1992 (3) TMI 142 - AT - Income Tax

Summary

Issues Involved:
1. Legality of the re-assessment order.
2. Validity of the notice issued under section 148/147(a).
3. Adequacy of the assessee's disclosure of income.
4. Application of section 147(a) in the context of the ITO's actions.

Detailed Analysis:

1. Legality of the re-assessment order:

The appeal was filed by the revenue against the order of the CIT(A) who quashed the re-assessment order, holding that the re-opening was illegal. The CIT(A) observed that the ITO had no fresh information to issue the notice under section 147(1)(a) or (b). The ITO was aware of the seizure by the Central Excise & Customs Authorities before the assessment under section 143(1) was completed. The Department had possession of the seized goods well before the order under section 143(1). The ITO had recorded the statement of the assessee before the assessment under section 143(1) was completed, indicating that there was no new information to justify re-opening the assessment.

2. Validity of the notice issued under section 148/147(a):

The ITO issued a notice under section 148 on 16-11-1983, based on the belief that the precious stones seized were the assessee's undisclosed income. However, the assessee had already provided evidence and affidavits from the owners of the goods, which were confirmed by their statements. The CIT(A) quashed the re-assessment proceedings, stating that there was no fresh information to justify the notice under section 147(a). The ITO had already recorded the statements and had the information before the original assessment was completed.

3. Adequacy of the assessee's disclosure of income:

The assessee filed a return of income for the assessment year 1980-81, which was accepted under section 143(1). The revised return showed a different income, but the ITO did not consider it a ground for re-opening the assessment. The assessee argued that all necessary facts were disclosed in the original return, and the ITO had all the information required to make an informed decision. The ITO's failure to act on this information at the time of the original assessment could not be used as a basis to re-open the assessment.

4. Application of section 147(a) in the context of the ITO's actions:

The ITO had the option to either believe the return filed by the assessee or to conduct further inquiries. By accepting the return under section 143(1), the ITO exercised his judicial discretion to believe the truthfulness of the return. The ITO's subsequent decision to re-open the assessment based on the same information was seen as a change of opinion, which is not a valid ground for action under section 147(a). The ITO's failure to issue a notice under section 139(2) during the relevant assessment year and the completion of the assessment under section 143(1) without further inquiry indicated that the ITO did not genuinely believe that the income had escaped assessment.

Conclusion:

The Tribunal upheld the decision of the CIT(A), stating that the re-assessment proceedings initiated under section 147(a) were invalid. The ITO's actions were seen as a change of opinion rather than a response to new information. The appeal filed by the revenue was dismissed, and the cross objection filed by the assessee was also dismissed as it became infructuous.