ORDER
N.V. Vasudevan, Judicial Member
1. The above appeal by the assessee was heard by the Division Bench. The first ground of appeal of the assessee reads thus:
(1) The initiation of proceedings Under Section 148 in the present case has been done at the behest and under the directions of C.I.T.(A). As such, the action Under Section 147/148 is bad in law rendering thereby the entire assessment as void ab initio, and hence non-est in law. It may kindly be quashed.
2. In respect of the aforesaid ground of appeal, there was a difference of opinion between the Learned Accountant Member and the Learned Judicial Member and, therefore, the following question was referred for consideration by the Hon’ble Third Member:
In the facts and circumstances of the case, is the action of the Ld. Accountant Member correct in quashing the assessment or is the action of the Judicial Member correct in upholding the assessment?
The Hon’ble Third Member has concurred with the view of the Learned Accountant Member and has held that there was no existence of reason to believe for issue of notice under Section 148 of the Act. The assessment was, therefore, held to be invalid and illegal. In accordance with the majority view, it is held that the notice under Section 148 is not valid and legal and, therefore, the assessment under Section 148 is quashed.
3. In the result, appeal of the assessee is allowed.
4. Order, pronounced in the open Court on 14.03.08
ORDER UNDER SECTION 255 (4) OF THE INCOME TAX ACT
1. Since there is difference of opinion between the Members while adjudicating the captioned appeal, the following questions is referred to the Hon’ble President of the ITAT for deciding the same as contemplated in Section 255(4) of the Act
In the facts ad circumstances of the case is the action of the Ld. Accountant Member correct in quashing the assessment or is the action of the Judicial Member correct in upholding the assessment?
Diva Singh, Judicial Member
1. On receiving the draft order from my learned brother I have discussed the same with him and since I am unable to agree with the view expressed by him I am constrained to write my separate dissenting order.
2. As far as the facts are concerned there is no dispute in as much as there was a return filed by the assessee in response to notice Under Section 142(1) of the Act wherein certain additions were made, by the A.O. The assessee challenged these additions in appeal before the CIT(A) who, taking note of the fact that the return filed was beyond the period as prescribed Under Section 139 restored to the Assessing Officer with the direction to regularize the same.
3. There is also no dispute over the issue that notice under Section 148 within the prescribed time was issued to the assessee in order to regularize the same. It is also an admitted fact that in response to this, the assessee stated that the return of income filed originally on 31.12.93 may be treated as return of income filed in compliance to the notice Under Section 148 of the Act. In the fresh round also additions were made which were challenged by the assessee before the CIT(A) on merit. However, before the CIT(A) there was no representation and the action of the AO was confirmed in an ex parte order. Aggrieved by this, the assessee is in appeal. Before the Tribunal the assessee has challenged the addition on merits and also the invocation of Section 147/148 of the Act.
4. In the draft order sent by the ld. A.M. vide para 14 to 16 the Assessment has been quashed for the reason that the assessment has been reopened on the basis of the direction given in the CIT(A)’s order and the AO has not formed his own opinion. The issue which requires consideration is that can the direction given in appeal by the CIT(A) to the AO to regularize the assessment be considered to be “information” within the terminology as applied by judicial pronouncements.
5. The undisputed fact that emerges is that the original assessment was set aside with certain direction, as a result of the appeal of the assessee against the addition on merits. This set aside order stands on record and has not been challenged as such not upset by any higher forum. The position as a result of this is that there is no assessment with respect to the assessee and thus this income in the year under consideration has not to assessed (sic) and as such is materially and significantly different from cases where different view is attempted to be taken on same facts and thus unsettled a settled position. Thus, in these peculiar facts can the present proceeding be regarded in the list of judgement where different view has been taken, unaisputedly the fact that glaringly emerges is that can the AO form the belief in these circumstances that income assessabte tot ax has escaped assessment and it is seen that the action is neither barred by limitation nor by judgements where the principle has been laid that different o same facts is not appropriate. The fact also remains undisputed that reasons have been recorded. The sufficiency and adequacy of the recording of reasons is not open to chaiienge and there are a ptethora of judgements which have laid down this ratio. Thus, sufficiency of reasons cannot be examined unless shown to be perverse. In the facts of the case no perversity has been argued the oniy facile argument has been that re-opening is on the direction of the CIT(A). Thus, in the facts of the present case reasons have been recorded and it is not even a case of change of opinion on same facts. Thus, what devolves for consideration is can the directions/findings/observations given in appellate orders constitute as “information” which the AO took cognizance of and formed a betief hat income has escaped assessment.
