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 ITO vs. Vikram A. Pradhan (ITAT Mumbai)

Validity of: Re-assessment - Fresh facts received
May, 02nd 2008

Kush Leasing (P) Ltd. vs ITO
Citation 2008 20 SOT 337

Validity of: Re-assessment - Fresh facts received

The returns filed were originally processed under s.143(1). Later, the AO received information from the Investigation Wing that the assessee company was engaged in giving bogus entries of sales or purchases by way of giving accomodation entries. There was material form a belief that its income has escaped assessment. The issue of notice under s.148 was valid.

S.147 and s.148 of the Income Tax Act 1961 

Validity of: Exparte order - Condition precedent: Specific notice
The AO had failed to give specific notice as per proviso to s.144 of the Income Tax Act 1961 before passing exparte order. The assessment made was bad in law.

S.144 of the Income Tax Act 1961 

ITAT, New Delhi

Kush Leasing (P) Ltd. vs ITO

ITA Nos. 2829, 2830, 2831, 2832 and 2833/Del./2006, Assessment Years: 1998-99, 1999-2000, 2000-01, 2001-02 and 2002-03

G.S. Pannu, AM and Joginder Singh, JM

5 October 2007

B.L. Gupta, for the Appellant
B. Koteswara Rao, for the Respondent

ORDER

Per G.S. Pannu

These are a group of five appeals preferred by the assessee and arise out of the respective orders of the CIT(A) dated 22.05.2006 pertaining to the assessment year 1998-99 and dated 5.6.2006 pertaining to the assessment years 1999-2000 to 2002-03. Since the appeals relate to the same assessee and involve common disputes, they are disposed of by way of a common order for the sake of convenience and brevity.

2. The background leading up to the present preceedings can be summarized as follows. The assessee is a private limited company incorporated under the provisions of the Companies Act, 1956 for doing business in the field of financial activities. The Investigation Wing of the Revenue conducted a survey at the business premises of one Shri Sanjay Rastogi at Delhi on 04.03.2003. In the course of the survey, it appears that Shri Sanjay Rastogi admitted of having floated a number of companies to provide accommodation entries to various entities. The Assessing Officer in the present case received the information from the Investigation Wing that the assessee company was one such front company of Shri Sanjay Rastogi. Shri M. S. Rastogi the father of said Shri Sanjay Rastogi is a Director of the assessee company. The said Shri Sanjay Rastogi admitted before the Investigation Wing that various entities approached him or his associates for obtaining bogus entries of either sales or purchases or for seeking commission income, etc. He also stated that a few private limited companies were used as a conduit for execution of such entries/transactions. On the basis of the aforesaid the Assessing Officer issued notices under section 148 of the Act for the assessment years 1998-99, 1999-2000, 2000-01 and 2001-02 on 16.03.2004 for bringing to tax income escaping assessment. The assessments have been thereafter framed under section 144 r.w.s. 147 of the Act on 30.03.2005 for the said four assessment yeaRs. For the assessment year 2002-03 the Assessing Officer framed a similar assessment but in terms of section 144 of the Act. In the assessments so framed the Assessing Officer has made three types of additions. Firstly the Assessing Officer has brought to tax alleged commission income earned by the assessee on providing accommodation entries which according to the Assessing Officer was hitherto undisclosed. Secondly, the Assessing Officer examined the bank account of the assessee and found cash deposits and withdrawals on various dates. The net of deposits minus withdrawals have been treated by the Assessing Officer as unaccounted income of the assessee utilized for the purpose of giving accommodation entries. Hence the addition. Thirdly, the expenses claimed by the assessee, mainly, under the heads Personal expenses and Administration expenses were disallowed as according to the Assessing Officer in the business of providing accommodation entries no such expenditure could have been incurred. Having noted the manner in which the assessments have been framed by the Assessing Officer we may now take up the specific areas of the dispute between the assessee and the Revenue.

