Income Tax Appellate Tribunal - Lucknow
Inder Kumar Bachani (Huf) vs Income-Tax Officer on 14 December, 2005
Equivalent citations: [2006]99ITD621(LUCK), (2006)101TTJ(LUCK)450
ORDER
P.N. Parashar, Judicial Member
1.These two appeals have been filed by the same assessee. As the facts involved in these appeals are common and common pleas are to be considered while adjudicating these two appeals, for the sake of convenience, these two appeals are decided together.
2. Shri Rakesh Garg, Id. Advocate appeared for the assessce whereas Shri K.K. Pandiya, Id. CIT DR represented the revenue.
3. First, we take up appeal in ITA No. 486/Lucknow/2003.
4. The assessee has taken as many as 12 grounds in this appeal. As the order passed under Section 263 has been challenged on various legal and factual grounds, we consider it proper to reproduce these grounds in our order. The grounds are as under:
1. Because the order passed by the Commissioner of Income Tax (I) under Section 263 is contrary to law inasmuch as it has been passed on the same facts as were considered by the Assessing Officer by imposing his opinion over that of the Assessing Officer.
2. Because the impugned order under section passed by the Commissioner of Income-tax is without jurisdiction inasmuch as the assessment framed was the subject-matter of appeal before the Commissioner of Income-tax (Appeals) and there is no fresh matter other than the matter which was the subject-matter of appeal filed before Commissioner of Income-tax (Appeals).
3. Because the impugned order is bad in law and without jurisdiction inasmuch as the very initiation of proceedings which resulted in the assessment order which was the subject-matter of the impugned order under Section 263 was without jurisdiction and bad in law.
4. Because the initiation of proceedings by issue of notice under Section 148 having been issued by the Income-tax Officer who has no jurisdiction the entire proceedings made in pursuance thereof including the impugned order under Section 263 is bad in law and liable to be quashed.
5. Because in absence of any material to justify the inference that the appellant acquired any diamond or gold jewellery in the previous year relevant to assessment year 1998-99. The direction made by the CIT in taking the value of Diamond and Gold jewellery at the rate prevailing in the previous year relevant to the assessment year 1998-99.
6. Because the Id. Commissioner of Income-tax was not justified in law in ignoring the statement in oath and the Affidavit given by the appellant categorically denying the allegations and averments made in respect of the VDIS return which the appellant never filed.
7. Because the assessment made in respect of the Diamond and Gold jewellery which the appellant categorically denied to have acquired and also categorically stated that the appellant was ever in possession of any Diamond or Gold jewellery the directions to assess the diamond or gold jewellery by applying the rate prevailing in the previous year relevant to the assessment year 1998-99.
8. Because the Income-tax Authorities at Surat had no jurisdiction and therefore, the information furnished by the said officer on the basis of the VDIS, 1997 which was in fact never filed by the appellant could not be the ground for assessing the appellant on the value of the assets alleged to have been declared in the VDIS and could not farmed the basis for addition of diamond and gold jewellery unless corroborated by other material evidence.
9. Because in the absence of any evidence to suggest that assets such as gold ornaments, diamonds and cash were acquired by the appellant in any of the assessment years 1995-96,1996-97, 1997-98 or 1998-99 the assessment framed is arbitrary and on hypothetical facts and therefore, the impugned order under Section 263 passed by the Commissioner of Income-tax, Kanpur is contrary to law.
10. Because the learned Commissioner of Income-tax, Kanpur was not justified in law in making the impugned order under Section 263 ignoring facts stated in the submission made by the appellant and also the facts stated in the statement of facts filed before the Commissioner (Appeals), the copies of which are attached herewith.
11. Because in any event the addition made on the basis of VDIS Declaration and the papers accompanying the same such as valuation report which was fictitious the additions made are contrary to law.
12. Because in the absence of any material to justify the applicability of Section 69 the impugned order is liable to be quashed.
5. The facts concerning the matter are as under :
5.1 The assessee filed Income-tax return for assessment year 1998-99 in February, 1999 declaring income from other sources being interest on deposit at Rs. 43,338.
