TMI Blog2009 (6) TMI 119X X X X Extracts X X X X X X X X Extracts X X X X ..... the appeal filed by the Revenue for the assessment year 1988-89 in I.T.A. 253/Coch/2002. The income escaping assessment in this case was made by the assessing authority for the reason that the audited profit and loss account and balance-sheet filed by the assessee with its bankers M/s. South Indian Bank Ltd., disclosed a higher amount of profit than the income returned. The assessee challenged the income escaping assessment on two grounds: "(1) The first ground being the issue of merits that the profits reflected in the profit and loss account and in the balance-sheet filed before the bankers were not the actual profit but an estimated figure to support the loan facilities sought for by the assessee. (2) The second ground is that the reopening of the assessment under section 147 was not justified." Regarding the merit of the case, the Commissioner of Income-tax (Appeals) held that there is no reason as per the details available on record to prefer the profits reflected in the account statements filed before the bankers, to the income returned by the assessee before the income-tax authorities. The Commissioner of Income-tax (Appeals) accepted the contention of the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... idered the explanation offered by the assessee regarding the circumstances in which the inflated profit and loss accounts happened to be filed before its bankers. The Assessing Officer acted mechanically and jumped into a conclusion that the statements of profits filed before the bankers of the assessee were conclusive enough to hold the case against the assessee. We do not think that, it is proper for the Assessing Officer to treat the documents filed with a third party as always sacrosanct. The Assessing Officer has to make his own assessment regarding the probative value of the documents, after hearing the assessee and considering his explanations. The assessing authority could not take advantage of a situation hostile to the assessee without appreciating the facts of a particular case independently. The accounts statements filed with the bank cannot be accepted as the ultimate truth. The Assessing Officer has held a view that the profits reflected in the profit and loss accounts filed before the bankers were the correct profit of the assessee and the profits reflected in the return of income were false. This is only one side of the issue. An equally possible view could be th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... out by the Commissioner of Income-tax (Appeals), the statements filed before the bankers were in the nature of fresh information. In such circumstances the correct provision to be applied is section 147(b). The limitation period for the purpose of that section did expire on January 31, 1993. Here the notice was issued on March 29, 1999. The hon'ble Kerala High Court in the case of Cochin Plantations Ltd. [1994] 210 ITR 91 has held that the service of a valid notice constitutes the very foundation of the jurisdiction to reopen an assessment and failure of such a notice or any invalidity in the notice would render the assessment procedure illegal and invalid. Therefore, in the present case notice issued under section 148 is invalid. Therefore, the Commissioner of Income-tax (Appeals) has rightly held that the income escaping assessment is void. The appeal filed by the Revenue for the assessment year 1988-89 fails. Next, we will consider the appeal filed by the Revenue for the assessment year 1989-90 in I.T.A. No. 254/Coch/02. The only ground raised by the Revenue in this appeal is that the Commissioner of Income-tax (Appeals) has gone wrong in allowing the appeal of the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me escaping assessment is not permissible when an assessment is already pending. In the light of the above judicial pronouncements, it is clear that once an assessee has filed a return of income and the assessing authority has issued notice under section 143(2) for the purpose of completing the assessment thereon, issue of notice under section 148 for the purpose of making an income escaping assessment is not permissible. This is mainly because once notice under section 143(2) is issued by the assessing authority, the assessment proceedings do commence and once the assessment proceedings are commenced, the proceedings should come to a logical end. In the present case the assessee has filed the return and the assessment proceedings have been initiated by issuing notice under section 143(2) and therefore the assessment is pending as such. Before completing the said assessment already initiated, it is not possible to hold a view whether income has escaped or not. Therefore, in the light of the above judgments, it has to be held that issue of notice under section 148 when the return is pending for assessment pursuant to the notice issued under section 143(2), is quite prematur ..... X X X X Extracts X X X X X X X X Extracts X X X X
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