3. We may take up for consideration the appeal of the assessee for the assessment year 1998-99 (ITA 2829/Del./06). In this case the assessee filed a return of income on 30.11.1998 declaring total income of Rs. 28,440/-. Subsequent to the issuance of notice under section 148 to the assessee on 16.03.2004, no return of income was filed by the assessee. The Assessing Officer records in the assessment order that notices under section 143(2) fixing the case for various dates were served but with no response. It is further noted that summon under section 131 was also issued to the assessee but there was no response. In the absence of any response, the Assessing Officer has proceeded to complete the assessment under section 144 of the Act on the basis of the material on record. Accordingly he has brought to tax sums of Rs. 39,400/- as undisclosed commission on accommodation entries; Rs. 13,80,000/- as unexplained cash deposited in bank account; and Rs. 4,84,849/- as unexplained expenses. The total income was determined at Rs. 19,34,000/-. In appeal before the CIT(A) the assessee challenged the order of the Assessing Officer on various grounds. Firstly, it was contended that the assessment was completed under section 144 without satisfying the conditions of the said section. Secondly, it was also contended that the Assessing Officer erred in invoking the provisions of section 147/148 without satisfying the conditions laid down in the said sections. Thirdly, the various additions made were also contested on merits. The CIT(A) has since dismissed the stand of the assessee on all issues raised before him. Against the aforesaid the assessee is in appeal before us.

4. Before us the first and foremost submissions of the Ld. Counsel Shri B. L. Gupta is that the Assessing Officer has wrongly assumed jurisdiction under section 147/148 of the Act. According to him the reasons furnished do not show formation of belief by the Assessing Officer that any income had escaped assessment. Our attention has been drawn to the reasons supplied to the assessee, which are placed in the Paper-book. The Ld. Counsel contended that the reasons merely record certain transactions in the bank accounts maintained by the assessee. It was argued that mere existence of entries in the bank account cannot lead to a conclusion that any income had escaped the assessment. Reliance was placed on the following decisions of the Tribunal (i) Delhi Bench 'C' in the case of M/s Bangalore Polymers Limited (ITA No. 3941 8s 3942/Del./06 dated 10.08.2007) (ii) Delhi Bench (SMC) in the case of MRs. Vinita Jain (ITA No. 4824 and 4825/Del./04 dated 12.04.2006). The Ld. Counsel submitted that in the absence of any specific identification of escapement of income the resort to section 147/148 can be construed as made with the purpose of merely conducting enquiries to arrive at a finding that income has escapement assessment.

5. Further it is argued that the Assessing Officer has erred in farming an assessment under section 144 of the Act without satisfying the conditions mentioned therein. In this regard reference has been made to sub-section (1) of section 144 and is submitted that none of the conditions mentioned therein are satisfied in the case of the assessee. It is also submitted that the Assessing Officer failed to issue the show cause notice as required by the proviso to section 144(i) before making an assessment in terms of the said section. The show cause notice was necessary as in this case no notice under section 142(1) has been issued by the Assessing Officer.

6. The Ld. Counsel has also argued with respect to the merits of the various additions made. At the outset, the Ld. Counsel conceded the fact position that the assessee was engaged in the providing of accommodation entries. According to him, once it is so accepted, the addition made by treating the cash deposits in bank as income in the hands of the assessee, is unjustified. For this reliance was placed on the decision of the Delhi Bench 'G' of the Tribunal in the case of M/s J.R.D. Stock Brokers Pvt. Ltd (IT/SS/A.No. 55/Del./04 dated 30.11.2004), a copy of which has been placed on record. Regarding the expenses disallowed, the Ld. Counsel submitted that the complete disallowance was unjustified and that to a reasonable extent expenditure should have been allowed to compute the total income.

On the other hand the Ld. Departmental Representative has defended the orders of the lower authorities in support of the case of the Revenue. The Ld. D.R. submitted that the reasons weighing with the Assessing Officer to invoke section 147/148 was the information provided by the Investigation Wing which was based on the findings of the survey conducted on Shri Sanjay Rastogi. According to the Ld. DR, at the time of recording of reasons and issuance of notice under section 148 only a Prima-facie belief is required to be entertained by the Assessing Officer regarding escapement of income, which in the present case stood satisfied on account of the information from the Investigation Wing of the department. The Ld. DR has relied upon the decisions of the Hon'ble Supreme Court in the case of Phool Chand Bajrang Lal and another V ITO, 203 ITR 456, Sri Krishna Pvt. Ltd. V ITO 221 ITR 538 (SC) and Mahanagar Telephone Nigam Ltd. V Chairman, Central Board of Direct Taxes 8s another, 246 ITR' 173 (Del). With regard to the non fulfillment of the conditions mentioned in section 144, the Ld. DR submitted that although no notice under section 142(1) was issued before completion of assessment but a number of opportunities were provided by the Assessing Officer before finalizing the assessment. According to the Ld. DR the arguments of the assessee, on this aspect at best can be treated as technical default which does not vitiate the entire assessment. With regard to the merits of the additions, the Ld. DR submitted that in the absence of any explanation regarding the source of cash deposits in the bank account, the Assessing Officer was justified in treating the same as unexplained. With regard to the expenditure, the Ld. DR pointed out that the same has been disallowed in the absence of any evidence in support.