5.2 In the office of Commissioner of Income-tax, certain papers pertaining to the assessee for filing declaration under VDIS, 1997 were received. These included application by Shri Inder Kumar Bachani, Form under Section 65 (1) prescribed under Rule 3 of Income-tax Rules, statement of voluntarily disclosed income, valuation report as on 1-4-1987, dated 26-12-1997, affidavit of Shri Inder Kumar Bachani, return and statement of income (copies of these papers have been filed by the assessee in the paper book and are available at pages 35 to 47).
5.3 These papers were sent from the Office of CIT, Surat to Income-tax Officer-III, Kanpur who issued letter dated 7-2-2002 to the assessee. As per this letter/notice, the assessee was required to appear on 12-2-2002.
5.4 On 12-2-2002, the Authorised Representative of the assessee appeared and the Assessing Officer drew the order sheet dated 12-2-2002, which is as under :
Order Sheet dated 12-2-2002.-Shri M.K. Shukla, Advocate attend Sri Basant Bachani the younger brother of Shri I.K. Bachani attended. They state that though the statements ie., the enclosures of the declaration have been signed by Shri I.K. Bachani but the declaration form has never been signed by him. He i.e., Basant Bachani has also stated that some one who is rival of Shri I.K. Bachani has taken signatures on the statements which he has not in the knowledge of Shri I.K. Bachani. He had nothing to declare in VDIS. He is an old assessee of Ward 1(5), Kanpur and the return of income i.e., only interest income on deposit with M/s. Raj Laxmi Traders, Naughara, Kanpur.
He is required to file an affidavit to that effect. Adjourned for 26-2-2002.
5.5 In compliance to this direction, Shri Inder Kumar Bachani appeared before the Assessing Officer on 26-2-2002 on which date his statement was recorded (copy available at pages 28 to 32 of the paper book). Shri Inder Kumar Bachani admitted signatures on the papers but submitted that these have been obtained by somebody under coercion. It was categorically denied by him that he never acquired any diamond or gold jewellery nor filed any VDIS Declaration and all the papers have been forged and filed by somebody, which is due to fraud for taking revenge or business rivalry.
5.6 The Assessing Officer, however, proceeded to initiate proceedings under Section 148/147 and recorded reasons for action under Section 148 on 5-4-2002. These reasons are as under :
Reasons for Action under Section 148 5-4-2002 VDIS declaration in the case of Shri Indra Kr. Bachani, HUF, 50/14, Naughara, Kanpur has been forwarded by the CIT-II, Surat's letter F.NO.SRT/CIT-II/HQ/VDIS/2001-02, dated 18-2-2002 is received and which is placed on file. Since the assessee has not deposited the tax on the disclosure of income of Rs. 3,74,312, he loses immunity under the VDIS-1997. In the above circumstances, income of Rs. 3,74,312 chargeable to tax has escaped assessment under the provisions of Section 147 of IT. Act, 1961.
Issue notice Under Section 148 of IT. Act, 1961.
5.7 During the assessment proceedings again, the statement of the assessee was recorded on 15-11-2002. The assessee also filed certain letters and through his statement in these letters, the denial was repeated. The assessment was thereafter completed vide order dated 29-1-2003 under Section 148/143(3) and the income for assessment year 1998-99 was assessed by adding undisclosed income of Rs. 5,34,312. It may be pointed out that this enclosed undisclosed income was taken on the basis of alleged declaration made by the assessee under VDIS.
5.8 The assessee filed appeal against assessment order before the Id. CIT and challenged the assessment order on various grounds which have been filed in ITA No. 623/Lucknow/2005.
5.9 The order passed by the Assessing Officer under Section 148/143(3) was examined by the Id. CIT who issued a notice under Section 263 of the Income-tax Act dated 21-3-2003. The assessee filed reply to this notice on 31-3-2003. In this reply, the assessee submitted that there is no material with the department for alleging that the assessee had acquired any gold, jewellery or diamonds in the previous year relevant to assessment year 1998-99 and in absence of any material to hold that the assessce acquired jewellery or gold and diamond in the previous year relevant to assessment year 1998-99, income could not be assessed from undisclosed income in that year. In para (v), it was specifically submitted that the proceedings of reassessment initiated under Section 148 are unwarranted and without jurisdiction.
