round of appeal has annulled the assessment. However, in further appeal filed by the Revenue before the Tribunal, it was held by the Tribunal vide order dt. 3rd June, 2008 that notice was issued under s. 143(2) within the specified time, however, since issues raised on merit were not considered by the learned CIT(A), the matter was restored to him for deciding the issue on merit. To give effect to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... diture incurred on vehicle and telephone, we found the same to be excessive. Accordingly, the AO is directed to restrict the disallowance to the extent of 1/10th of the expenditure incurred thereon. We direct accordingly. 12. ITA No. 317/Ind/2009 is in respect of penalty imposed under s. 271(1)(c) of the IT Act, 1961, which is consequential to confirming the addition by CIT(A). As the quantum appeal itself has been restored back to the file of CIT(A), the penalty order passed by him is also restored back to him for deciding after considering the legal issue raised by the assessee with respect to legality of proceedings under s. 154 after issue of notice under s. 143(2). We direct accordingly. 13. In the result, the appeals ..... X X X X Extracts X X X X X X X X Extracts X X X X
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