1999 (9) TMI 109 - AT - Income Tax

Tribunal Invalidates Assessment: Procedural Issues Found

Verma Roadways. Versus Assistant Commissioner Of Income-Tax

The Tribunal held in favor of the appellant-assessee, M/s Verma Roadways, declaring the assessment bad in law and void ab initio due to various procedural ... Block Assessment Issues Involved:1. Validity of proceedings u/s 132 and issuance of warrant of authorization.2. Validity of notice u/s 158BC.3. Validity of approval by CIT.4. Determination of undisclosed income for the block period.5. Additions on account of cash seized.6. Additions on account of stock of Supari and Cloth.7. Additions on account of unexplained investment in house property.8. Additions on account of unexplained investment in trucks.9. Additions for part of the assessment year.Summary:1. Validity of Proceedings u/s 132 and Issuance of Warrant of Authorization:The Tribunal held that the power u/s 132 was not exercised in the case of the appellant-assessee, M/s Verma Roadways, as no warrant of authorization was issued against the assessee. Consequently, the assessment was declared bad in law and void ab initio. The submissions raised on behalf of the assessee-appellant, relating to ground Nos. 1 & 5, were accepted, and those of the revenue were not accepted.2. Validity of Notice u/s 158BC:The Tribunal found that the notice dated 8-5-1997 was invalid and illegal due to several reasons: it could not be issued based on an alleged search u/s 132, there was no requisitioned material before the issuance of the notice, the notice did not specify the status of the assessee, it did not indicate whether it was issued on the basis of 'search' or 'Requisition', and it wrongly mentioned the block period. Consequently, the assessment framed under such conditions was declared bad in law and void ab initio.3. Validity of Approval by CIT:The Tribunal held that the approval granted by the Commissioner was non-speaking and indicated non-application of mind. The approval was granted in a mechanical or formal way, leading to the conclusion that the assessment order made on the basis of such approval was also liable to be quashed.4. Determination of Undisclosed Income for the Block Period:The Tribunal found that the Assessing Officer failed to compute the income year-wise as required by section 158BB. The assessment was set aside, and the matter was restored to the Assessing Officer for making a fresh assessment in accordance with the provisions of section 158BB(1).5. Additions on Account of Cash Seized:The Tribunal set aside the findings of the Assessing Officer regarding the withdrawal of Rs. 39 lakhs and restored the matter for fresh adjudication. The addition of Rs. 65,59,302 was confirmed as the assessee failed to establish that the amount belonged to Late Rameshwar Dayal Shiksha Samiti. The matter regarding the balance amount of Rs. 78,65,878 was restored to the Assessing Officer for fresh adjudication.6. Additions on Account of Stock of Supari and Cloth:The Tribunal set aside the findings of the Assessing Officer regarding the addition made on account of unexplained stock of Supari and restored the matter for fresh adjudication. Similarly, the matter regarding the addition made on account of stock of cloth was also restored to the Assessing Officer for fresh adjudication.7. Additions on Account of Unexplained Investment in House Property:The Tribunal deleted the addition of Rs. 3,40,000 made on account of unexplained investment in house property, as it was based purely on surmises and guesswork without any material evidence.8. Additions on Account of Unexplained Investment in Trucks:The Tribunal deleted the addition of Rs. 10.5 lakhs made on account of unexplained investment in trucks, as the acquisition of these trucks had been shown by the assessee in its return for the assessment year 1996-97.9. Additions for Part of the Assessment Year:The Tribunal deleted the additions of Rs. 38,70,217 made on account of the application of net profit rate, enhancement of profit on sale of trucks, and enhancement of income from scrap sales, as there was no justification for these additions.Conclusion:The appeal of the assessee was allowed on legal grounds and partly allowed on merits, with several matters being restored to the Assessing Officer for fresh adjudication.