Written, communicated assessment order is essential before reassessment jurisdiction under section 147 can validly be invoked.
A mere assessment order-sheet entry is not a valid completed assessment unless the statutory requirements of a written, communicated assessment order and, where loss is computed, notification of that loss are satisfied. Without such a legally effective original assessment, reassessment jurisdiction under section 147 of the Income-tax Act, 1961, cannot be invoked on the footing that the earlier return had already been concluded. The text explains that an uncommunicated or incomplete assessment does not prejudice the assessee in the manner required for reopening, and any reassessment based on that defective foundation cannot stand.
Issues: (i) Whether an entry in the assessment order sheet stating that the assessee was assessed at a loss, without a communicated written assessment order and without notification of the loss computed, could be treated as a valid order of assessment. (ii) Whether, in the absence of a valid completed assessment on the original return, the proceedings initiated under section 147 of the Income-tax Act, 1961, and the consequent reassessment were valid.
Issue (i): Whether an entry in the assessment order sheet stating that the assessee was assessed at a loss, without a communicated written assessment order and without notification of the loss computed, could be treated as a valid order of assessment.
Analysis: Under the then applicable assessment law, the Income-tax Officer was required, when making an assessment, to pass an order in writing and, where a loss was computed, to notify the assessee by order in writing of the amount of loss so computed. A mere order-sheet entry, unsupported by the usual assessment form, unsanctioned by a communicated order, and not followed by the required notification of loss, did not satisfy the statutory requirements of a completed assessment. The absence of communication was material because an uncommunicated order could not be treated as one that validly prejudiced the assessee's rights.
Conclusion: The entry could not be treated as a valid order of assessment.
Issue (ii): Whether, in the absence of a valid completed assessment on the original return, the proceedings initiated under section 147 of the Income-tax Act, 1961, and the consequent reassessment were valid.
Analysis: If the original return remained pending because no valid assessment had been completed, the Income-tax Officer could not ignore that return and proceed on the footing that escaped income had to be reopened. Reassessment jurisdiction under section 147 presupposed a legally effective completed assessment liable to be reopened. Where the earlier assessment was held invalid, the reassessment notice and the assessment made in pursuance of it could not stand.
Conclusion: The reassessment proceedings and the consequent assessment were invalid.
Final Conclusion: The reference was answered against the revenue and the assessee succeeded on both questions, as the purported earlier assessment was not valid and the reopening based on it failed.
Ratio Decidendi: A mere order-sheet entry does not amount to a valid assessment unless the statutory requirements of a written, communicated assessment order and, where loss is computed, the required notification of that loss are satisfied; in the absence of such a valid assessment, reassessment jurisdiction cannot be invoked on the footing that the earlier return had already been concluded.