2010 (11) TMI 795 - HC - Income Tax

High Court orders reassessment for 1986-87, emphasizes thorough examination of accounts. Authorities criticized for lack of scrutiny.

The High Court directed a complete reassessment for the assessment year 1986-87, emphasizing the need for a thorough examination of certain entities' ... Assessment - Tribunal by order and Cross-Objection and other connected matters, after going through the accounts of ICA and KSD produced by the Assessee opined that in the revised returns filed by the Assessee, the income of ICA and KSD were wrongly included and that the income of the said entities could not be considered as income of the assessee. It also opined that in case of Transcorp Associates - Delhi, Megacorp-Bombay and Intercorp-Bombay should not be computed as the income of the assessee and the income of the said firms to be excluded from the scrutiny while reassessing the income of the assessee – Held that:- Tribunal directed for redoing the assessment as directed by the C.I.T earlier, there should not have been a fresh assessment orders. By virtue of the orders in the [2008 (10) TMI 326 - KARNATAKA HIGH COURT] there cannot be any order which could be enforced order than the order dated 14.10.2008. The authorities concerned have a mandate to follow the directions of this court as this order 2008 (10) TMI 326 - KARNATAKA HIGH COURT has reached finality now. In that view of the matter, neither the assessment order passed on the second occasion nor the orders of the C.I.T nor the orders of the ITAT in the second round of litigation will hold good, authorities concerned directed to redo the entire assessment in the light of the observations made by this Court in the order dated 14.10.2008, appeal stands disposed of accordingly Issues:1. Assessment year 1986-87 - Rectification of assessment order under Section 143(3) of the Indian Income Tax Act.2. Validity of Tribunal's order excluding certain entities' income from the assessee's income.3. Challenge to fresh assessment orders by the Assessee before the C.I.T. Appeals.4. Dismissal of appeal by C.I.T. Appeals and subsequent challenge by Revenue before ITAT.5. Impugned orders of the Tribunal in light of the High Court's earlier order dated 14.10.2008.Analysis:1. The appeal pertained to the assessment year 1986-87, where a search was conducted in the Assessee's premises in 1988 leading to rectification of the assessment order under Section 143(3) of the Income Tax Act. The Assessee appealed before the C.I.T. challenging additional items added by the Assessing Officer, resulting in the matter being remitted for reassessment by the Appellate Authority.2. The Tribunal, in ITA No.653/2000, excluded the income of certain entities from the Assessee's total income, namely ICA, KSD, Transcorp Associates - Delhi, Megacorp-Bombay, and Intercorp-Bombay. The Tribunal's decision was challenged in court, where it was observed that while ICA and KSD's income was properly considered, there was no material provided for the other entities. The court held that scrutinizing the accounts of these entities without proper material was not valid, allowing the Assessing Officer to investigate further.3. Fresh assessment orders were passed in compliance with the Appellate Authority's directions, leading to challenges by the Assessee before the C.I.T. Appeals. The C.I.T. Appeals dismissed the appeal, citing technical and statistical reasons. The Revenue then appealed to the ITAT, which upheld the Tribunal's orders, leading to further challenges in the present appeals related to the same assessment year.4. The Revenue contended that the Tribunal's orders were invalid post the High Court's modification order dated 14.10.2008, which directed a complete reassessment considering the entities' accounts. The authorities were criticized for confirming the earlier assessment without proper examination, leading to the set aside of all subsequent orders.5. The High Court, noting the finality of its earlier order, directed the authorities to redo the entire assessment in line with the observations made in the order dated 14.10.2008. As there was nothing left for consideration on merits, the appeal was disposed of accordingly, emphasizing the need to follow the court's directions for a comprehensive reassessment.