5.10 The Id. CIT, however, passed order under Section 263 on 29-1-2003 and set aside the order of Assessing Officer. The relevant observations and direction of the Id. CIT are being reproduced as under :
6. As already mentioned above, the assessment under Section 148/143(3) of the IX Act, 1961 was made on the basis of a set of documents forwarded by CIT-H, Surat regarding declaration made by the assessee under VDIS-1997. The issue involved in the notice under Section 263 of the IT. Act was whether the income declared by the assessee under the VDIS-1997 should be taken at Rs. 5,34,312 (being the value of assets as on 1-4-1987) or whether the value of assets should be taken at the market value during the financial year 1997-98 in which the assets have been treated to be acquired in absence of any immunity available to the assessee. Obviously, the assets were declared for the first time during the financial year 1997-98 and no immunity under VDIS-1997 was available for want of payment of tax by the assessee. The order passed by the Assessing Officer is erroneous insofar as it is prejudicial to the interest of revenue as while completing the assessment for the assessment year 1998-99 he has wrongly taken the value of gold and diamond ornaments as on 1-4-1987 whereas the value of the said ornaments/jewellery should have been taken at the market price prevailing during the financial year relevant to the assessment year 1998-99. As mentioned above, the assessee has not furnished any explanation in compliance to the notice under Section 263 of the I.T. Act on this issue. I, therefore, in exercise of powers available under Sub-section (1) of Section 263 of the Income-tax Act, 1961 set aside the assessment order dated 29-1-2003 under Section 148/143(3) of the I.T. Act, 1961 made by the Income-tax Officer, Ward 3(4), Kanpur with the direction to make it afresh after taking the value of gold ornaments and diamond jewellery at the market price prevailing during the financial year 1997-98 relevant to the assessment year 1998-99. The Assessing Officer is directed to give the assessee proper opportunity of being heard while making a fresh assessment.
6. The Id. counsel for the assessee, Shri Rakesh Garg assailed the order under Section 263 on various grounds and supported all the grounds of appeal, which have been reproduced above. His first contention was that the assessee had not filed declaration under VDIS and, therefore, the Department was not justified in presuming that the documents received in the office of the Commissioner of Income-tax, Surat pertained to the assessee. In support of his argument, he made reference to various letters of the assessee, his affidavit and statement recorded by the Assessing Officer. According to him, the assessee was filing return at Kanpur and, therefore, there was no possibility or necessity for filing VDIS at Surat.
6.1 The next argument of the Id. counsel for the assessee was that the order passed under Section 148/143(3) was itself an invalid order because the Assessing Officer had no jurisdiction to pass order under Section 148/143(3) on the basis of material before him. In this regard, it was submitted by him that although the assessee had denied to have filed any declaration under VDIS but even presuming that any such declaration was filed by the assessee then also on the basis of that material and in absence of any other material with the department, no basis for reopening assessment for assessment year 1998-99 is made out. It was explained by the Id. counsel that even as per the alleged affidavit and the declaration, etc., the assessee had disclosed income on account of acquisition of diamond, jewellery, cash, etc., for assessment years 1980-81, 1981-82, 1984-85 to 1997-98. In this regard, he made specific reference to statement of voluntarily disclosed income available at pages 39 and 40 of the paper book and affidavit at page 42 of the paper book. It was pointed out that even before the Assessing Officer, the assessee challenged the proceedings on this basis but the Assessing Officer had not adjudicated the issue while completing the assessment order. In this regard also, he made reference to the letter of the assessee dated 15-11 -2002 available at page 20 of the paper book and letter dated 11-1-2003 available at pages 21 and 22 of the paper book.
6.2 Thus, the argument of the Id. counsel for the assessee was that since the order passed under Section 148/143(3) was itself an invalid order, the Id. CIT did not have any power to exercise jurisdiction under Section 263 against a void and non est order. In support of this contention, the Id. counsel for the assessee placed reliance on the decision of the Cochin Bench of the ITAT in the case of Paul John, Delicious Cashew Co. v. ITO [2005] 94 ITD 131 and the decision of ITAT Ahmedabad Bench in the case of Smt. Kamini Hanskamal Grover v. ITO [2005] 95 TTJ (Ahd.) 363.
