- (1.) The present appeal has been filed under section 260A of the Income Tax Act, 1961, hereinafter referred to as 'the Act', against the order dated 31.3.2005 passed by the Income Tax Appellate Tribunal, Lucknow Bench Lucknow. The Department has proposed the following substantial questions of law said to be arising out of the Tribunals order.: WHETHER the Income Tax Appellate Tribunal was justified in law in dismissing the appeal filed by the department against the order of the CIT(A) in quashing the assessment for invalid reasons recorded by the Assessing Officer without appreciating the facts of the case?
(2.) WHETHER the Income Tax Appellate Tribunal was justified in law in dismissing the appeal of the department on technical ground without going to the merit of the case? Briefly stated the facts giving rise to the present appeal are as follows. The appeal relates for the Assessment Year 1995 -96. In the proceedings arising out of Sections 147 and 148 of the Act,. The respondent assessee derives income from running of a flour mill for production of Maida, Suji, Atta in the name and style of M/s. Kanodia Flour Mills at Dulhipur, Varanasi and has head office at Kanpur. For the Assessment Year 1995 -96 the original return of income was filed on 31.10.1995 declaring total income of a sum of Rs. 7,73,880 which was processed under section 143(1)(a) of the Act, on 24.1.1996 resulting a refund of Rs. 45,361, which was rectified under section 154 of the Act and further refund of Rs. 2216 was allowed. While making assessment for the assessment year 1996 -97, the Assessing Officer was of the view that loss in shares has been fraudulently claimed. During the assessment year in question also as there were bogus transactions and after recording the following reasons issued notice under sections 147 and 148 of the Act, which are quoted below: The facts of this year are similar to assessment year 1996 -97 wherein addition of above Rs. 12 lakhs has been made on account of dealing in shares. The basis of addition has been discussed in detail in the body of the assessment order. In this year also loss of Rs. 14 lakhs has been claimed which is to be disallowed. Also the expenses in the head office account are to be examined since huge additions have been made in assessment year 1996 -97. 2. The assessee did not file any return. However, vide letter dated 25.11.1999 it was stated by the assessee that the original return of income was filed on 31.10.1995 and the same be treated as return filed in pursuance of notice under section 148 of the Act also. Further a return was filed on 23.12.1999 declaring the total income of Rs. 7,73,880. In the reassessment proceedings the share transactions were examined and vide order dated 24.3.2000 the assessment was made on income at Rs. 23,59,390 Feeling aggrieved the assessee preferred an appeal before the Commissioner of Income Tax (Appeals) II, Kanpur, who vide order dated 23.6.2000 allowed the appeal but directed the Assessing Officer to take action under section 148 of the Act against the assessee. The appeal preferred by the Revenue before the Tribunal has been dismissed by the impugned order. We have heard Sri Ashok Kumar, learned Senior Standing Counsel for the Revenue and Sri S.K. Garg, learned counsel for the respondent -assessee.
(3.) SRI Ashok Kumar submitted that the CIT (Appeal), as also the Tribunal was not justified in setting aside the reassessment order and also in quashing the order for issuing notice under section 148 on the ground that no proper reasons were recorded and on the reason recorded the proceedings under section 148 could not have been initiated. He further submitted that in the assessment proceeding for the assessment year 1996 -97 bogus share transactions were detected as the modus operandi was the same as in the previous assessment year also and therefore the proceedings for reassessment were validly initiated.;