TMI Blog1988 (10) TMI 22X X X X Extracts X X X X X X X X Extracts X X X X ..... the explanation of the assessee that the building works were being carried on at Assam where the assessee had no previous experience and had to transport labour and materials from Calcutta as also there was increase in the prices of building materials and labour rates after the commencement of the work under contract and as such, the rate of net profit was not high. The Income-tax Officer estimated the rate of net profit at 10 per cent., computed the income accordingly and made an ex parte order of assessment on March 21, 1973. It was recorded in the order of assessment that penalty proceedings under sections 271(1)(a), 271(1)(c) and 140A(3) of the Income-tax Act, 1961, had already been initiated. Being aggrieved by the aforesaid, the assessee preferred an appeal before the Appellate Assistant Commissioner contending, inter alia, that the assessment was barred by limitation as the same had not been completed within one year from the date of filing of the revised return, that is, before February 8, 1973. It was contended further that the limitation was not saved by section 153(1)(b) of the Income-tax Act, 1961, which did not apply and, in any event, there was no material on reco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts income within the meaning of section 271(1)(c) of the Act, or that the records led to a reasonable inference that there was even a prima facie case of concealment. The Tribunal held that there was nothing on record to indicate that the assessee was guilty of concealment of income. On the other hand, the assessee had returned its income on estimate basis and the Income-tax Officer had adopted the same basis for determining the income of the assessee. The Tribunal noted that the estimates made by different persons were bound to differ and it could not be presumed therefrom that the assessee had concealed its income. The Tribunal noted further that the Income-tax Officer, in making the assessment, did not invoke or apply section 153(1)(b) of the Act which was noted for the first time by the Appellate Assistant Commissioner. Before the assessment became time-barred on February 8, 1973, there was no prima facie finding by the Income-tax Officer that the assessee had concealed its income within the meaning of section 271(1)(c) of the Act. Even thereafter, there was no such specific finding. Only on March 21, 1973, the Income-tax Officer initiated penalty proceedings in a routine manne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reof be reopened or that before any order of assessment is passed against him, he be reheard." Section 153: "(1) No order of assessment shall be made under section 143 or section 144 at any time after (a) the expiry of - . . . (iii) two years from the end of the assessment year in which the income was first assessable, where such assessment year is an assessment year commencing on or after the 1 st day of April, 1969, or ... (c) the expiry of one year from the date of the filing of a return or a revised return tinder sub-section (4) or sub-section (5) of section 139, whichever is latest ... Explanation 1 -In computing the period of limitation for the purposes of this section, the time taken in reopening the whole or any part of the proceeding or in giving an opportunity to the assessee to be reheard under the proviso to section 129 or any period during which the assessment proceeding is stayed by an order or injunction of any court, shall be excluded. " Section 271: "(1) If the Income-tax Officer or the Appellate Assistant Commissioner, in the course of any proceedings under this Act, is satisfied that any person -. . . (c) has concealed the particulars of his incom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... disclosing net income of Rs. 7,073. The Income-tax Officer completed the assessment on March 31, 1960. In the assessment, the Income-tax Officer added a sum of Rs. 10,000 as income from undisclosed sources on the basis of unexplained cash credits, as also another sum of Rs. 17,767 being the share income of the assessee from another firm which had not been disclosed in the return or at any time prior to the completion of the assessment. The assessee contended that under section 34(3) of the Indian Income-tax Act, 1922, the assessment was barred by limitation as the same had to be completed during a period of four years from the end of the year in which the income became first assessable. The Income-tax Officer rejected the contention on the ground that this is a case where the provisions of section 28(1)(c) of the said Act of 1922, applied and as such a longer period of limitation was available. Appeals by the assessee to the Appellate Assistant Commissioner and the Tribunal were unsuccessful. On a reference, a Division Bench of the Madras High Court held that in view of the non-disclosure of the assessee's income from the said firm in the return of the assessee and the addition t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... her. The successor Income-tax Officer continued the penalty proceedings from the stage at which his predecessor had left it and without issuing a fresh notice either under section 129 or under section 274 of the Income-tax Act, 1961, imposed penalty on the assessee. The order of penalty was set aside by the Appellate Assistant Commissioner on the ground that the same had been imposed without hearing the assessee as required by section 274 of the Act of 1961. On appeal by the Revenue, the Tribunal affirmed the order of the Appellate Assistant Commissioner. On a reference, a Division Bench of the Calcutta High Court held, inter alia, that under section 129 of the Act of 1961, it was open to an assessee to demand a rehearing before a successor Income-tax Officer before he continued the previous proceedings or any part thereof. It was held further that there was nothing on record to show that the assessee had knowledge that the successor Income-tax Officer intended to proceed with the matter from the stage at which has predecessor had left it. It was also held that though no reply had been filed to the notice under section 274 of the Act of 1961, issued by the predecessor Income-tax Of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xt to be considered is whether the Revenue is entitled to the benefit of the extended period of limitation under section 153(1)(b) of the Act of 1961. On the materials on record, the Tribunal has found as a fact that there was nothing to establish even prima facie that the assessee was guilty of concealment of any income within the meaning of section 271(1)(c) of the Act nor was there any finding by the Income-tax Officer to that effect at any time before or after the assessment became time-barred on February 8, 1973. The Tribunal noted that the assessee's return of income was on the basis of estimate, which basis was also adopted by the Income-tax Officer. A difference in estimate, it was held, would not lead to the conclusion that there was prima facie concealment. The penalty proceedings were initiated by the Income-tax Officer in a routine manner on March 21, 1973, after the assessment became time-barred. The Tribunal also noted that the proceeding under section 271(1)(c), initiated in the instant case, had ultimately been dropped against the assessee. On the basis of the aforesaid facts, the Tribunal has come to the conclusion that the Revenue was not entitled to the benefit o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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