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2016 (1) TMI 376 - ALLAHABAD HIGH COURT

2016 (1) TMI 376 - ALLAHABAD HIGH COURT - [2016] 380 ITR 658 - Reopening of assessment - period of limitation - invoking the provision of Section 150(1) Held that:- n the instant case, the Tribunal has given a categorical finding that the assessee had disclosed all the material facts necessary for making the assessment and there was no failure on his part. We find that this finding of the Tribunal is perfectly correct and, as we have observed, the Assessing Officer in his original assessment pro .....

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n specified under Section 149 of the Act, the period of limitation was 10 years. Accordingly, the reassessment notice could be issued on or before 31.05.2001 whereas in the instant case reassessment notice under Section 148 of the Act was issued on 11.04.2001, which was within the period of limitation. Consequently, we are of the opinion that the notice issued under Section 148 of the Act was issued within the period of limitation.

The question of invoking the provision of Section 150 .....

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t cannot be given by the Appellate or Revisional Authority or by the Court if on the date on which the order in appeal or revision was passed, the reassessment proceeding had become barred by time. Under Section 150(2) of the Act the Appellate or the Revisional Authority or the Court could give direction for reassessment only in respect of that assessment year. In respect of reassessment, proceedings could be initiated on the date of passing of the order in appeal. Since we have held that the no .....

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Act). The facts leading to the filing of the appeal is that the assessee is a company engaged in the manufacture of boxes and trading in timber. For the assessment year 1991-92, the assessee filed its return declaring a total income of ₹ 1,88,483/-. Subsequently, a search and seizure operation under Section 132(1) of the Act was carried out at the premises of the assessee on 12.03.1992. At the time of search and seizure operation the assessment proceedings had not started on the basis of .....

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ate Authority on 17.02.1995, pursuant to which the appeal effects were given. 2. For the assessment year 1992-93 an assessment order was made on 31.03.1995. The assessee, being aggrieved filed an appeal. The Ist Appellate Authority passed an order on 12.01.2004 and, while disposing of the appeal for the assessment year 1992-93, made certain observations for the assessment year 1991-92. The extract of the observation made by the Appellate Authority is extracted hereunder: "13. The appellant .....

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nt order on 31.3.94. The present A.O. is directed to carefully study these bill books since the blank bill books were found from the custody of the appellant it is obvious that the credit balances atleast would be bogus. The same could be true about the purchases. How this figure of ₹ 653523/- has been arrived is not known. The A.O. should work out the exact quantum of credit balance and the bogus purchases which have been introduced in the books of account of the appellant by means of bla .....

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he reasons to believe was basically based on the observations made by the Ist Appellate Authority in its order for the assessment year 1992-93. 4. Pursuant to the notice issued under Section 148 of the Act, a re-assessment order for the assessment year 1991-92 was passed by the Assessing officer on 28.03.2003. The income was increased and an addition of ₹ 28,37,343/- was made on account of bogus purchases made from six parties of Nagaland. 5. The assessee, being aggrieved, filed an appeal .....

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being aggrieved, filed a second appeal before the Tribunal, which was allowed by the Tribunal by its order dated 05.05.2005. The Tribunal held that the proceedings initiated under Section 148 was invalid inasmuch as there was no failure on the part of the assessee to disclose fully and truly all material facts necessary for making an assessment and, therefore, held that the notice issued under Section 148 of the Act beyond the period of four years from the end of the assessment in question was .....

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sued by the AO in consequence to the directions given by the Ld. CIT (A) and as per the provisions of section 150(1) of the Act. There is no bar of limitation for issue of notice u/s 148 in consequence of or to give effect to such directions of the appellate authorities? (2) Whether on the facts and circumstances of the case, the Hon'ble Tribunal erred in law in quashing the assessment made u/s 143(3)/148 by observing that there was no failure on the part of the assessee to disclose fully an .....

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D.Singh, the learned Senior Counsel along with Sri K.D.Vyas for the Assessee. 8. The learned counsel for the appellant submitted that the Tribunal committed a manifest error in holding that the assessment proceedings were invalid on the ground that the issuance of notice was beyond the period of four years from the end of the relevant assessment year without considering the provision of Section 150(1) of the Act. It was urged that there was no bar of limitation for issuance of notice under Secti .....

