1997 (4) TMI 42 - HC - Income Tax

Summary

Issues:
1. Validity of assessment order for the assessment year 1974-75.
2. Interpretation of limitation period under section 153(1)(b) of the Income-tax Act, 1961.
3. Revising a return filed under section 139(4) of the Act.

Analysis:
The High Court was tasked with determining the validity of an assessment order for the assessment year 1974-75. The assessee filed a return under section 139(4) of the Income-tax Act, 1961, on September 6, 1975, with a revised return submitted on March 21, 1977. The Income-tax Officer initially framed a best judgment assessment under section 144 on March 6, 1978, which was later cancelled and replaced with an assessment order under section 143(3) on September 10, 1980. The Tribunal, in response to an appeal, considered the issue of whether the assessment made on March 6, 1978, was beyond the period of limitation. The Tribunal relied on judgments from different High Courts and concluded that the assessment was indeed beyond the limitation period. The Tribunal emphasized the importance of interpreting tax statutes favorably towards the assessee when there are two reasonable views, citing the Supreme Court's precedent in Naga Hills Tea Co. Ltd. case. Consequently, the Tribunal annulled the assessment.

Regarding the interpretation of the limitation period under section 153(1)(b) of the Act, the High Court referred to the Supreme Court's decision in Kumar Jagdish Chandra Sinha v. CIT, which favored the assessee and overruled the view taken by the Calcutta High Court. The High Court noted that the recording of a finding by the Income-tax Officer beyond the ordinary limitation period for extension of limitation under section 153(1)(b) is a factual determination. Based on the Supreme Court's ruling in Kumar Jagdish Chandra Sinha's case, the High Court answered the question against the Revenue and in favor of the assessee.

The issue of revising a return filed under section 139(4) of the Act was also addressed. The High Court highlighted that there is no provision in the Income-tax Act, 1961, for revising such a return. The Delhi High Court and the Allahabad High Court supported this view, while the Calcutta High Court held a contrary opinion. The High Court reiterated the obligation to adopt an interpretation favoring the assessee when faced with conflicting views, as established by the Supreme Court. Consequently, the High Court upheld the view in favor of the assessee and annulled the assessment made by the Income-tax Officer.