7. We have considered the rival stands carefully. The first issue in this appeal relates to the validity of assumption of jurisdiction by the Assessing Officer by issuance of notice u/s 148 dated 16.3.2004. In terms of section 47 where the Assessing Officer has reasons to believe that any income chargeable to tax has escaped assessment for any assessment year, he may subject to the provisions of Sections 148 to 153 bring to tax such income. To resolve the controversy in this appeal the presence of expression "reasons to believe" in Section 147 is relevant. The expression "reasons to believe" as appearing in Section 147 has been the subject matter of consideration by various Courts. A reference can be made to the judgments of the Hon'ble Supreme Court in the case of Lakhmani Mewal Dass, 103 ITR 437 (S.C) as also the decision in the case of Ganga Saran and Sons Pvt.Ltd., 131 ITR 1. On the basis of the aforesaid judgements, it is safe to deduce that the reasons which enable an Assessing Officer to form a belief that certain income had escaped assessment must have a rational connection with or relevant bearing on the formation of belief. In other words the expression "reasons to believe" postulates that there must be a nexus or live link between the material coming to the notice of the Assessing Officer and the formation of his belief that there has been an escapement of income of the assessee from assessment in the particular assessment year. Moreover, the Hon'ble Supreme Court in the case of S. Narainappa vs CIT, 63 ITR 219 held that the expression "reason to believe" does not mean a purely subjective assessment on the part of the Assessing Officer and that the reason must be held in good faith and it cannot be merely a pretence. Further more, it is also a trite law that the Courts cannot enquire into the sufficiency of reasons in the formation of requisite belief. The jurisdiction in this regard merely extends to examining as to whether the reasons recorded have a rational connection or relevance to the formation of belief that certain income belonging to the assessee had escaped assessment in a particular assessment year. The authorities on the meaning of the expression "reason to believe" are many and in our view having noted as above, it would not serve any purpose to multiply authorities in this regard.

8. In the above background, we may come back to the facts of the instant case and look at the reasons weighing with the Assessing Officer in the present case to re-open assessment. What we find is that the primary reason weighing with the Assessing Officer was the result of the survey conducted by the Investigation Wing on the business premises of one Shri Sanjay Rastogi on 4.3.2003. In the course of the survey the said Shri Sanjay Rastogi admitted of being engaged in providing of bogus/accommodation entries to various entities in the shape of purchase and sale or commission incomes etc. From the discussion in the assessment year as also from the reasons recorded, it is noticed that the said Shri Sanjay Rastogi admitted of having floated a number of front companies which acted as a conduit to provide accommodation entries to various entities. The said Shri Sanjay Rastogi purportedly identified the assessee company before us as one such front company. Shri M.S.Rastogi, father of said Shri Sanjay Rastogi is a Director of the assessee company. The Assessing Officer was in receipt of such information. The Assessing Officer also records in the reasons that the assessee has provided various accommodation entries against consideration. In the reasons recorded there is also a reference to the investigations carried out by the Investigation Wing of the Department whereby the entire modus-operandi has been admitted by Shri Sanjay Rastogi. The said Shri Sanjay Rastogi has a close connection to the assessee is undeniable in as much as his father is the Director of the assessee company. Considered in this light it is a case where on a prima-facie basis the Assessing Officer was correct in entertaining a belief that income had escaped assessment. It is noteworthy that the return of income filed originally on 30.11.98 was processed u/s 143(1) of the Act. Ostensibly an assessment framed by way of processing u/s 143(1) does not lend itself to be called as an assessment based on an opinion. In fact the assessment u/s 143(1) is made summarily without recourse to the presence of the assessee. The unearthing of fresh facts subsequent to such assessment can form a basis for the Assessing Officer to entertain a belief that certain income has escaped assessment. In the present case, as the subsequent developments show, the modus-operandi of the assessee earning incomes outside the books of account by indulging in providing of accommodation entries against receipt consideration came to the knowledge of the A.O. as a result of survey conducted on Shri Sanjay Rastogi. Therefore, on the basis of such material and evidence, in our view, the Assessing Officer was justified in forming a prima-facie belief that certain income had escaped assessment. The issuance of notice u/s 148 on 16.3.2004 in the above background is in accordance with provisions of the Act. We do not find any infirmity in the same. The stand of the assessee is dismissed.

