1997 (10) TMI 106 - AT - Income Tax

Tribunal quashes assessment orders, citing lack of jurisdiction and procedural violations.

Kirtilal Kalidas & Co. Versus Deputy Commissioner Of Income-Tax.

The Tribunal quashed the assessment orders for the block period in all cases, allowing the appeals. The Tribunal found that the Assessing Officer lacked ... Block Assessment Issues Involved:1. Jurisdiction and legality of the Assessing Officer's orders.2. Limitation period for passing the assessment orders.3. Influence of the Dy. Director of Inspection's appraisal report on the Assessing Officer.4. Previous approval by the Commissioner of Income-tax.5. Merits of the additions made as undisclosed income (UDI).Summary:Jurisdiction and Legality:The appellants challenged the orders passed by the Assessing Officer u/s 158BD read with section 143(3) of the Income-tax Act, 1961, on the grounds of lack of jurisdiction, violation of statutory provisions, and rules of natural justice. The Tribunal observed that the searches were conducted under section 132 of the Act, and the subsequent appraisal report and notices issued u/s 158BC confirmed the jurisdiction.Limitation Period:The Tribunal held that the assessments were barred by limitation as per section 158BE(1). The searches were conducted on 30-8-1995, and the assessments should have been completed by 30-8-1996. Since the assessments were made on 31-3-1997, they were beyond the prescribed period and thus required annulment.Influence of Appraisal Report:The Tribunal found that the Assessing Officer was influenced by the directions in the Dy. Director of Inspection's appraisal report dated 14-11-1995. The Tribunal emphasized that assessment proceedings are quasi-judicial and should be conducted independently, without external influence. The refusal to provide the appraisal report further supported the conclusion that the Assessing Officer did not act independently.Previous Approval by the Commissioner:The Tribunal held that the previous approval by the Commissioner u/s 158BG was a quasi-judicial act requiring adherence to principles of natural justice, including providing a hearing to the affected parties. The approval given on 31-3-1997 without any recorded reasons was deemed mechanical and without application of mind, rendering the assessments invalid.Merits of Additions as UDI:The Tribunal reviewed the additions made by the Assessing Officer as UDI and found them unjustified:- M/s. Kirtilal Kalidas & Co.: Additions for unexplained shortfall in gold jewelry and repairs, and unexplained cash were not supported by evidence.- M.R. Agros: Additions for unexplained investments in land and building were found recorded in the account books.- M/s. Vispark Jewellery Manufacturers Pvt. Ltd.: Additions for unaccounted turnover and wastage of gold were based on conjectures and not supported by evidence.- Dr. Usha Mehta: Additions for unexplained gold jewelry, diamonds, and cash were satisfactorily explained and recorded in wealth-tax returns.Conclusion:The Tribunal quashed the assessment orders for the block period in all cases, allowing the appeals.