2002 (3) TMI 43 - HC - Income Tax

Summary

Issues involved:
Challenge to notices issued under sections 143(2) and 142(1) of the Income-tax Act, 1961 for the assessment year 1975-76; Interpretation of liberty granted by the court to make assessment under section 143 after quashing draft assessment order under section 144B; Time limit for assessment under section 143 and validity of notices issued beyond the specified period.

Analysis:
The petitioner challenged the notices issued under sections 143(2) and 142(1) of the Income-tax Act, 1961 for the assessment year 1975-76, seeking their cancellation, withdrawal, and rescission by the court. The High Court noted that section 144B, under which draft assessment orders were passed, was omitted by the Direct Tax Laws (Amendment) Act, 1987. Consequently, the court quashed the draft assessment orders and granted liberty to make an assessment under section 143 of the Act. The writ petition was disposed of with no order as to costs, and a judgment from a previous case was referred to in support of the decision.

The petitioner contended that the time limit for assessment under section 143 is specified under section 153 of the Act, and no assessment can be made beyond the prescribed period. Referring to a Supreme Court judgment, the petitioner argued that the Income-tax Officer cannot issue notices after the expiry of the specified time limit. However, the court noted a provision in the Act extending the time limit in certain cases, which was distinguished from the case cited by the petitioner. The court highlighted amendments to section 153(3)(ii) and emphasized that the liberty granted by the court does not debar the authority from proceeding with the assessment.

The court further discussed the distinction between an observation of the court and granting liberty, emphasizing that the authority cannot be debarred from issuing notices based on the liberty granted under the court's order. The court dismissed the writ petition, stating that challenging the notices directly before the court was not the proper course of action. It emphasized the importance of consistency in court orders and refused the prayer for stay. The judgment was to be supplied to the parties within seven days for compliance.

In conclusion, the court upheld the authority's right to issue notices based on the liberty granted under the court's order, dismissing the writ petition due to the improper challenge of the notices directly before the court and emphasizing the need for consistency in court orders.