9. Before parting we may also refer to the reliance placed by the assessee on the decision of the Delhi Bench of the Tribunal in the case of Bangalore Polymar Ltd. (supra). In the said case the Assessing Officer found that the assessee had certain transactions with a concern 'X'. Merely because the assessee had certain dealing with the concern 'X', the Assessing Officer recorded a satisfaction u/s 147 and proceeded to issue notice of re-assessment u/s 148 of the Act. The Tribunal found that there was no averment by the Assessing Officer as to whether such transactions resulted into any income escaping assessment or not. The Tribunal further noted that the reasons were recorded so as to re-open assessment and thereafter make further enquiries to arrive at a finding that certain income had escaped assessment. In other words the Tribunal, on facts, found that on the basis of material available at the time of recording of reasons, a belief could not be entertained that certain income had escaped assessment. In the present case, as we have seen earlier, the requisite enquiries were made by the Investigation Wing of the Department before recording of reasons by the Assessing Officer. It was on the basis of investigations carried out that the Assessing Officer entertained a prima-facie belief that certain income had escaped assessment. Thus, on facts, the decision of the Tribunal in the case of Bangalore Polymar Ltd. (supra) does not help the case of the assessee. Similarly, reliance placed by the assessee on the decision of Vinita Jain (supra) is also inapposite since the reasons recorded there were held to be vague. In the present case, in the face of the admission by Shri Sanjay Rastogi of the assessee company being a front company indulging in providing of accommodation entries, no vagueness can be seen in the reasons recorded. The said decision also does not help the case of the assessee. Thus, for the aforesaid reasons, we are unable to accept the plea of the assessee that the assumption of jurisdiction by the Assessing Officer by issuance of notice u/s 148 dated 16.3.2004 suffers from any infirmity. Thus, on this ground the assessee fails.

10. Now we take up next plea of the assessee against invoking of Section 144 by the Assessing Officer to make the impugned assessment. Section 144 provides for framing of best judgement assessment in the event of the defaults mentioned therein. Clause (a) of Section 144(1) provides that best judgement assessment can be made if a person fails to make the return required u/s 139(1) or Section 139(4) or Section 139(5) of the Act. In terms of clause (b), a best judgement assessment can be made if a person fails to comply with the terms of a notice issued u/s 142(1) or fails to comply with directions issued u/s 142(2A) of the Act. Similarly in terms of clause (c) a best judgement assessment can be made where a person having made a return fails to comply with all the terms of a notice issued u/s 143(2) of the Act. Further the first proviso below Section 144(1) provides for giving opportunity to the assessee calling upon him to show cause why assessment should not be completed to the best of his judgement. In the second proviso it is provided that such opportunity shall not be necessary where a notice u/s 142(1) has been issued prior to the making of an assessment under Section 144.

11. In the present case the Assessing Officer has framed the best judgement assessment u/s 144 read with Section 147 of the Act. The plea of the assessee is that recourse to Section 144 is bad in law. Reason being that none of the conditions prescribed in clauses (a) (b) or (c) of Section 144(1) is attracted. The factual aspect is that the assessee had made a return initially u/s 139(1) on 30.11.98 which was processed u/s 143(1). The impugned assessment is as a consequence to a notice issued u/s 148 on 16.3.2004. According to the assessee and factually there is no dispute to it, the assessee did not file a return in response to the notice u/s 148 dated 16.3.2004. Thus it is contended that clause (a) and (c) of Section 44(1) are not attracted. Similarly it is submitted that the Assessing Officer did not issue any notice u/s 142(1) or a direction u/s 142(2A) and thus clause (b) is also not attracted. Thus it is canvassed that the defects triggering the invoking of Section 144 do not exist in the present case.

