2012 (11) TMI 341 - AT - Income Tax

Appeals dismissed over flawed reassessment proceedings; addition of Rs.61,42,981 deleted by appellate authority

The appeals challenging the reassessment proceedings and subsequent additions were dismissed. The reassessment initiated by the AO based on an invalidated ... Reassessment Proceedings – Assessee being in business of onions on commission basis in the notified market area of Market Committee, Amritsar. Order of Secretary, Market Committee, Amritsar, is without mentioning of any number and date of passing of such order. Such order cannot be sustained in the eyes of law and, therefore, the said order has been set aside. Held that:- Since the basis for which the reassessment proceedings were initiated has been set aside, there remains nothing with the Income Tax Department for the issuance of notice u/s 148 of the Act and the matter does not survive and therefore, the order of the AO is bound to collapse since the super structure erected on the foundation of illegal order cannot stand and accordingly the Ld. CIT(A) has rightly deleted the addition of Rs.61,42,981/- no infirmity in the order of CIT(A), who has rightly quashed the assessment made by the AO and has rightly deleted the addition so made - Thus, all the grounds of appeal of the Revenue for the A.Y. 2001-02 are dismissed – in favour of assessee Issues:1. Appeal challenging reassessment proceedings initiated by the AO based on the order of the Secretary, Market Committee, Amritsar.2. Validity of the reassessment proceedings and the subsequent order passed by the AO.3. Applicability of the order of the appellate authority of Punjab Mandi Board, Chandigarh on the reassessment proceedings.4. Justification for deleting the addition made by the AO.Analysis:1. The appeal of the Revenue in ITA No. 460(Asr)/2010 for the assessment year 2001-02 challenged the reassessment proceedings initiated by the AO based on the order of the Secretary, Market Committee, Amritsar. The AO reopened the case after notice u/s 148, citing findings from the Investigation Wing that led to additional demand and penalties. However, the order of the Secretary, Market Committee, Amritsar was set aside by the Secretary, Punjab Mandi Board, Chandigarh, deeming it illegal and non-speaking. The appellate authority directed the assessing authority to re-assess the business of the firm in accordance with the law. The AO made an addition of Rs.61,42,981, which was later deleted by the CIT(A).2. The validity of the reassessment proceedings and the subsequent order passed by the AO were scrutinized. The AO's decision to reopen the case based on the now-invalid order of the Secretary, Market Committee, Amritsar was challenged. The CIT(A) rightly quashed the assessment and deleted the addition, emphasizing that the foundation of the reassessment was flawed due to the illegal order, rendering the proceedings unsustainable in the eyes of the law.3. The applicability of the order of the appellate authority of Punjab Mandi Board, Chandigarh on the reassessment proceedings was a crucial aspect. The appellate authority's observation that the order of the Secretary, Market Committee, Amritsar lacked a reasonable basis and was non-speaking led to the setting aside of the order. The assessing authority was directed to conduct fresh assessment proceedings within a specified timeframe, which was not adhered to. The appellate authority's decision played a pivotal role in determining the fate of the reassessment proceedings.4. The justification for deleting the addition made by the AO was based on the flawed foundation of the reassessment proceedings. The AO's reliance on the invalidated order for initiating the reassessment was deemed unjustified. The CIT(A) rightly upheld the deletion of the addition, citing various court decisions and emphasizing that when the basis for reassessment no longer exists, the entire assessment collapses. The order of the CIT(A) in quashing the assessment and deleting the addition was found to be in line with legal principles and court precedents.In conclusion, all the grounds of appeal of the Revenue were dismissed, and the appeals challenging reassessment proceedings and subsequent additions were rejected based on the flawed foundation of the reassessment process and the lack of a reasonable basis for the original order passed by the Secretary, Market Committee, Amritsar.