PARAS RICE MILLS Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) THIS appeal, filed under s. 260A of the IT Act, 1961 (for short "the Act"), proposes the following questions of law : "I. Whether in the facts and circumstances of this case, the passing of the appeal effect order under s. 154/254 of the IT Act, 1961 by the AO instead of relevant s. 240 of the IT Act, 1961 is absolutely illegal rendering the appeal effect order Annex. A2 as null and void ? II. Whether in the facts and circumstances of the case and in the event of quashing of the whole proceedings against the appellant and cancelling the assessment order by the Tribunal vide order Annex. A1, the AO gravely erred in relying on adjudication of facts by the Tribunal ? III. Whether the AO was justified in creating demand against the appellant on the basis of the adjudication on facts by the Tribunal in a situation when the appellant has suffered a net loss of Rs. 36,862.56 after telescoping and set off of loss as per s. 70 of the Act ? IV. Whether in the facts and circumstances of the case the appellant is entitled to interest as per the provisions of s. 132B of the Act on the seized assets with effect from 1996 when the notice under s. 158BC was issued to the appellant as well as refund of Rs. 23,330 along with upto date interest ? V. Whether in the facts and circumstances of the case the Tribunal was justified in dismissing the appeal and upholding order of CIT(A) that appeal against order of appeal effect is not competent ? VI. Whether in the facts and circumstances of the case the Tribunal was justified in not deciding the ground Nos. 2 -6 of the grounds of appeal Annex. A9 ? VII. Whether in the facts and circumstances of the case appeal is competent against the order of appeal effect Annex. A2 ? properties of the assessee and its partners. Ultimately, the assessment was framed after making various additions on an undisclosed income of Rs. 1,41,75,090. The assessee impugned the assessment order before the Tribunal on merits. Subsequently, the assessee moved an application for addition of additional grounds relating to the validity of the search. On the allowing of this application by the Tribunal, the Revenue challenged the same by way of ITA No. 129 of 2002, in which no relief was granted to the Revenue. Eventually, the Tribunal held that it had jurisdiction to look into the validity of the search in an appeal filed before it against the order passed under s. 158BC(c) of the Act determining the undisclosed income of the assessee and that it could also call for the records of the authority authorizing the search. After noticing that the Revenue had not produced the material to justify the search before it, the Tribunal drawing an adverse inference against the Revenue, quashed the assessment framed by the AO.

(2.) THEREAFTER , the Tribunal noticed that even though the assessment order had been quashed but since both sides had advanced lengthy arguments on the merits, the same were also being considered. Ultimately on merits too, the Tribunal gave substantive relief to the assessee. The matter then went back to the Asstt. CIT for giving effect to the appeal order wherein the total undisclosed income was reduced to Rs. 14,12,234 on which tax of Rs. 8,47,340 was computed.

(3.) THE above order was also challenged in appeal before the CIT(A) who dismissed the same holding that the appeal would lie only before the Tribunal. The matter was carried by the assessee again before the Tribunal on the grounds that firstly in law, the appeal would lie only before the Tribunal and not before the CIT(A), and secondly the Tribunal was required to adjudicate the matter on merits.