12. On this aspect we have carefully considered the stand of the assessee. The pertinent fact is that the assessee did not file the return in response to notice issued u/s 148 of the Act. The issuance of such notice has culminated in the impugned assessment. In this context we may refer to the phraseology of Section 148 which empowers the Assessing Officer to call for the return of income after recording of reasons in terms of Section 147 of the Act. In sub-section 1 of Section 148 the following expression exists:

"The provisions of this Act shall, so far as may be, apply accordingly as if such return were a return required to be furnished under Section 139."

The import of the said expression is that once a notice u/s 148(1) has been issued calling for the return of income, the return in question is required to be considered as a return which was required to be furnished u/s 139 of the Act. The presence of the expression "so far as may be, apply" mean that all the provisions of the Act would treat the said return as if it was a return which was required to be furnished in terms of Section 139 of the Act. Thus, on account of the presence of said expression, it does not permit even Section 144 to exclude from its purview a return called for u/s 148(1) for the reason that Section 148(1) itself ensures that such a return is to be treated as a return required to be furnished u/s 139. Now we may read again the provisions of clause (a) of Section 144(1) which reads as under:

144. 52 [(1)] If any person-

(a) fails to make the return required 53[under sub-section (1) of section 1391 and has not made a return or a revised return under sub-section (4) or subsection (5) of that section, or

13. Evidently it refers to the failure on the part of the assessee to file a return of income as envisaged u/s 139(1), 139(4) or 139(5) of the Act. Notably returns of income can be filed only under these three sub-sections of Section 139. On a combind reading of Section 148(1), 139 and 144(1)(a) it has to be inferred that failure to file a return in response to notice issued u/s 148(1) shall constitute a default envisaged in clause (a) of Section 144(1) of the Act. Any such failure shall provide jurisdiction to the A.O. to make a best judgement assessment u/s 144 of the Act.

14. Now we may refer to a judgement of the Hon'ble Bombay High Court in the case of R.B.Seth Shreeram Durga Prasad and Fatechand Narsingdas (Export) Firm V CIT, 170 ITR 23 wherein the issue was as to whether an assessment u/s 144 was permissible in a case where Section 147 of the Act is applied to make assessment of an escaped assessment. The Hon'ble High Court observed as under:

"A best judgement assessment under section 144 of the Income Tax Act, 1961, has to be made upon such material as is available. Section 147 of the said Act predicates the existence of such material. Where an assessee does not respond to a notice under section 148 of the said Act, the taxing authority is obliged to determine the assessee's income as best as it can based on that material. There is no real difference between the manner in which the taxing authority reaches its conclusions under the provisions of section 144 and section 147. Both are assessments made to its best judgement. It is open to the assessee to argue that the material does not support the assessment made under section 147 as under section 144. There is, therefore, no merit in the submission that the words "so far as maybe" in section 148 exclude the applicability of the provisions of section 144 to an assessment made under section 147."

Therefore merely because the jurisdiction to make an assessment has been invoked u/s 147/148, the same does not exclude the applicability of Section 144 to the assessment proceedings. As a consequence we are unable to accept the plea of the assessee that the invoking of Section 144 in the present case was void ab-initio. On the contrary the assessment has been made u/s 144 on the strength of a default covered under clause (a) of subsection (1) to Section 144 and there is no infirmity in such invocation.

15. Another argument taken by the assessee is that in terms of the first proviso, the Assessing Officer was duty bound to allow an opportunity to the assessee to show cause as to why the assessment should not be completed to the best of his judgement. In this connection we have perused carefully the order of the Assessing Officer and find that there is a reference made to the issuance of notice u/s 143(2) on several occasions during the assessment proceedings with no response from the assessee. In fact the Assessing Officer also issued summons u/s 131 which also remained unattended. So however, there is no averment that any show cause notice was issued by the A.O. as required in the proviso below Section 144(1) calling upon the assessee as to why assessment should not be completed to the best of his judgement u/s 144 of the Act. In this context we may refer to the judgement of the Hon'ble Rajasthan High Court in the case of Agro Engineers, 266 ITR 637. In the case before the Hon'ble High Court, the assessee was issued notices u/s 143(2) repeatedly which were not complied with. The assessment u/s 144 was completed without giving assessee the opportunity as provided for in the proviso to Section 144(1). The Hon'ble High Court held that the proper course was to set aside the assessment and remit the matter back to the Assessing Officer to make a fresh assessment after affording opportunity to the assessee for assessment u/s 144 of the Act.