6. The decisions relied upon, by my brother are not applicable on count of the fact that as has already been observed and monstrated that the present case is not a case where a different has been taken by the Assessing Officer and he has as such settled a settled position. The word information is of wide (sic) and can indude the direction/finding or observation given by the CIT(A) in appeal since once having noticed that a return filed was beyond the period the only course of action open was to restore it for regularizing the and this direction has been carried out and has not been challenged.
7. There is also evidence on record, and no dispute over the issue as has been already observed that the reasons have been recorded by the AO. The sufficiency of the adequacy of the reasons as observed is also not on issue which is open to challenge in the present proceedings. The only relevant fact is that there must be a live link of nexus with the re-opening. In the facts of the present case it is no body’s case that there is no live link. The relevance and the nexus of the same itself is evident from the facts of the case. This is also not a case where the Assessing Officer has considered the material and formed his opinion in the first round which stands on record and in the second round has sought to change the same and disturb the earlier finding with a different view subsequently on same facts. Here the facts at the cost of repetition are that the Assessing Officer in the first round was set aside for regularizing the same as the return was filed beyond the time prescribed under the Act. As a result of this the income brought to tax. In the present proceedings was not assessed at all. In the re-assessment the issue settled is not being unsettled as even in the first round the income was identically treated.
8. It is worth pointing out that in fact in Chatturam Hariram Limited v. CIT reported in 27 ITR 709 the Supreme Court has laid down that where earlier assessment proceedings had been taken but failed to result in a valid assessment owing to a lacuna in the law despite the chargeability of the income to tax, it would be a case of chargeable income escaping assessment. It may also be relevant to refer to another decision of the Apex Court rendered in the case of CIT v. Narsee reported in 40 ITR 307 wherein it has been held that the income is said to have escaped assessment within the meaning of this section even where there was a failure to charge the income was entirely due to oversight or inadvertence on the part of the Income Tax Authorities. In fact their lordships in Kaneshwar v. State of Bihar 37 ITR 388 (SC) have held that the section is not confined to cases where income has not been returned and also covers cases where income is included in the return made by the assessee but is left unassessed by the AO.
9. Their Lordship have held in Esthuri v. ITO reported in 41 ITR 539 (SC) and CIT v. Bidhu reported in 63 ITR 278 that no doubt income cannot be said to have escaped such assessment within the meaning of this section if the assessment proceedings in respect of that income which still pending and have not yet terminated in a final order. However, the Assessing Officer’s noting “not assessed” or “not assessable” or “no proceeding” or “filed” would ordinarily amount to a final order lawfully terminating the assessment proceedings and thereafter action can be taken under the section. The pedantic argument that no information was available with the AO on facts is as such not correct.
10. In the facts of the present case reliance has been placed by my brother in para 15 of the proposed draft in the case of Yashwant Tallkies 157 ITR 103 wherein the facts considered are reproduced as under:
After the completion of the original assessment of the assessee, the Income tax Officer received certain audit objections that in the original assessment of the assessee, certain expenses allowed in respect of gratuity, bonus, etc., were not properly allowed. Consequent to the audit objections, the Income-tax Officer made enquiries and discovered reasons for the disallowance of some of the items. The Income-tax Officer initiated proceedings under Section 147(b) and completed the reassessment after disallowing certain items. The assessee filed an appeal to the Commissioner (Appeals) and contended that the Income-tax Officer had no jurisdiction to re-open the assessment under Section 147 (b) because, at the time of the original assessment, the Income-tax Officer had allowed at the claims after necessary enquiries. The assessee further contended that the Income-tax Officer considered the matter afresh after receiving the opinion of the adult party, which did not constitute information within the meaning of Section 147 (b) on the basis of which the Income-tax Officer could record his satisfaction. The Commissioner accepted the contention of the assessee and annulled the assessment. The Tribunal held that the initiation of reassessment proceeding by the income tax officer was valid but remanded the matter to the Commissioner (Appeals) for consideration on merits. On a reference, the assessee contended that the Income-tax Officer had sent a report to the Commissioner asking him to take action under Section 263 since no new information had been collected by him for initiating action under Section 147(b) and hence, the reassessment proceedings were invalid.
