- (1.) This is a Department's appeal against the order of the Tribunal setting aside the assessment made under Section 148 of the Income Tax Act, 1961 (hareinafter referred to as the Act). The facts leading to the filing of the appeal is that the assessee is a company engaged in the manufacture of boxes and trading in timber. For the assessment year 1991-92, the assessee filed its return declaring a total income of Rs.1,88,483/-. Subsequently, a search and seizure operation under Section 132(1) of the Act was carried out at the premises of the assessee on 12.03.1992. At the time of search and seizure operation the assessment proceedings had not started on the basis of the return filed by the assessee. Accordingly, when assessment proceedings were started by the Assessing Officer, the assessee was asked to explain each and every document seized during the course of search and seizure operations. The submission and reply made by the assessee was considered and thereafter the Assessing Officer passed an assessment order on 31.03.1994 making addition in the income of the assessee. The assessee thereafter preferred an appeal, which was partly allowed by the Appellate Authority on 17.02.1995, pursuant to which the appeal effects were given.
(2.) For the assessment year 1992-93 an assessment order was made on 31.03.1995. The assessee, being aggrieved filed an appeal. The Ist Appellate Authority passed an order on 12.01.2004 and, while disposing of the appeal for the assessment year 1992-93, made certain observations for the assessment year 1991-92. The extract of the observation made by the Appellate Authority is extracted hereunder: "13. The appellant surrendered a sum of Rs. 1000000/- in assessment year1991-92. The A.O. in his assessment order dated 31.3.94 noted that the appellant had inflated purchases to the tune of Rs. 289698/- and further the A.O. Gave credit of Rs. 346477/- and for the balance amount, addition of Rs. 653523/- was given. The A.O.has generally discussed these bill books and has nowhere meticulously gone through these bill books and books of accounts as evident from the discussion in para 4 of the assessment order on 31.3.94. The present A.O. is directed to carefully study these bill books since the blank bill books were found from the custody of the appellant it is obvious that the credit balances atleast would be bogus. The same could be true about the purchases. How this figure of Rs. 653523/- has been arrived is not known. The A.O. should work out the exact quantum of credit balance and the bogus purchases which have been introduced in the books of account of the appellant by means of blank bill books and arrived the figure and take action u/s. 148 of I.T.Act 1961 if the limit is in excess of Rs. 100000/-."
(3.) Pursuant to the observation made by the Appellate Authority, the Assessing Officer issued a notice under Section 148 of the Act on 10.04.2001 recording reasons to believe that certain income chargeable to tax had escaped assessment by reason of the omission or failure on the part of the assessee to disclose fully and truly all materials necessary for assessment. The reasons to believe was basically based on the observations made by the Ist Appellate Authority in its order for the assessment year 1992-93.;