6.3 The last contention of the Id. counsel for the assessee was that even assuming the order passed under Section 148/143(3) to be a valid order, the Id. CIT did not have any justification to pass order under Section 263 merely on the basis of his own estimate or difference of opinion. According to him, there is no material on record to suggest that the jewellery, etc., was acquired by the assessee in financial year 1997-98. He further submitted that the entire material available before the department for estimating undisclosed income was on the basis of alleged documents received in the office of Commissioner of Income-tax, Surat and even on the basis of these documents, it cannot be said that there was any evidence to show that the assessee had acquired jewellery, diamond and gold, etc., in previous year relevant to assessment year 1998-99. In support of this contention, the Id. counsel for the assessee placed reliance on the decision of CIT v. Gabrial India Ltd. and Patel Cotton Co. Ltd. v.
Asstt. CIT [1998] 64 TTD 273 (Mum.).
7. The Id. CIT (DR.), on the other hand, strongly supported the order of the Id. CIT under Section 263. According to him, since the assessee had filed declaration under VDIS, 1997 pertaining to Assessment year 1998-99, the Id. CIT was justified in issuing the direction to the Assessing Officer for working out the valuation of ornaments and diamond jewellery by taking market price prevailing during the financial year 1997-98 relevant to assessment year 1998-99.
8. We have carefully considered the entire material. So far as the first contention of the Id. counsel for the assessee regarding denial of authorship of the documents pertaining to VDIS is concerned, since the assessee has admitted his signatures on the affidavit and Anr. documents, the burden was on the assessee to show that the signatures were obtained under fraud, coercion, mis-representation or threat. Although in the statement recorded and also in the affidavits and letters, the assessee has reiterated his version stating that the signatures were obtained by somebody with oblique motive but, in our opinion, the assessee had not been able to substantiate such version. Neither any F.I.R was filed by the assessee against any such fraud nor any specific details of such fraud had been given. It may be that the assessee might have prepared some documents but later on might have not filed the same and somebody else taking advantage of the situation might have sent the papers to the Office of CIT, Surat. However, in absence of any strong explanation, it cannot be believed that the papers were signed by the assessee under some mis-representation, fraud or coercion. Thus, we hold that the papers of VDIS were prepared by the assessee and the same have been signed by him as also admitted by him.
8.1 So far as the next contention is concerned, we find full force in the submissions of the Id. counsel for the assessee. In the VDIS, the disclosure pertains to other assessment years and not to assessment year 1998-99. We consider it proper to reproduce the statement of VDIS, which is as under :
________________________________________________________________ SL No Amount of Assessment If the income is represented Remarks No Income dec- Year(s) to by cash(including jewellery, lared (in which bank deposits),the bullion, investment in shares,debts figures and income due from or any other assets words) relates other persons, commodities (RS.) _______________________________ Description Name in Amount of asset which held Rs.
_________________________________________________________________
1. 2. 3. 4. 5. 6. 7.
__________________________________________________________________
1. 159500.00 Between A.Y. Diamonds Self 159500 Considered 1980-81 M.V. as on 1-4-1987 196992.00 Between A.Y. Diamonds Self 196992 Considered 1981-82 M.V. as on 1.4-1987
2. 17820.00 Between A.Y. Jewellery Self 17829 Considered 1984-85to Gold & M.V. as on 1987-88 Ornaments 1-4-1987
3. 160000.00 Between A.Y. Cash Self 160000 -do-
1988-89 to 1997-98 534312 To.534312.00 _________________________________________________________________ _________________________________________________________________ Items Year of Approx. Weight Cost of Remarks Acquisi- Quantity Acquisition tion _________________________________________________________________ Diamonds Between Asstt. 723 pcs. 36.25 Cts. Rs. 134125 Year 1980-81 Diamonds Between Asstt. 684 pcs. 41.04 Cts. Rs. 168264 Year 1981-82 Gold Between Asstt... 81.00 Gm. Rs. 16119 Ornaments Years 1984-85 to 1987-88 318508 ___________________________________________________________________ The above declaration is made for the purpose of making declaration under the Voluntary Disclosure of Income Scheme, 1997.
The above informations are true to the best of my information and belief.
SIGNED IN WITNESTH HEREOF ON AT SURAT.