11. The facts appreciated therein were diametrically distinct in as much as therein the first assessment order stood on record and only on the basis of the Audit Objection it was sought to be revised. Their Lordships in those facts rendered the judgement as the final position was sought to be disturbed merely on the basis of Audit Report. In the facts of the present case the original assessment wherein identical addition were made has been set aside and the re-opening is only to regularize the original return which was beyond the period. Thus in the facts of the present case it was not a situation where a settled position was being arbitrarily or whimsically being unsettled and nor was it a situation where a different, view was being taken on same facts as was the case in Yashwant Talkies.
12. The next judgement relied upon by my brother in the proposed draft is of Sheo Narain jaiswal and Others 176 ITR 352. The undisputed facts therein were that the AO was of the view that a particular amount should not be assessed and the AO sending the proposal also expressed his doubts about taxability of the amount and initiated proceeding only on the instruction or the CIT and ACIT who held the view that a particular amount should be assessed. It was on these facts where a settled issue was being unsettled on the basis of instruction where the AO admittedly was of the view that amount was not taxable. Thus, in those facts it could not be said that the AO had formed its belief that income has escaped assessment since his own belief was that it was not taxable and the notice was issued only on the instruction of CIT and ACIT. In the facts of the present, case AO was of the view that income was assessable ad notice was given to regularize the return and it was not a case of unsettling a settled position ad was clearly a case where AO had formed his own belief that income had escaped assessment. To take a contrary view would be a situation of misreading the principle and proposition of law laid down by the Court. Accordingly, it is seen that the judgement in the case of Narain Jaiswal on facts is not applicable as it operates in the realm of entirely different and distinguishable facts and operate in the domain of unsettling a settled position on whims and the AO, therein expressed his doubts that the amount was assessable land acted contrary to his belief only on the instruction of the CIT and ACIT.
13. In the same para i.e. para 15 of the proposed draft order reliance has been placed on 103 ITA 437. The re-opening was on the confession of one MK and it is on these facts their Lordships came to the conclusion that there was no direct/live link with the information received so as to resort to reopening. Thus, the settled position on the basis, of flimsy information was frowned upon which is not the case in the facts of the present case.
14. Similarly in the case of ITO v. Lakhamani Miwal Das their Lordships held that the formation of belief must be held to be in good faith and should not be a mere practice. This principle in the facts of the present case in fact helps the Revenue and goes against the assesses as nowhere in the record has it been the case of the assessee that the re-opening suffers from mala fide and is not in good faith. The facts as appearing before their Lordships in the Supreme Court were that legitimately concluded assessment order was sought to be disturbed only on the basis of some confession by MK which was held to a case of re-opening not in good faith and a live and direct nexus was found wanting.
15. On a careful reading of these judgements it is seen that the issue can and has to be resolved on the basis of peculiar and specific facts of each case The Courts are unanimous in their approach with respect to the recording of reasons. They have categorically held that the reasons for the formation of the belief contemplated by Section 147 of the Income-tax Act, 1961, for the reopening of an assessment must nave a rational connection or relevant bearing on the formation of this belief. Rational connection postulates that there must be a direct nexus or live link between the material coming to the notice of the Income-tax Officer and the formation of his belief that there has been escapement of the income of the assessee from assessment in the particular year because of his failure to disclose fully and truly all material facts. The Courts have also been categoric in their approach that the courts cannot go into the deficiency or adequacy of the material, and substitute its own opinion for that of the Income-tax officer on the point as to whether action should be initiated for reopening the assessment. In the facts of the present case it cannot be said that the “information” available with the AO was vague and indefinite or distant, remote or far-fetched, as such it could not warrant the formation of the belief relating to escapement of the income of the assesses form assessment. The reason for the formation of the belief must be held to be in good faith and should not be a mere pretence. In the facts of the present case the reasons are not vague, distant, flimsy, indefinite, far fetched or remote, but in fact are direct having a direct and definite live link/nexus and in my opinion once the re-opening is not barred by limitation and is on the basis of reasons recorded which form a direct and live link/nexus and the proceedings cannot be quashed on the ground of being illegal and invalid ab initio.
