1995 (7) TMI 440 - AT - Income Tax

Appeal allowed for deletion of addition & interest, reopening of assessment deemed invalid. Assessment order upheld despite defective notice.

SAQI BROTHERS Versus INCOME-TAX OFFICERS

The appeal was allowed in favor of the assessee regarding the deletion of the addition of Rs. 2,67,219 and the non-charging of interest under sections ... - Issues Involved:1. Reopening of assessment under section 1482. Validity of proceedings after quashing notice under section 1483. Directions issued under section 144A4. Quantum of addition5. Charging of interest under sections 139(8) and 217Issue-wise Detailed Analysis:1. Reopening of assessment under section 148:The first issue concerns the reopening of the assessment for the assessment year 1982-83. The original return was filed on 31st August 1982, and the assessment was completed on 25th March 1985. The assessment was set aside by the AAC on 25th February 1986, directing a de novo assessment. Despite this, the Assessing Officer issued a notice under section 148 on 15th July 1986. The Tribunal found that the Assessing Officer was aware that the assessment had been set aside by the AAC and that the proceedings were pending. Therefore, the issuance of the notice under section 148 was deemed invalid.2. Validity of proceedings after quashing notice under section 148:Despite holding the notice under section 148 as invalid, the Tribunal noted that the assessment order dated 30th March 1989 was a composite order. It considered both the reopening under section 148 and the directions from the first appellate authority. The Tribunal concluded that the order was valid and the proceedings could not be quashed solely based on the invalidity of the section 148 notice. This issue was decided against the assessee.3. Directions issued under section 144A:The assessee argued that the learned Dy. CIT issued three different directions under section 144A, which vitiated the proceedings. The Tribunal agreed that the Dy. CIT should not have reviewed his directions multiple times. However, it held that this did not render the entire assessment order illegal. The first direction was issued after hearing the assessee and was valid. The Tribunal concluded that while the quantum of addition might be affected, the assessment order itself was not invalid.4. Quantum of addition:The Assessing Officer made an addition of Rs. 3,17,219, which was contested by the assessee. The Tribunal found that the exercise of working out month-wise trading results was based on assumptions and was not permissible in law. It referred to the Punjab & Haryana High Court decision in the case of Bhalla Brothers, which held that no addition could be made based on such discrepancies. The Tribunal concluded that the addition of Rs. 2,67,219 was not justified and deleted it, holding that the Rs. 50,000 offered by the assessee under the Amnesty Scheme was adequate.5. Charging of interest under sections 139(8) and 217:The assessee challenged the charging of interest under sections 139(8) and 217. The Tribunal noted that the assessment order was a composite order and not a regular reassessment. It referred to Circular No. 451, which suggested a lenient view in cases where surrender was made after the matter was set aside by the appellate authority. Given that the addition of Rs. 2,67,219 was deleted and the assessee had offered Rs. 50,000, the Tribunal held that no interest under sections 139(8) and 217 was chargeable.Conclusion:The appeal was allowed in favor of the assessee in terms of the deletion of the addition of Rs. 2,67,219 and the non-charging of interest under sections 139(8) and 217. The reopening of the assessment under section 148 was held invalid, but the assessment order dated 30th March 1989 was deemed valid. The directions issued under section 144A did not render the proceedings illegal, although they affected the quantum of addition.