DAY OF DECEMBER, 1997 SD/-(INDER KUMAR BACHHANI) KARTA DECLARANT"
8.2 In the affidavit also, the details of acquisition of property are given by the assessee. This affidavit is as under :
AFFIDAVIT 1 INDER KUMAR BACHHANI Karta of Shri Inder Kumar Bachhani (HUF), resident of 202-A, Sagar Shopping Centre, Ring Road, Surat, hereby declare on solemn affirmation as under:-
1. That I have acquired Jewellary from time to time between the period of assessment years 1980-81 to 1987-88, out of my undisclosed income and on some social occasions from my friends and relatives.
2. That I wish to avail the benefit of Voluntary Disclosure of Income Scheme, 1997 and accordingly, I offer Jewellery, cash for the tax.
3. That particulars of Jewellery are mentioned in the registered valuer's report annexed herewith for the valuation as on 1-4-1987. The summary of the jewellery and its cost of acquisition is as under:-
___________________________________________________________ Items Year of Approx. Weight Cost of Remarks Acquisi- Quantity Acquisi-
tion tion
____________________________________________________________
Diamonds Between 723 pcs. 36.25 Cts. Rs. 134125
Asstt.
Year 1980-81
Diamonds Between Asst. 684 pcs. 41.04 Cts. Rs. 168264
Year 1981-82
Gold Between Asst ... 81.00Gm. Rs. 16119
Ornaments Years 1984-85
to 1987-88
318508
_____________________________________________________________
The above declaration is made for the purpose of making declaration under the Voluntary Disclosure of Income Scheme, 1997.
The above informations are true to the best of my information and belief.
SIGNED IN WITNESTH HEREOF ON DAY OF DECEMBER, 1997 AT SURAT.
SD/-(INDER KUMAR BACHHANI) KARTA DECLARANT 8.3 It may be pointed out that except these two documents, there is no other material with the Department to hold that the assessee had acquired any jewellery or any property in the previous year relevant to the assessment year 1998-99. In fact, in this aspect of the matter, no enquiry was conducted by the department. Thus, there is no material on record to show that the assessee had acquired any jewellery or any other property in previous year relevant to assessment year 1998-99. The only material available with the department were the documents relating to VDIS referred to and reproduced above. Whatever conclusion could be drawn about acquisition of property and year of acquisition has to be only on the basis of such documents which constituted the only material available before the departmental authorities.
8.4 We may point out that addition under Section 69A can be made only when it is found that the assessee is owner of any money, bullion, jewellery, etc. or other valuable article, etc.; in the financial year relevant to the assessment year in which addition on account of unexplained money etc. is made. The provisions of Section 69A are as under :
69A. Where in any financial year immediately preceding the assessment year the assessee has made investments which are not recorded in the books of account, if any, maintained by him for any source of income, and the assessee offers no explanation about the nature and source of the investments or the explanation offered by him is not, in the opinion of the [Assessing] Officer, satisfactory, the value of the investments may be deemed to be the income of the assessee of such financial year.
8.5 It is to be pointed out that the Assessing Officer reopened the assessment for assessment year 1998-99 merely on the ground that the assessee has allegedly filed a declaration under VDIS in 1997. The filing of VDIS in a particular year cannot be a ground to hold that the assessee was owner of money or bullion etc. in that year. To repeat, as per the material allegedly belonging to the assessee, which was the only documentary evidence, no finding could have been recorded that the assessee was owner of money etc. in the assessment year 1998-99. In the reasons recorded for reopening the assessment which has been reproduced above, the Assessing Officer has made reference to the letter of CIT-II, Surat. It has been observed that since the assessee had not deposited the tax on the disclosure of income; he loses immunity under section VDIS, 1997. On this basis, he has held that income chargeable to tax at Rs. 3,74,312 has escaped assessment under the provisions of Section 147. On this basis, notice under Section 148 has been issued. In our considered opinion, the material on the basis of which reopening has been made for assessment year 1998-99 cannot at all justify the reopening of assessment as there was no basis for doing so. On the basis of documents on which reopening has been made, it cannot be said that any income for assessment year 1998-99 escaped assessment because on the basis of such material, prima facie, it cannot be believed nor could there be any reason to believe that income for this assessment year has escaped assessment. The department has no other material in its possession for having reason to believe that income pertaining to assessment year 1998-99 had escaped assessment.
