A.C.I.T, CIR-I, ASANSOL vs. SUBHAMOY MONDAL,, BURDWAN

The Assessee is an individual and derives income from trading in foreign liquor under license issued by Excise authorities. For A.Yrs.2004-05 and 2005-06, the assessee filed return of income on 31.10.2004 and 31.10.2005 respectively. The impugned orders are silent with regard to the fate of these two returns filed by the assessee. It appears that there was a survey u/s 133A of the Income Tax Act, 1961 (Act) conducted in the business premises of the assessee on 27.04.2007. In the course of the survey some documents, papers and registers were impounded. Notice u/s 148 of the Act dated 17.07.2007 was issued to the assessee. In response to the aforesaid notice the assessee filed a letter dated 3rd August, 2007 stating that the return filed on 31.10.2004

The AO thereafter proceeded to frame the assessment u/s 148 read with Sec.144 of the Act i.e. the best judgment assessment. Even before the AO the assessee had pointed out that his objections to the validity of initiation of re-assessment proceedings u/s 148 of the Act had not been considered by the AO by passing a speaking order on the same. In the best judgment assessment the AO determined the total income of the assessee determining the total income of 47,76,217/- for A.Y.2004-05 as against the returned total income of Rs.4,71,227/- and for A.Y.2005-06 the total income declared by the assessee was Rs.4,54,863/-. The total income determined in the best judgment assessment mu/s 144 of the Act was Rs.48,00,630/-. In the assessments completed the AO added the liability shown by the assessee as unexplained and also disallowed expenses claimed by the assessee in the profit and loss account. 2

Aggrieved by the aforesaid orders of assessment, the assessee preferred appeals before CIT(A). Before CIT(A) the assessee pointed out that the order assessments framed by the AO without furnishing the assessee copies of the reasons recorded is not valid in law and in this regard placed reliance on the decision of the Hon’ble Bombay High Court in the case of CIT vs Videsh Sanchar Nigam Ltd. 340 ITR 66 (Bom.) wherein it was held that if the AO does not provide reasons within a reasonable time on request from the assessee the re-assessment is invalid. The CIT(A) called for a remand report from the AO on the aforesaid objections by the assessee. In the remand report the AO reported that the reasons recorded are either not available in the assessment records or have been misplaced. After considering the aforesaid remand report the CIT(A) held as follows :- “6. I find that the reasons are not provided to appellant on request. During appeal proceedings, Remand Report was called for from Assessing Officer vide letter dt. 10.11.2010. Reply was received from Assessing Officer. Another letter specifically asking Assessing Officer to intimate reason for issue of notice u/s 148 was issued on 14.02.2013. A reply was received on 13.03.2013. In both the letters, it was informed that reasons are not found or misplaced. 7. In view of decisions referred to in para 4 above and the fact that reason for issue of notice u/s 148 is to be established, I have no alternative but to declare the reassessment void ab initio. I accordingly cancel the assessment order. Grounds 1 to 3 are accordingly allowed. 8. In the course of appeal a notice No. C.I.T. (A)/AsIl2009-10/S.M.l79 dated 17.04.2009 u/s 251 (2) for enhancement of income was issued. This is pending. As I have annulled the reassessment, no enhancement is possible. Accordingly I drop the enhancement proceedings.”

Similar order was passed in both the assessment years by CIT(A) against which the present appeals have been preferred by the revenue.

We have considered the rival submissions. It is clear from the order of CIT(A) that reasons for reopening the assessments before issue of notice u/s 148 of the Act, were not recorded by the AO. The remand report of the AO filed before the CIT(A) makes it clear that reasons recorded were not available in the record of assessment. It is not the case of the revenue before us that reasons were in fact recorded but were misplaced. No such evidence or contention was put forth nor was copy of reasons recorded before issue of notice u/s.148 of the Act furnished before the tribunal. In the circumstances one has to presume that reasons for issue of notice u/s.148 of the Act were in fact not recorded. A Reading of the provision of section 147 and 148 of the Act shows that the proceedings u/s 147 can be re-initiated to bring to tax income which is chargeable to tax and which has escaped assessment for any assessment year. The above provisions of section 147 are subjected to the provisions of section 148 to 153 of the Act. The provision of section 148 of the Act mandates the AO to serve a notice on the assessee requiring him to furnish a return of income before framing the assessment. Section 148(2) of the Act mandates before issue notice u/s 148 of the Act AO has to record reasons for issue of notices u/s 147 of the Act for initiating assessment proceedings to bring to tax income which is chargeable to tax and which has escaped assessment. The absence of the reasons recorded is very fatal to the validity of the proceedings u/s 147 of the Act. The law is well settled that in the absence of reasons recorded before issue of notice u/s.148 of the Act for making assessment u/s.147 of the Act, the proceedings u/s.147 of the Act are invalid and illegal and have to be annulled. The CIT(A) has taken note of the remand report of the AO in which the revenue has admitted that the reasons recorded before issuing notice u/s 148 of the Act were either not recorded or misplaced. In the absence of compliance of the requirement of section 148(2) of the Act we are of 4

In the result the appeals of the revenue are dismissed.