Kerala H.C : Whether, on the facts and in the circumstances of the case, should not the Tribunal have remitted the case to the officer for a de novo consideration?”

Counsel Appeared

P.K.R. Menon & N.R.K. Nair, for the Applicant : C. Kochunni Nair, for the Respondent

MRS. K.K. USHA, J. :

Reference is at the instance of the CIT Cochin. It arises out of the order passed by the Tribunal, Cochin Bench in ITA No. 19(Coch/1987). The relevant assessment year is 1982-83. The following are the questions referred for opinion of this Court:

“1. Whether, on the facts and in the circumstances of the case, (a) the Tribunal is justified in cancelling the assessment? (b) the Tribunal is right in deleting the addition without further enquiry?

2. Whether, on the facts and in the circumstances of the case, should not the Tribunal have remitted the case to the officer for a de novo consideration?”

The assessee is a non-resident. During the previous year relevant to the asst. yr. 1982-83, the assessee had purchased certain immovable properties for a consideration of Rs. 4,76,000. The ITO initiated proceedings under s. 147 of the IT Act, 1961. Since the assessee did not comply with the notice under s. 148, the ITO issued notice under s. 142(1) twice. Since there was no response from the assessee, the ITO issued a letter giving out the information in his possession regarding the purchase of properties and proposing to complete the assessment ex- parte estimating the income at Rs. 6,00,000. Since there was no response to this letter also, the ITO completed the assessment under s. 144 estimating the income at Rs. 6,00,000. On appeal, the CIT(A) confirmed the order of the ITO.

The assessee filed second appeal before the Tribunal. Before the Tribunal the assessee contended that under the notice dt. 2nd Jan., 1985 referred in the assessment order, the assessee was never required to explain the sources of the investment and there was no reference to the sources of the assessee for his personal expenditure. It was also contended that for the asst. yr. 1981-82 the assessee has been assessed to wealth-tax with status of a non- resident on a net wealth of Rs. 20,00,000. The Tribunal took the view that the assessment was clearly arbitrary and cannot be sustained. According to the Tribunal, there was no material on record to connect the investments with any unexplained sources of funds of the assessee. It also held that ‘in the face of facts that the assessee has been assessed to wealth-tax the assessment lacks any material with reference to the undisclosed personal expenditure for which any income could be sustained.’ The Tribunal, therefore, annulled the assessment.

The learned standing counsel for the applicant contended that the Tribunal has committed an error in annulling the assessment. Relying on a decision of the Supreme Court in CIT vs. Segu Buchiah Setty (1970) 77 ITR 539 (SC) : TC 11R.89, learned counsel submitted that the ITO was fully justified in proceeding with the ex-parte assessment when the assessee failed to submit returns. Alternatively he contended that even if the Tribunal was of the view that the CIT should have taken into consideration the contention raised by the assessee in his appeal relying on the wealth-tax assessment for the years 1981-82 and the WT return filed by him for the year 1982-83, the Tribunal should have set aside the order passed by the first appellate authority and remitted the matter to the assessing authority for fresh consideration. The Tribunal should not have directly annulled the assessment

The learned counsel for the assessee submitted that the assessee had placed before the first appellate authority itself materials regarding his wealth-tax assessment for the years 1981-82 and the WT return filed for the year 1982-83. The assessee had also contended that his power of attorney holder had responded to various notices and he had filed a reply on 24th Aug., 1984 requesting for one month’s time. Copy of the letter referred above is Annexure D. In the above letter, the power of attorney holder has stated that the assessee was out of India and he was expected only in the month of October, 1984. Since the full details were not furnished to the power of attorney holder, he requested for time till 31st Oct., 1984 to file the returns. It was submitted by the learned counsel for the assessee that apart from the WT return the assessee had subsequently filed the IT returns also.

Under these circumstances, according to the learned counsel, the assessment order, where the assessee had been treated as a resident, is not sustainable under law. Therefore, the Tribunal was fully justified in annulling the assessment order.

7. After hearing both sides we are of the view that the Tribunal should not have annulled the assessment as such. It should have set aside the order passed by the first appellate authority and remitted the matter to the assessing authority for fresh consideration. We, therefore, answer question No. 1(a) in the negative in favour of the Revenue and against the assessee.

Question No. 1(b) is answered in the negative in favour of the Revenue and against the assessee. Question No. 2 is also answered in the affirmative in favour of the Revenue and against the assessee.

[Citation :234 ITR 461]