8.6 In view of the above, we are of the considered opinion that action taken under Section 148/147 was wholly illegal because there was no basis for reopening of assessment as has been done in this case. The order was, therefore, without any jurisdiction and thus void.
8.7 Since the assessment order passed under Section 147/143(3) was itself illegal and void, Id. CIT(A) was having no justification to invoke jurisdiction under Section 263 against such void or non est order. In the case of Paul John, Delicious Cashew Co. v. ITO [2005] 94 ITD 131, the Cochin Bench of the IT AT had considered the similar matter and has observed as under :
9. Section 263 empowers the Commissioner to call for the records and examined of any person and on examining if he forms an opinion that the order passed by the Assessing Officer is erroneous insofar as it is prejudicial to the interest of revenue, he may after giving the assessee an opportunity of being heard and after making or causing to be made such enquiry as he deems necessary, pass such orders thereon as the circumstances of the case justify, enhancing or modifying the assessment or cancelling the assessment and directing a fresh assessment. From the above it is very clear that first of all the order passed by the Assessing Officer should be erroneous and also it should be prejudicial to the interest of revenue. If the order is not erroneous, even if it is prejudicial to the interest of revenue, the Commissioner has no revisionary power. If the Assessing Officer has no jurisdiction to pass an order, it is not an order at all It is null and void. In the instant case it is very clear that on the basis of the policy decision taken by the Board, the Assessing Officer's power is taken away to reopen the assessment under Section 147. If the Assessing Officer has no power, the Commissioner also has no power.
[Emphasis supplied] 8.8 Thus, our view finds fully fortified by the decision of Cochin Bench referred to above. We hold that as the order of the Assessing Officer passed under Section 147/143(3) was itself void, the order of CIT passed under Section 263 for quashing this order was without jurisdiction. Hence, the same is liable to be quashed. We, therefore, quash the order of the Id. CIT passed under Section 263.
8.9 In view of the above, we quash the impugned order of Id. CIT passed under Section 263.
8.10 The last contention of the Id. counsel for the assessee, in the alternative, is also to be considered. We find force in the same also. Although after holding the order under Section 147/143(3) as invalid and after quashing the impugned order under Section 263, we are not required to dispose of the alternative plea raised before us. However, on considering the arguments, we are of the view that the Id. CIT(A) had no justification to hold that the assessee had acquired jewellery and diamond etc. in the previous year relevant to assessment year 1998-99. In our opinion, there is no material before the Id. CIT to record a prima facie finding that the assessee was owner of money, bullion, etc. in the previous year relevant to assessment year 1998-99. No such finding can be recorded on the basis of the material which came to the possession of the revenue and besides this material there was no other material collected by it to hold that the assessee was owner of any money, bullion, etc, in the previous year relevant to assessment year 1998-99 in the terms and conditions contained under Section 69A of Income-tax Act. In this regard, reference can be made to the decision of Patel Cotton Co. Ltd. v. Asstt. CIT[1998] 64 ITD 273 (Mum.) and CIT v. Gabrial India Ltd. [1993] 203 ITR 108 (Bom.) which fully support our findings. In the case of Gabrial India Ltd. (supra), the Hon'ble Bombay High Court has observed as under:
Held, that the Income-tax Officer in this case had made enquiries in regard to the nature of the expenditure incurred by the assessee. The assessee had given a detailed explanation in that regard by a letter in writing. All these were part of the record of the case. Evidently, the claim was allowed by the Income-tax Officer on being satisfied with the explanation of the assessee. This decision of the Income-tax Officer could not be held to be 'erroneous' simply because in his order he did not made an elaborate discussion in that regard. Moreover, in the instant case, the Commissioner himself, even after initiating proceedings for revision and hearing the assessee, could not say that the allowance of the claim of the assessee was erroneous and that the expenditure was not revenue expenditure but an expenditure of capital nature. He simply asked the Income-tax Officer to re-examine the matter. That was not permissible. The Tribunal was justified in setting aside the order passed by the Commissioner of Income-tax under Section 263.