16. In para 16 of the proposed draft reliance has been placed on the judgement of Giridhar Gopal Gulati wherein assessment completed Under Section 143(3) after a detailed inquiry on the basis of DVO was sought to be disturbed which was held to be a case of change of opinion on the same facts.
17. Accordingly, not the detailed reasons given hereinabove the facts and circumstances, of the case after a careful analysis of the judgements of different High Courts relied upon by my esteemed brother and the law as laid down by the Apex Court, I am of the view that the ground No. 1 in the original ground substantiated by Ground No. 1 in concise grounds challenging the proceedings Under Section 147 is dismissed. Ordered accordingly. The remaining grounds which survive are ground Nos. 2.1 to 2.3, 3.1 to 3.2,4.1 to 4.2 and Ground No. 5 in original grounds substituted by Ground No. 2(a) and 2(b); Ground No. 3, Ground. No. 4.1 and 4.2 and Ground 5 challenging the additions on merits.
18. In view of the fact that in the proposed draft order these grounds have not been addressed as relief has been granted to the assessee wherein the AO itself has been quashed on a legal ground and taking note of the face that before the First Appellate Authority the impugned order was passed ex parte. Accordingly in the aforementioned facts and circumstances I deem it fit and proper to restore this issue to the file of the CIT(A) with the direction that he may decide the same in accordance with law by way of a speaking order. Needless to say that the assessee will be afforded an opportunity of being heard.
19. In the result the appeal of the assessee is partly allowed for statistical purposes.
M.L. Gusia, Accountant Member
1. This appeal of the assessee is directed against the order passed by CIT(A.)-II, Agra on 29.10.1997 for the A.Y. 1991-92.
2. With the original memo of appeal, about 9 grounds of appeal were taken and thereafter, additional ground, of appeal was also taken during the course of hearing. However, it is noted that the grounds of appeal were overlapping, therefore, concise grounds of appeal including the additional ground of appeal have been filed by the Id Counsel for the assessee. No objection has been raised by the learned D.R. Hence, the same has been accepted. In the concise grounds of appeal, the first ground taken is that initiation of proceedings Under Section 148 in the present case has been done at the behest and under the directions of CIT(A) As such, the action Under Section 147/148 is bad in law rendering thereby the entire assessment as void ab initio, and hence, non-est in law, which may be quashed.
3. The facts of the issue are that the assessee company came into existence on 16.10.89. However, no return of income, was filed. Therefore, the Assessing Officer issued notice Under Section 142(1) on 08.01.1992 The assessee filed return of income on 31.13.93 declaring nil income. The return of income for the year under consideration was due on 31.03.93. The return of income being a belated return, was an invalid return in the eye of law. However, the Assessing Officer proceeded to act upon the invalid return of income and passed the assessment order Under Section 143(3) on 30.3.1994 at the total income of Rs. 23,72,180/-. The above assessment order was set aside by the CIT(A) with the following observations:
The return was filed beyond me period prescribed wider Section 139 and the A.O. was required to regularize the return. The return being invalid could not have been acted upon and in order to set right the infirmity the assessment has to he restored to his file for framing fresh assessment after regularizing the return as all the proceedings taken up consequent upon filing of an invalid return. also become invalid. While framing fresh assessment the A.O. should observe all the legal formalities namely issue of summons etc. on the concerned parties. He should also allow the appellant me benefit for those amounts which appear in names of existing assessee as it is for these individuals to prove the source of investment made by them in the company, and the appellant should not be burdened with proving the genuineness of amounts in those cases where the amounts are owned by these persons.
4. Thereafter, the Assessing Officer recorded the reasons for re-opening the case for the year under consideration. The reasons recorded on 06.12.1995 have been submitted at page 28 of the paper book, which is filed by the assesses during the course of hearing before us. The same is reproduced as under:
The assessee has failed to file its return of income for A.Y. 91-92 within statutory time limit i.e., 31.3.93, The return filed by the assessee for A.Y. 91-92 on 31.12.93 being an invalid return, has therefore been filed. On perusal of records, it is found that the assessee copy has raised fresh share application money amounting to Rs. 21,91,900/- and unsecured loan to the extent of Rs. 2,62,000/- and source of which are unexplained at the hands of assessee company to the total of such deposits amounts to Rs 24,53,900/-
Keeping in view of above facts, I have. therefore, reason to believe that income of Rs. 24,53.900/- escaped assessment for A.Y. 91-92 Hence, it is established that it is a fit case to issue notice Under Section 148 read with Section 147 of I.T. Act.