16. Considering the aforesaid judgement and having regard to the fact position that the notice envisaged in the proviso below Section 144(1) has not been served on the assessee, the Assessing Officer clearly erred in making the assessment u/s 144 of the Act. Hence the Assessing Officer directed to make an assessment afresh after complying with the provisions of Section 144 before framing fresh assessment. In the result, on this ground we uphold the stand of the assessee to the above extent.

17. Since we have set aside the matter to the file of the Assessing Officer to make a fresh assessment after complying with provisions of Section 144, we do not deem it fit at the present stage to deal with the other grounds of the assessee relating to merits of the additions. As a consequence, the order of the CIT(Appeals) on those issues is also set aside and the Assessing Officer shall make an assessment afresh after complying with the provisions of Section 144.

18. Thus, the appeal of the assessee in ITA No. 2829/Del/06 stands partly allowed.

19. Now, we take up for consideration the appeal of the assessee for the assessment year 1999-2000 (ITA 2830/Del./ 06). In this case the assessee filed a return of income on 30.12.1999 declaring total income of Rs. 13,700/-. Herein also, subsequent to the issuance of notice under section 148 to the assessee on 16.03.2004, no return of income was filed by the assessee. The Assessing Officer records in the assessment order that notices under section 143(2) fixing the case for various dates were served but with no response. It is further noted that summons under section 131 was also issued to the assessee but there was no response. In the absence of any response, the Assessing Officer has proceeded to complete the assessment under section 144 of the Act on the basis of the material on record. Accordingly he has brought to tax sums of Rs. 43,954/- as undisclosed commission on accommodation entries, and Rs. 6,64,614/- as unexplained expenses. The total income was determined at Rs. 7,22,268/-. In this year no addition has been made with respect to the cash deposits and withdrawals in the bank account for the reason that the amount of total deposits was found to be less than the total cash withdrawals. In appeal before the CIT(A) the assessee preferred similar grounds; as taken for the assessment year 1998-99. The CIT(A) following his decision for the assessment year 1998-99 has not accepted the pleas of the assessee but in relation to the addition of Rs. 43,954/- made on account of commission income the CIT(A) directed the Assessing Officer to verify whether such income has been shown by the assessee in the original return of income and proceed accordingly. Against the aforesaid the assessee in appeal before us.

20. In this year too the arguments of the Ld. Counsel for the assessee in sum and substance remain the same as that for the assessment year 1998-99.

21. The stand of the Revenue also remains similar to that in the assessment year 1998-99.

22. In so far as the plea regarding the assumption of jurisdiction u/s 148 is concerned, we have perused the reasons recorded which have been placed in the Paper book. The reasons weighing with the Assessing Officer to issue notice u/s 148 in this year also stands similar to that in the assessment year 1998-99. For the reasons discussed by us in the appeal for assessment year 1998-99, herein also we do not find any infirmity in the action of the Assessing Officer in issuing notice u/s 148 on 16.3.2004. The grievance of the assessee on this issue is rejected.

23. The facts and circumstances with regard to the challenge to the validity of assessment u/s 144 in this year also stands on similar footing as taken by the assessee in the assessment year 1998-99. After considering the rival stands we have deemed it fit and proper to set aside the order of the CIT(Appeals) and direct the Assessing Officer to make assessment afresh after complying with provisions of Section 144 of the Act. In this year also, we set aside the order of the CIT(Appeals) for similar reasons and direct the Assessing Officer to make assessment afresh after complying with requirements of Section 144 of the Act.

