Commissioner of Income Tax vs Agro Engineers

The appeal has been admitted on 9th April, 2001, in terms of the following question :

"Whether Tribunal was justified in not confirming the order of CIT(A) who had set aside the order of assessment with the direction to give fresh opportunity to the assessee ?"

The relevant assessment year is 1990-91. The assessee has filed the return of income declaring income at Rs. 98,108. Thereafter notice u/s 143(2) of the IT Act was issued more than 10 times, but assessee did not respond to the notice. Thereafter the AO has made the assessment order u/s 144 of the IT Act, 1961, and estimated the income of the assessee at Rs. 3,52,947 and apportioned it amongst the partners as referred in the assessment order.

That assessment has been challenged before the CIT(A). CIT(A) has noticed that before framing the assessment u/s 144 of the Act, proviso to Sub-section (1) of Section 144 has not been complied with, Therefore, he set aside the order of the AO and restored it back to the AO with a direction to make a fresh assessment after affording opportunity to the assessee, CIT(A) has also referred the decision of Calcutta High Court in the case of Commissioner of Income Tax Vs. Popular Electric Co. (P.) Ltd., wherein similar direction has been given by the Calcutta High Court i.e., remitted the matter back to the AO with a direction to make the fresh assessment on the basis of material on record and after giving opportunity to the assessee.

In appeal before the Tribunal, Tribunal has annulled the assessment holding that there is a statutory requirement under proviso to Sub-section (1) of Section 144 to give notice before estimating the income of the assessee u/s 144 of the Act.

None appeared for the assessee, Heard learned counsel for the Revenue, Mr. Singhi.

The facts are not in dispute that 10 notices u/s 143(2) of the Act were issued to the assessee any they were duly served. In spite of that, assessee did not respond to the notices, therefore, AO framed the assessment u/s 144 of the Act.

It is true that proviso to Sub-section (1) of Section 144 requires that before framing the assessment u/s 144, an opportunity should be given to the assessee. As 10 notices u/s 143(2} were issued to the assessee but in spite of service he did not respond. Though AO has committed a mistake by not issuing the fresh notice, for assessment u/s 144 of the Act that does not mean that assessee is not liable for the tax on its income. If in cases opportunity has not been given either required under statute or required under principles of natural justice, it did not make any difference but fact remains that when the income has not been assessed properly, the only proper course is that income should be assessed properly and in accordance with law.

We agree with CIT(A), he was justified in remitting the matter back to the AO to make a fresh assessment after affording opportunity to the assessee for assessment u/s 144 of the Act. Tribunal has committed error in annulling the assessment made by the AO, If statutory requirement has not been complied with, direction can be given to make a fresh assessment after complying the provisions of Section 144, before framing the fresh assessment.

Considering the submissions of Mr. Singhi, we set aside the impugned order of Tribunal and restore the view taken by the CIT(A). We direct the AO to. afford opportunity to the assessee before framing the fresh assessment u/s 144 of the Act.

The appeal is accordingly allowed.