2007 (2) TMI 282 - AT - Income Tax

Tribunal upholds annulment of assessment orders due to lack of material facts disclosure.

The Tribunal upheld the CIT(A)'s decision to annul assessment orders for the mentioned years. It found that the AO failed to establish non-disclosure of ... Full And True Disclosure Issues involved: Department's appeal against CIT(A) order for assessment years 1988-89 and 1989-90.Issue 1: Validity of assessment orders under IT Act- Department raised grounds challenging CIT(A)'s annulment of assessment orders under s. 143(3) r/w s. 147 for the mentioned assessment years.- CIT(A) held that additional income offered by assessee was not considered by AO, questioning the validity of notice issued under s. 148.- CIT(A) erred in ignoring that income had escaped assessment, leading to valid reopening of assessments by AO u/s 147 with Jt. CIT's approval.Issue 2: Background and actions taken- Assessee, engaged in jewellery business and money-lending, faced search and seizure by Police Department.- Assessee's suicide noted during search, with subsequent actions under s. 132/132A of IT Act.- Assessee's widow offered additional income for tax in response to proceedings.Issue 3: Assessment proceedings and challenges- AO accepted returns under s. 143(1) without showing offered income.- CIT set aside assessments under s. 263, later challenged by Department.- AO initiated proceedings under s. 147, leading to annulment by CIT(A) due to jurisdictional issues.Judgment and Legal Analysis:- Tribunal found CIT(A)'s conclusions valid, citing changes in s. 147 post-1989 amendments.- AO's failure to establish non-disclosure of material facts by assessee led to invalid initiation of proceedings under s. 147.- Tribunal emphasized the importance of disclosing material facts for assessment validity.- Case law highlighted the obligation of AO to draw correct inferences from disclosed primary facts.- Lack of precise disclosure failure by assessee rendered s. 147 proceedings invalid.- Tribunal quashed assessment orders for both assessment years, dismissing Department's appeals.