N JAYAPRAKASH Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) Income-tax Appeal No. 149 of 2001 is an appeal preferred by the assessee against the order of Tribunal, Cochin Bench, in ITA No. 210/Coch/1998 dt. 27th July, 2001 and IT Appeal No. 140 of 2001 is an appeal preferred by the Revenue against the same order. We may first deal with the appeal preferred by the assessee under Section 260A of the IT Act, 1961. Assessee has raised six questions of law, of which the first four questions are consolidated, redrafted and stated as follows :

(2.) The propriety of issuing a second notice under Section 148 was questioned by the assessee vide letter dt. 16th April, 1996 and reply was given on 15th July, 1996. AO later completed the assessment by order dt. 26th March, 1997 determining the aggregate income of the assessee as Rs. 30,36,990 as against the total income shown in the original return of Rs. 1,36,970. The major variation is the addition of Rs. 16,60,854 on account of unaccounted sales of tins. AO had narrated the events which led to this addition. He has also highlighted the inconsistent explanations. Aggrieved by the order of the assessing authority, assessee took up the matter in appeal before the CIT(A). Appellate authority found no infirmity in the assessing authority issuing second notice after having found that the first notice dt. 1st Oct., 1993 was invalid. Appellate authority also endorsed the view that initiation of proceedings by issuing fresh notice under Section 148 dt. 28th March, 1996 was valid. Order passed by the assessing authority was upheld except with regard to the plea of the assessee regarding agricultural income. Appellate authority held that there is no basis for keeping the figure of agricultural income especially when no such amount is returned in the second return filed. Aggrieved by the said order assessee filed appeal before the Tribunal. Contention of the assessee was that there was no scope for issuing fresh notice under Section 148 since the plea of escaped income was rejected by the Tribunal. On merits the assessee's appeal was partly allowed. Tribunal found force in the contention of the assessee that it cannot be presumed that the sale of the entire tins had taken place in one stretch. Tribunal felt that only peak sales can be taken as the basis for making the addition. Consequently, Tribunal directed the AO to give the assessee necessary relief in the light of the directions given by the Tribunal. Revenue as well as the assessee filed appeals aggrieved by that part of the order which is adverse to them.

(3.) Counsel appearing for the assessee, Sri T.M. Sreedharan, submitted that the Tribunal was not justified in rejecting his legal plea stating that it was too technical. Counsel submitted, Tribunal should have found that the effect of the subsequent amendment with retrospective effect by Finance Act 2 of 1996 was to confer validity to the notice dt. 1st Oct., 1993 under Section 148, even though such notice allowed only less than 30 days for filing the return of income. Counsel submitted that by giving retrospective effect to the amended law w.e.f. 1st April, 1989 the notice dt. 1st Oct., 1993 issued under Section 148 was legal and valid. Counsel therefore submitted that final assessment for the year 1992-93 should have been completed before 31st March, 1996 by virtue of Section 153(2) of the IT Act and that the assessment order passed on 26th March, 1997 was invalid. Counsel further submitted that in the light of return of income pending before the AO when he issued fresh notice under Section 148 on 28th March, 1996, there was no legal validity for the fresh notice dt. 28th March, 1996 and any assessment order made pursuant thereto would be invalid. In support of his contention, reference was made to the decision of the apex Court in State of UP v. Raja Syed Mohammad Saadat Ali Khan , CIT v. Ranchhoddas Karsondas , CIT v. S. Raman Chettiar .