Issue notice Under Section 148 of I.T. Act.
Sd/-
(A.C.I.T., Circle 1.)
Mathura.
5. After recording the above reasons, notice Under Section 148 was issued and in response to that notice it was submitted that the return of income filed originally on 31.12.1993 may be treated as return of income filed in compliance to the notice issued Under Section 148 of the Act.
6. The ld. Counsel for the assessee during course of hearing before us filed a paper book containing total pages 89 winch is placed on record. He invited our attention to page 28 of the paper book, where the reasons have been recorded and the same have been reproduced above. The ld. Counsel for the assessee argued that in the reasons recorded on 06.12.1995, the Assessing Officer has mentioned that the assessee has failed to file its return of income within the statutory time limit i.e., 31.3.1993 and the return filed on 31.12.1993 was an invalid return, therefore, the same has been filed. The ld. Counsel argued that it is incorrect to say that the invalid return was filed, rather the Assessing Officer has acted upon the said invalid return of income and the assessment order was framed Under Section 143(2) on 30.3.1994. A copy of the said original assessment order is placed at page 3 to 22 of the paper book. The ld. Counsel further argued that the Assessing Officer has further recorded for re-opening of the assessment that I have, therefore, reason to believe that income of Rs. 24,53,900/- has escaped assessment for the A.Y. 91-92 Hence, it is established that it is a fit case to issue notice Under Section 148 read with Section 147 of the IT. Act” The ld. Counsel for the assesses has vehemently argued that there was no reason to believe that income of Rs. 24,53,900/- has escaped for the A.Y, 1991-92, In fact, all these information have already been provided by the assessee while filing the return of income on 31.12.93. If that was an invalid return of income, then the Assessing Officer should not have been acted upon the invalid return of income filed on 31.12.1993. The Assessing Officer has acted upon the invalid return of income and framed the assessment order Under Section 143(3) of the Act on 30.3.1994, at the income of Rs. 23,72,180/-. The ld. Counsel argued that in the assessment order it is nowhere mentioned that income escaped to be assessed. Rather, the assessment originally made and after re-opening Under Section 148, the income was assessed at the same income. It is, further submitted that the original assessment order was set aside to regularize the invalid return of income on the basis of which the original assessment order was framed. No notice Under Section 148 could be issued at the behest of the higher authorities. In support of his submissions he has relied upon the judgment of Hon’ble S.C. in the case of ITO v. Lakhmani Mewal Das 103 ITR 437, wherein Hon’ble Supreme Court held as under:
The reasons for the formation of the belief contemplated by Section 147(a) of me Income-tax Act, 1961, for the reopening of an assessment must have a rational connection or relevant bearing on the formation of the belief Rational connection postulates that there must be a direct nexus or live link between the material coming to the notice of the income-tax Officer and the formation of his belief that there has been escapement of the income of the assessee from assessment in the particular year because of his failure to disclose fully and truly all material facts.
7. The Hon’ble Supreme Court has further held that:
The duty of the assessee in any case does not extent beyond making a true and full disclosure of primary facts. Once he has done that his duly ends. It is for the Income tax Officer to draw the correct inference from the primary facts. It is not the responsibility of the assessee to advise the income tax Officer with regard to the inference which he should draw from the primary facts. If an Income-tax Officer draws an inference which appears subsequently to be erroneous, mere change of opinion with regard to that inference would not justify initiation of action for re opening assessment…. The reasons for formation of the belief must be held in good faith and should not he mere pretence.
