2005 (9) TMI 241 - AT - Income Tax

Tribunal annuls assessment order due to errors, lack of jurisdiction

Shaw Wallace And Company Limited. Versus Deputy Commissioner Of Income-Tax.

The Tribunal found multiple errors in the original assessment order, including incorrect recording of dates, invalid notices, lack of jurisdiction, and ... Income escaping assessment, Mistake Apparent Issues Involved:1. Incorrect recording of dates and facts.2. Validity of notices under Section 142(1) and Section 148.3. Jurisdiction of the Assessing Officer (AO).4. Best judgment assessment under Section 144.5. Disallowance of Rs. 8.36 crores.6. Provision for bad debts.7. Prior period expenses.8. Levy of interest under Sections 234A and 234B.Detailed Analysis:1. Incorrect Recording of Dates and Facts:The assessee contended that the Tribunal had recorded the date of notice under Section 142(1) as 24th August 1997 instead of the correct date, 24th August 1998. This error was acknowledged, and the Tribunal rectified the mistake by recording the correct date.2. Validity of Notices under Section 142(1) and Section 148:The Tribunal considered whether the notices under Section 142(1) issued after the end of the assessment year rendered the assessment invalid. The assessee argued that since the notices were issued after the assessment year ended, they were illegal and invalid. The Tribunal agreed, referencing the Supreme Court's decision in CIT vs. Narsee Nagsee & Co., which mandates that notices must be issued within the assessment year unless a notice under Section 148 is issued for escaped income.3. Jurisdiction of the Assessing Officer (AO):The AO's jurisdiction was challenged because the notice under Section 142(1) was issued beyond the expiry of the assessment year, and no notice under Section 148 was issued. The Tribunal held that the AO lacked jurisdiction to proceed with the assessment without a valid notice under Section 148, making the assessment invalid.4. Best Judgment Assessment under Section 144:The assessee argued that the AO did not issue a show-cause notice before making a best judgment assessment under Section 144, violating the principles of natural justice. The Tribunal found that the AO failed to provide the necessary opportunity for the assessee to be heard, rendering the assessment invalid.5. Disallowance of Rs. 8.36 Crores:The Tribunal examined the disallowance of Rs. 8.36 crores written off by the assessee. The Tribunal found that the amount was not paid during the assessment years 1993-94 and 1994-95 but was a waiver of loan and interest under a scheme sanctioned by the Calcutta High Court. The Tribunal noted that the AO did not consider the correct facts and evidence, leading to a mistake apparent on record.6. Provision for Bad Debts:The Tribunal confirmed the disallowance of the provision for bad debts of Rs. 3,71,98,000, applying the retrospective amendment by the Finance Act, 2001. The assessee contended that the amended section was not available at the time of assessment, and its applicability was not discussed. The Tribunal acknowledged the mistake of non-consideration of relevant provisions of law.7. Prior Period Expenses:The Tribunal upheld the disallowance of prior period expenses of Rs. 18,27,00,543. The assessee argued that no opportunity was given to explain the claim, and the CIT(A) enhanced the disallowance without notice. The Tribunal found multiple errors, including non-compliance with mandatory provisions and failure to consider material evidence, leading to a denial of justice.8. Levy of Interest under Sections 234A and 234B:The Tribunal confirmed the levy of interest under Sections 234A and 234B without considering that ITNS 150 was not served on the assessee. The Tribunal acknowledged the factual error and referenced the Supreme Court's decision in CIT vs. Ranchi Club Ltd., which mandates the service of ITNS 150 along with the assessment order.Conclusion:The Tribunal found multiple errors in the original order, including incorrect recording of dates, invalid notices, lack of jurisdiction, and failure to follow principles of natural justice. The Tribunal annulled the assessment as invalid and bad in law, rectifying the order to bring it in conformity with the correct legal and factual position. The miscellaneous application filed by the assessee was allowed.