8.11 In view of the ratio of the said decision and further in view of the decision of ITAT, Mumbai Bench in the case of Patel Cotton Co. Ltd. (supra), we are of the considered opinion that the Id. CIT was not justified in holding that the order of the Assessing Officer was erroneous or prejudicial to the interest of revenue. On this ground also, the order of Id. CIT(A) is liable to be quashed.
8.12 In the result, the appeal of the assessee is allowed and is disposed of as above.
9. Now, we take up appeal No. 623/Lucknow/2005. This appeal was filed by the assessee on 16-8-2005. The assessee had taken following grounds in this appeal:
1. Because the Commissioner of Income-tax (Appeals) has erred in facts and in law and was not justified in dismissing the appeal as infructuous instead of deciding the same on merits which order is contrary to facts and bad in law.
2. Because the Commissioner of Income-tax (Appeals) has failed to appreciate the facts and circumstances of the case and has erred in not deciding upon the validity of the re-assessment, which issue was not in dispute or for consideration under Section 263, the order passed by the Commissioner of Income-tax (Appeals) is erroneous and misconceived.
3. Without prejudice to the above there being no reason to belief, nor any valid reasons nor any income having escaped for the year under consideration i.e., 1998-99 the re-assessment proceedings initiated and the re-assessment order framed thereon is without jurisdiction, bad in law and be quashed.
4. Because in any case on a proper consideration of the facts and circumstances of the same, the order passed under Section 147/143 is void ab initio, bad in law and be quashed.
10. The appeal was admitted by the Bench by condoning the delay. In this regard, a separate order was passed on 18-10-2005. The contention of the Id. counsel for the assessee was that the reopening of the assessment was fully unjustified. According to the Id. counsel, the Id. CIT (Appeals) should have decided the grounds raised before him. On the other hand, the Id. Departmental Representative submitted that the approach of the Id. CIT (Appeals) in holding the appeal as infructuous is fully justified in law.
11. In rejoinder, the submission of the Id. counsel for the assessee was that the entire matter is before the Tribunal and, therefore, the Tribunal is ceased of the entire matter and the legal issue raised before it should be adjudicated. In support of his argument, the Id. counsel for the assessee has placed reliance on the decision in the case of Smt. Kamini Hanskamal Grover v. ITO [2005] 95 TTJ (Ahd.) 363.
12. We have carefully considered the entire material on record. In Ground Nos. 3 and 4, the averment of the assessee is that the assessment order dated 29-1 -2003 passed under Section 147/143 of the Income-tax Act is liable to be quashed as void ab initio. In support of these grounds, the Id. counsel advanced the same arguments which he has advanced while arguing ITA No. 486/Del./2003 and which arguments have been discussed by us while deciding that appeal. The Id. counsel also placed reliance on the decision in the case of Smt. Kamini Hanskamal Grover {supra) and pointed out that in that case also, facts were similar and Ahmedabad Bench of ITAT has held the assessment order as illegal.
13. On going through the record, it is clear that with regard to accounting year relevant to assessment year 1998-99, no undisclosed income was declared by the assessee in the alleged VDIS papers and, therefore, there was no material to have reason to believe that the income of the assessee had escaped assessment. It is thus not discernible as to how the Assessing Officer prima facie believed that the income for the assessment year 1998-99 has escaped assessment. As there was no material to form any belief for reopening the assessment for this assessment year and also there was no information or material in possession of the Assessing Officer to authorise him to believe that reasons existed for opening the assessment for assessment year 1998-99, the assumption and jurisdiction by the Assessing Officer for initiating action for reassessment cannot be justified. In our opinion, the Assessing Officer ought not have reopened the assessment for this assessment year on the basis of whatever material was before him.
14. In view of the above facts and also in view of our observations made while deciding ITA No. 486/Lucknow/2003, we hold that the entire proceedings of reassessment have been undertaken without any legal justification and jurisdiction exercised by the Assessing Officer in doing so is without valid authority of law. Consequently, the assessment order passed under Section 147/143 is held to be null and void and the same is quashed accordingly.
15. In view of the above, ground Nos. 3 and 4 taken in this appeal are allowed.
16. As we have allowed ground Nos. 3 and 4 and declared the assessment order null and void, we are not required to adjudicate ground Nos. 1 and 2 of this appeal.
17. In the result, both the appeals of the assessee are allowed as above.