8. The ld. Counsel for the assessed pleaded that the assesses had filed true and full facts before the Assessing Officer by filing return of income on 31.12.1993 and in case that was the invalid return of income, the Assessing Officer should not have acted upon the same and he should not have framed assessment order Under Section 143(3) of the Act. After completion of the assessment order, no fresh information, was gathered by the Assessing Officer to draw an inference that the income has escaped to assessment. The ld. Counsel father argued that the notice Under Section 148 was issued at the behest of the CIT(A), There was no ommission or failure on the part of the assesses to disclose full and true material maters, necessary for framing fresh assessment. As such, the action on the part of the Assessing Officer was illegal and bad in law. In support of his submissions, he relied upon the decision of Calcutta High Court in the case of Santosh Debi B aid v. ITO 81 ITR-552. In that case the assessee furnished returns for the assessment years 1956-57 to 1960-61 before the Income-tax Officer and the assessment was completed by the Income-tax Officer for the aforesaid years in due course. The Commissioner cancelled the assessment orders under Section 33B of the Indian Income-tax Act, 1922, on December 22, 1962 and directed fresh assessments in accordance with law by the Income-tax Officer having proper jurisdiction over the case after due enquiry, Notices of reassessment were issued to the assessee on November 27, 1964, by the Income-tax Officer, Central Circle, Calcutta, under Section 148 of the Income-tax Act, 1961, for the assessment years 1956-57 to 1959.60. The assessee challenged the validity of the assessment notices. Hon’ble Calcutta High Court held that
The sole ground on which the proceedings were sought to be reopened against the assessee under Section 148 of the 1961 Act was that the original assessments had been cancelled by the Commissioner under Section 33B of the 1922 Act. There was no indication of any omission or failure on the part of the assessee to disclose fully or truly any material facts necessary for assessment in me course of the original assessment proceedings. The original returns were filed by the assessee in the original proceedings on me basis that the income tax Officer had jurisdiction over the assessee’s case, Therefore, it cannot be, said that there was no filing of the returns or that the returns filed were a nullity. At the highest it was only an irregularity, which had been condoned by the assessing income-tax Officer. The conditions precedent for the assumption of jurisdiction under Section 147(1) of me Income-tax Act, 1961, not having been fulfilled the Income tax, Officer has no jurisdiction to issue the impugned notice under Section 148 of the Act.
9. The ld. Counsel for the assessee has further argued that the reasons were recorded at the behest of the CIT(A) while any procedural defect cannot, amount to get jurisdiction as is held by Hon’ble Madras High Court in the case of CIT v. T.R. Rajkumari 96 ITR – 68 as under:
There is a clear cut distinction between jurisdiction and procedure and a defect in procedure will not normally amount to lack of jurisdiction. Section 147(a) of the Income-tax Act, 1961, sets out certain conditions for invoking the power and jurisdiction under that section. If those conditions are not satisfied, there is no jurisdiction for the officer to reassess under that section. Even, if the conditions precedent set out in Section 147(a) are treated as matters of procedure, still me contemplated procedure has to be followed for attracting the jurisdiction under that section. Hence, the extreme contention that even if the statutory provisions had not been followed still the order of reassessment has to be taken as valid cannot be accepted.
A condition precedent for initiating reassessment proceedings is the reasonable belief of the Income-tax Officer that income had escaped assessment. Hence, when initiation of reassessment proceedings was stated to be on the direction of the commissioner, the reassessment proceedings are invalid even though on the facts it is established that there was non-disclosure by the assessee.
10. The 1d. Counsel argued that if the return, of income filed by the assessee on 31.12,93 was invalid then he should have not acted upon the said return of income. After framing the assessment order, the Assessing Officer cannot say that there was escapement of income. In support of his submissions, he relied upon the decision of Supreme Court in the case of Gemini Leather Stores v. ITO AIR 1975 page 1268, wherein the Hon’ble Supreme Court has held as under:
While making a best judgment assessment, the income-tax officer had discovered certain transactions evidenced by the drafts which the assessee had not disclosed. In spite of this discovery and the knowledge of all the material facts the Income-tax Officer did not make necessary enquiries and draw proper inferences as to whether the amounts invested in the purchase of the drafts could be treated as part of the total income of the assessee during the relevant year.
Held that it was plainly a case of oversight and the Income tax Officer could not take recourse to Section 147(a) to remedy the error resulting, from his own oversight and that therefore, the notice wider Section 148 should be quashed.
11. The Id, Counsel further submitted that the reasons recorded by the Assessing Officer on 6.12.95 were false reasons so far as it is mentioned that the return of income originally filed on 31.12.93, was filed and he has reason to behave that an income of Rs. 24 53,900/- escaped the assessment for the assessment year 1991-92. On the basis of false reasons, the Assessing Officer cannot, get jurisdiction, to issue notice Under Section 148. As such the notice Under Section 148 is illegal and invalid, which is based on false reasons recorded, which is apparent from the facts of the case.