24. In the result, appeal of the assessee in ITA 2830/Del/06 is partly allowed.

ITA No. 2831/Del/06 and 2832/Del/06

25. In so far as the appeals of the assessee for assessment year 2000-01, 2001-02 in ITA Nos. 2831 and 2832/Del/06 respectively are concerned, the same are taken up together as the fact situation stands on identical footing. The first grievance of the assessee is against assumption of jurisdiction by Assessing Officer for issuance of notice u/s 148 on 16.3.2004. In so far as the challenge of the assessee is based on reasons considered by us in the appeal for assessment year 1998-99 is concerned, we do not find any merit in the present ground of the assessee. So however, the assessee has taken an additional plea to challenge the assumption of jurisdiction for issuance of notice u/s 148 in the following lines. According to the assessee the requirement of Section 151(2) has not been complied with in the present case. According to the assessee the notice u/s 148 has been issued without obtaining sanction of competent authority in the manner required in Section 151(2) of the Act. For this our attention has been drawn to copy of the reasons recorded where the Additional Commissioner has merely put a remark "seen" whereas the requirement of law is that the action of the Assessing Officer shall be approved by the competent authority. Similar is the situation for assessment year 2001-02 wherein also the Additional Commissioner has put remarks "seen

26. On the other hand, the stand of the learned DR on this count is that the putting of remarks "seen" is to be construed as an approval and therefore the same cannot be construed as an infirmity in the issue of notice u/s 148 of the Act.

27. On this aspect we have considered the rival submissions carefully. Section 151 deals with the provisions relating to sanction for issue of notice u/s 148 of the Act. Sub-section (1) of Section 151 deals with a case where an assessment u/s 143(3) or 147 has been made for the relevant assessment year. Ostensibly in the present case, no assessment was made u/s 143(3) or 147 prior to issuance of notice u/s 148 on 16.3.2004. Subsection 2 deals with cases other than falling under Section 151(1) of the Act. This sub-section is relevant for our purpose. It is provided therein that a notice u/s 148 can be issued within 4 years by an Assessing Officer of any rank and if four years have expired, it can be issued either by an Assessing Officer of the rank of Joint Commissioner or by an Assessing Officer of a lower rank with the prior sanction of Joint Commissioner. In the present case the assessment years involved are 2000-01 and 2001-02. The notice u/s 148 has been issued on 16.3.2004 by Income tax Officer, Ward-III, New Delhi. Ostensibly period of four years has not expired from the end of the relevant assessment year and thus the notice could have been issued by the Income Tax Officer, Ward-III, New Delhi without even obtaining prior sanction of the Additional Commissioner. It is noteworthy that subsection (2) of Section 151 specifically prohibits issuance of notice by an Assessing Officer below the rank of Joint Commissioner without prior sanction only in situation where such notice is to be issued after the expiry of four years from the end of the relevant assessment year. Such is not the situation in the present case. Thus the said plea of the learned counsel of the assessee does not help the case of the assessee. Therefore, we uphold the assumption of jurisdiction by the Assessing Officer by issuance of notice u/s 148 of the Act.

28. With regard to the framing of assessment by recourse to Section 144 of the Act, herein also admittedly the Assessing Officer has not issued a notice to the assessee as required in the proviso below Section 144(1) of the Act. Following our decision in the earlier assessment years, herein also we set aside the order of the CIT(Appeals) and direct the Assessing Officer to make fresh assessment after complying with requirements of Section 144 of the Act.

29. In the result, the appeals of the assessee for assessment year 2000-01 and 2001-02 are partly allowed.

ITA 2833/Del/06, A.Y. 2002-03

30. Now we take the appeal of the assessee for assessment year 2002-03 in ITA No. 2833/Del/06. In this case the return of income was filed by the assessee on 30.10.2002 declaring an income of Rs. 3150/-. The assessment in this case has been completed by the Assessing Officer u/s 144 of the act. Herein also the plea of the assessee is that before completing best judgement assessment the show cause prescribed in terms of the proviso to Section 144(1) was not issued to the assessee. This grievance is similar to the grievance adjudicated by us in the earlier assessment yeaRs. For the reasons elaborated in the earlier paragraphs, herein also we set aside the order of the CIT(Appeals) and direct the Assessing Officer to make fresh assessment after complying with the requirements of Section 144 of the Act. Thus for similar reasons, as in the earlier years, herein also the appeal of the assessee is partly allowed.

31. In the result, all the appeals of the assessee are partly allowed.

 
 
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