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he Act was not applicable. 9. On the other hand, Sri S.D.Singh, the learned Senior Counsel contended that pursuant to the search and seizure operation, all the documents seized were fully explained and were considered by the Assessing Officer while making the original assessment proceedings and the same documents have formed the basis for issuance of the notice under Section 148 of the Act as well as the reasons to believe. The learned Senior Counsel contended that since the same documents were .....

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on 148 of the Act was a valid notice issued within the period of limitation specified under Section 149 of the Act but submitted that the provision of Section 150(1) of the Act was not applicable in the facts and circumstances of the instant case. 10. Having heard the learned counsel for the parties, we find that the reasons recorded by the Assessing Officer before issuance of notice under Section 148 of the Act is as under: "M/s Hemkunt Timber Ltd. C-11 Panki Industries Area Site No.1, Kan .....

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n of the seized material the assessment was completed u/s. 143(3) on 31.3.94 on a total income of ₹ 16,14,200/. After giving appeal effect to the CIT (A) order, as also under the provisions of section 154 of the IT Act, the total income was recomputed into the loss(-) ₹ 2,49,700/-. In this connection, during the course of the hearing of the appeal filed by the assessee for A.Y. 92-93 the ld. CIT (A) vide his appeal order dated 12.1.2001 para 13, for the reasons mentioned therein dire .....

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re found. It has been found that the assesss has recorded the purchases from these persons which have been held to be non-existent persons-for amount aggregating to ₹ 34,90,866 as under: Sl. No. Name of the Party Amount of the purchase (Rs.) 1 I.WABANG OZUKUM 725918 2 IMKONGLIBA AO 410619 3 V.N.ANGAMI 917053 4 B.C.KRO 481630 5 LOTHA TIMBER INDUSTRIES 559771 6 M.BENBANG LUKSHI LONG KUMER 395875 TOTAL 3490866 In view of the aforesaid facts and as per findings and direction of the ld. CIT (A) .....

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e F.No.148/22/CIT /Tech/KNP/2000-01/8899 dated 28.3.2001 and is placed in file. Issue notice u/s 148. ACIT 10.4.2001" 11. The aforesaid reasons to believe primarily indicates that it was based on the observations made by the Ist Appellate Authority while passing the order for the assessment year 1992-93. The reasons to believe for re-initiating assessment proceeding was primarily on the basis of the documents seized, which were contended to be bogus purchases and, consequently, there was a .....

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nder: "(4) (I) Since the time-barring assessment was pending the assessee could furnish the details and information for assessment purpose for A.Y.1991-92. It was also required vide this office letter dated 29.3.93 and finally on 7.3.94 giving specific papers to be explained and get them verified from the regular books of account which pertained to the assessment year 1991-92. The assessee com.has furnished details etc. and also furnished explanation from time to time in respect of seized p .....

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a perusal of aforesaid, it is apparently clear that the assessee furnished his explanation on each and every seized documents, which was marked as annexure ML-2/1 . 13. In the reasons recorded by the Assessing Officer, the Assessing Officer has observed that the entries made in this annexure relates to purchase, which explanation was given by the assessee in the original assessment proceedings. Consequently, all the necessary explanation and information was furnished by the assessee and, theref .....

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e course of the proceedings. The Ist proviso puts an embargo that the reassessment proceedings after expiry of four years from the end of the relevant assessment year could only be initiated if there was failure on the part of the assessee to disclose fully or truly all material facts necessary for assessment for that assessment year. The said provision makes it apparently clear that the reassessment proceedings after four years could only be initiated if the assessee failed to disclose fully or .....

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seized documents. Therefore, it was not a case where the assessee failed to disclose fully or truly all material facts necessary for making the assessment. The notice, in our view, issued under Section 148 of the Act was invalid. 16. In so far as the period of limitation is concerned, the present dispute relates to the assessment year 1992-93 and as per the then existing provision of limitation specified under Section 149 of the Act, the period of limitation was 10 years. Accordingly, the reasse .....

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