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TMI Blog2014 (9) TMI 1273X X X X Extracts X X X X X X X X Extracts X X X X ..... his return of income for the Assessment Year 1989-90 showing textile / cloth business on -- October, 1989 even prior to the date of search and the seized cash of Rs.2,60,000/- was out of the available cash balance of Rs.2,73,396/-as on 11th December, 1990 in the books of accounts. 1.3. The CIT(A) erred in not appreciating that the Assessing Officer in his order dated 24th December, 1999 at Page No. 4 para 4 has given a finding that the Appellant was doing business in textile in a small way. 1.4. The CIT(A) erred in not appreciating that once the books of accounts are accepted as correct and complete by him, the cash balance shown in the books of accounts as on 11th December, 1990 and seized by the Customs Authorities on 11th December, 1990 ought to be accepted as correct. ADDITION TOWARDS GOLD BALLS AND JEWELLERY SEIZED: 2. The CIT(A) erred in not appreciating that both at the time of original assessment as well as during the remand proceedings, the Department failed to verify from the Income-tax Department, Guntur about the veracity / correctness of the various documents / evidence produced by the Appellant. 2.1. The CIT(A) erred in not allowing entire value of gold ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Act, was issued to the assessee on 31.03.1996 calling for return of income for AY. under consideration. The assessee filed his return showing income of Rs.15,009/-.The AO finalised the assessment on 04.03.1999 u/s. 143(3) r.w. section 147(a) of the Act, determining the income of the assessee at Rs. 10.27 Lakhs. Aggrieved by the order of the AO, he preferred an appeal before the First Appellate Authority (FAA), who vide his order dated 24.12.1999 dismissed the appeal filed by the assessee. He challenged the order of the FAA before the Tribunal. Vide its order dated 09.08.2004, (ITA/1294/Mum/2000) 'G' Bench of the Mumbai Tribunal remitted the matter back to the file of the FAA to decide the matter afresh. While deciding the matter in pursuance of the ITAT's order, the FAA deleted certain additions made by the AO. However, he upheld the addition of Rs. 2.60 Lakhs and addition made by the AO. With regard to the 5 gold balls weighing 1545 gms., he directed the AO to file a remand report. He found that the AO had not carried out any verification as directed by him, about the evidences furnished by the Authorised Representative(AR) of the assessee with regard to the owner ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . (221 CTR 149), Cargo Clearing Agency (218 CTR 541) and Prakash Jewellers (261 CTR 195).Departmental Representative (DR) supported the order of the FAA. 4. Recording and supply of reasons u/s. 147-148 has been subject matter of a lot of litigation from the very beginning. As early as 1933 the issue was deliberated upon by the Hon'ble Calcutta High Court in the case of Anglo-Persion Oil Co. (India) Ltd. (1 ITR 129).With the passage of time the law relating to re-opening of completed assessment developed and in the case of GKN Driveshafts (India) Ltd., the Hon'ble Apex Court finally resolved the issue as under: When a notice under section 148 of the Income-tax Act, 1961, is issued, the proper course of action for the notice is to file the return and, if he so desires, to seek reasons for issuing the notices. The Assessing Officer is bound to furnish reasons within a reasonable time. On receipt of reasons, the notice is entitled to file objections to issuance of notice and the Assessing Officer is bound to dispose of the same by passing a speaking order. (259 ITR 19). The above judgment of the Hon'ble Supreme Court has been followed by various Hon'ble Courts while dealing with t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... purpose (and is not a mere formality on paper), i.e., to avoid arbitrariness or biased or mala fide action by the taxing authorities. Section 148(2) is silent regarding communication of reasons. The provision has to be interpreted in a manner which makes it meaningful and purposive. Keeping the object of the Legislature in mind, the courts, including the Supreme Court, have interpreted the section by laying down that reasons have to be communicated, as otherwise the same will remain a mere formality with no ultimate purpose or object to be served(emphasis by us).There is also nothing in section 148(2) of the Act indicating expressly or otherwise, that an assessee can ask for reasons to be communicated only after he has filed a "revised return" in response to the notice under that section. The recording of reasons and "obtaining approval" to give notice may be "administrative action" but the very act of giving notice backed by good and valid reasons under section 148(2) of the Act is a quasi-judicial function. If reasons are supplied along with the notice under section 148(2), it will obviate unnecessary harassment to the assessee as well as to the Revenue by avoiding unnecessary li ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rinciple while deciding the matter of Samsung India Electronics P. Ltd.(362 ITR 460) and held that the AO was duty bound to supply the reasons recorded by it. 4.1. We are of the opinion that the effect of reopening is to partly vacate or set aside the original order of assessment and to substitute it and the concept of escapement of income includes both non-assessment or under assessment. Whatever may be the reason but it is mandated by the Hon'ble Courts that reasons to believe must necessarily show, indicate and communicate why and for what grounds/cause any income has escaped assessment. Recording of reasons has been emphasised and adverted to as the foundation of the jurisdiction of an AO, who initiates reassessment proceedings. The validity of the reassessment proceedings is tested, by the Hon'ble Courts, on the basis of the underlying reasoning stated and recorded for opening of the reassessment. If the person affected by the action of the AO is not aware as to why the AO had found it fit to reopen his assessment, he will be in dark and will not be in position to defend himself. Principles of natural justice demand that nobody should be penalise unheard. Without furnishing t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r 18 years of the issuance of 148 of the Act, the AO is not been able to prove that the assessee was supplied copy of the reasons recorded. We find that in the case of Videsh Sanchar Nigam Ltd. (Supra) the Hon'ble High Court has held as under: The finding of fact recorded by the Income-tax Appellate Tribunal is that in the present case the reasons recorded for reopening of the assessment though repeatedly asked by the assessee were furnished only after completion of the assessment. The Tribunal following the judgment of this court in the case of CIT v. Fomento Resorts and Hotels Ltd., Income-tax Appeal No. 71 of 2006 decided on November 27, 2006, has held that though the reopening of the assessment is within three years from the end of the relevant assessment year, since the reasons recorded for reopening of the assessment were not furnished to the assessee till the completion of assessment, the reassessment order cannot be upheld. Moreover, special leave petition filed by the Revenue against the decision of this court in the of CIT v. Fomento Resorts and Hotels Ltd. has been dismissed by the apex court, vide order dated July 16, 2007. In this view of the matter, the presen ..... X X X X Extracts X X X X X X X X Extracts X X X X
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