12. The ld. Counsel further argued that the valid course of action for the Assessing Officer was that he should have framed assessment order Under Section 144 of the I.T. Act when he noted an invalid return of income. He further argued that the CIT(A)-II, Agra restoring the original assessment order to the file of the Assessing Officer, it is mentioned in para 2.I, that “the appeal is consequently to be taken for allowed for statistical purposes.” Therefore, according to the ld. Counsel for the assessee when the appeal of the assessee was allowed, he has no grievance. The aggrieved party was revenue for which it should have filed the appeal before the Tribunal. On the other hand, the ld. D.R. argued that the matter was restored to the Assessing Officer by the CIT(A) in order to set right the infirmity and to frame fresh assessment. In such circumstances, if the assessee was aggrieved then he should have filed second appeal before the Tribunal against the directions given by the CIT(A). The ld. D.R. further argued that the Assessing Officer has acted according to the directions given by the CIT(A).
13. We have carefully considered the rival submissions and also gone through the paper book filed by the ld. Counsel for the assessee. We noted from the reasons recorded by the ld. Assessing Officer on 06.12.95 that the return filed on 31.12.93 for the AY. 91-92 is beyond the statutory time limit. Therefore, the same is an invalid return and hence, the same was filed. This is patently wrong and distorted recording of facts. Actually the return was not filed, but on the basis of that invalid return, order Under Section 143(3) was passed by the Assessing Officer. We also noted that there was no difference in the income original assessed and subsequently assessed by issuing notice Under Section 148 of the Act. Therefore, the Assessing Officer further erred in mentioning the he has reasons to believe that income of Rs. 24,53,900/- has escaped assessment in the assessment year 1991-92. In fact, there was no reason before the Assessing Officer to believe that income escaped assessment for the A.Y. 1991-92. The notice issued Under Section 148 on false recording of reason to believe, cannot be held a valid proceeding. Therefore, subsequent action is also invalid and illegal.
14. We also noted that the fresh assessment order was made Under Section 143(3) read with Section 251 of the I.T. Act, 1961, meaning thereby, the fresh assessment order has been made at the behest and on the directions of the CIT(A), The Hon’ble M.P. High Court in the case of Yashwant Talkies v. CIT 157 ITR 103 has held that the Income-tax Officer for expressing his satisfaction for taking action Under Section 147 was the directions of the Commissioner, which on the material collected by the Income-tax Officer was not at all information or a new fact found. Therefore, the Income-tax Officer could not record his satisfaction to initiate proceedings Under Section 147 (b) and hence, the reassessment proceedings were held invalid. Further Hon’ble Patna High Court in the case of Sheo Narain Jaiswal and Ors. v. ITO 176 ITR-352 has held that if the Income tax Officer does not form his own belief, but merely acts at the behest of any superior authority, it must be held that the assumption of jurisdiction under Section 148 of the Act was bad for non-satisfaction of the condition precedent, We also noted that the reason to believe was not in good faith as there was no new material or information, on which the Assessing Officer could form a reason to believe and it is a false recording that the A.O. has filed the belated return. The Hon’ble Supreme Court, as already discussed in the case of ITO v. Lakhmani Mewal Das 103 ITR 437, has held that the reasons for formation of the belief must be held in good faith and should not have been mere pretence.
15. Hon’ble jurisdictional High Court of Allahabad has held in the case of Girdhar Gopal Gulati 269 ITR-45 that once the assessment was proposed to be made Under Section 143(3) of the Act, it is presumed that all the necessary enquiries have been done and the Assessing Officer cannot issue notice Under Section 148 after the assessment has been made unless there is deliberate concealment or there is information that income had escaped assessment. The Hon’ble High Court has further held that the record showed that for the A.Y. 1996-97, a detailed inquiry had been held by the Assessing Officer before making the assessment. Therefore, the notice issued Under Section 148 was passed only on change of opinion. Hence, it was invalid. In the instant case, the assessment order was passed Under Section 143(3) of the Act and no new information was brought on record. Therefore, the action of re-opening the assessment is invalid.
16. Keeping in view the above facts and circumstances, we quash the assessment order and hold the same illegal and invalid ab inito. This ground of appeal is allowed.
Since the assessment has been held invalid on legal ground, therefore, we need not to consider the other grounds raised on the merits of the case.
17. In the result, the appeal of the assessee is allowed.