Commissioner of Income Tax vs Narain Automobiles

Present appeal u/s 260A of the IT Act, 1961 has been filed against the judgment and order dt. 31st March, 2008 passed by Tribunal, Lucknow Bench ''A'' Lucknow.

Substantial questions of law which arise for consideration in the present case are as follows:

(I) Whether on the facts and in the circumstances of the case, the Tribunal was justified in holding that absence of concrete evidence of the recording of reasons before issuing notice u/s 148, a procedural lapse only, even when assessee regularly attended the reassessment proceedings, will result in quashing of the reassessment proceedings.

(II) Whether on the facts and in the circumstances of the case, the Tribunal was justified in concluding that the AO had not recorded reasons for reopening of the assessment while failing to appreciate that the said reasons were duly recorded and copy of the same was also provided to the assessee as per the order sheet entry dt. 8th Sept., 2006.

(III) Whether on the facts and in the circumstances of the case, finding of the Tribunal that reasons recorded by the AO for reopening the assessment were not available on record is not perverse.

Brief background of the case is that against the order of reassessment u/s 147 of the IT Act assessee preferred an appeal before CIT(A)-I, Lucknow on the ground that the AO did not provide reasons recorded for issuance of the notice u/s 148 of the Act. The assessee further contended that notice u/s 148 was issued without recording any reasons and even if recorded they were based on the facts and materials already considered by the AO while making the original assessment order. The CIT(A)-I Lucknow in view of the aforesaid facts held the action of the AO as legally not tenable as the recorded reasons were not stated to be available on record and besides an order u/s 143(3) of the Act had been passed before the issuance of notice u/s 148 of the Act. The CIT(A) further held that the notice u/s 148 has been incorrectly issued. Accordingly the CIT(A) quashed the order of reassessment. The Department being aggrieved with the above order of the CIT(A) preferred an appeal before the Tribunal. The Tribunal vide its impugned order dt. 31st March, 2008 upheld the order of the CIT(A) observing as under in para 5 of the appellate order:

We have considered the rival submissions and perused the material on record. It is undisputed legal position that before reopening of the assessment, the AO should have recorded the reasons. If the reasons were recorded later, or they are misplaced or were taken out of record, then it is for the Departmental authorities to initiate proceedings and come before the Tribunal with the relevant facts. Once the AO has in the remand proceedings before CIT(A) categorically stated that reasons are not available on record then it is for the Departmental authorities concerned to find out whether the reasons are actually recorded or not and if recorded then why they are not available on record. No evidence of any such enquiry or proceedings has been produced before us. No copy of the alleged order sheet on which the alleged reasons were provided by the Department to the assessee was put up for our perusal. Therefore, in absence of any material to the contrary the only inference of the AO''s report in the remand proceedings before the CIT(A) that reasons are not available on record is that such reasons were not recorded. As a result, in absence of reasons recorded for reopening of the assessment, we upheld the order of CIT(A) and dismiss the appeal filed by the Revenue.

Against the said order in question present Income Tax appeal has been filed.

Original record in question under the order of this Court has been produced.

Sri. D.D. Chopra, learned Counsel for the appellant contended with vehemence that in the present case finding of Tribunal that reason recorded by AO for reopening of assessment was not available on record is perverse and the fact of the matter is that reasons were available there and to the said reasons reply in question has been submitted, and further recording of reason was not at all a condition precedent for issuance of notice in this background on account of the said substantial question of law being there appeal in question deserves to be allowed.

Countering the said submission Sri. Mudit Agarwal, advocate representing assessee-respondent submitted that judgment and order which has been passed by Tribunal and CIT(A) are totally just and correct orders based on record as such appeal in question deserves to be dismissed as issues raised are pure question of fact.

After respective arguments have been advanced, original record in question has been perused and from perusal of the record in question and specially the order sheet, it is reflected that reasons had been indicated in the order sheet dt. 11th March, 2004 signed on 12th March, 2004 and thereafter orders were passed on 8th March, 2006 which indicates for issuance of notice u/s 148 of the Act, provided to the assessee. Order sheet dt. 13th Sept., 2006 thereafter proceeds to take note of the fact that counsel of assessee submitted his reply issue-wise. Order sheet of 13th Sept., 2006 bears signature of K.K. Dixit who was representing assessee and further reply has been filed on letterhead of the assessee and same also bears signature of one of partners. Once such a factual position which is emerging from perusal of the record, then finding of fact which has been mentioned by both CIT(A) and Tribunal clearly reflects that totally perverse observation has been made that reasons has not at all been recorded before issuing of notice u/s 148 of IT Act whereas reasons were there in the order sheet and further said reasons had been duly indicated and to each and every ground indicated therein adequate reply has been submitted on 13th Sept., 2006. In this background question Nos. 2 and 3 are answered in favour of appellant and orders which have been passed by Tribunal dt. 31st March, 2008 as well as dt. 14th Dec, 2007 passed by CIT(A), Lucknow are hereby quashed and set aside. Matter is remitted back to decide issues raised by Revenue/assessee in accordance with law preferably within next three months from the date of presentation of certified copy of this order.

With the above direction present Income Tax appeal is allowed.

No orders as to cost.