1989 (8) TMI 348 - HC - Income Tax

Summary

Issues Involved:
1. Validity of the return filed by the assessee on 14-3-1974 under section 139(4) or section 139(5) of the Income-tax Act, 1961.
2. Entitlement of the assessee to receive a notice under section 143(2) based on the return filed on 14-3-1974.
3. Justification of the Tribunal in not setting aside the assessment order dated 25-3-1974 and directing the Income-tax Officer (ITO) to make a fresh assessment.
4. Reasonableness and perversity of the Tribunal's conclusion that no effective opportunity of being heard was given to the assessee for the original return filed on 25-7-1973.

Detailed Analysis:

1. Validity of the Return Filed on 14-3-1974:
The primary issue was whether the return filed by the assessee on 14-3-1974 could be considered valid under section 139(4) or section 139(5) of the Income-tax Act, 1961. The Tribunal determined that the return was valid. However, the High Court found that the return filed on 14-3-1974 was not valid under section 139(5) because the original return filed on 25-7-1973 was under section 139(4) and not under section 139(1) or section 139(2). The court emphasized that a revised return under section 139(5) is permissible only if the original return was filed under section 139(1) or section 139(2). The court also noted that the revised return was filed to delay the assessment proceedings, which is not permissible under the law.

2. Entitlement to Notice under Section 143(2):
The second issue was whether the assessee was entitled to a notice under section 143(2) based on the return filed on 14-3-1974. The Tribunal held that the assessee was entitled to such a notice. However, the High Court disagreed, stating that since the return filed on 14-3-1974 was not a valid return, the ITO was not obligated to issue a notice under section 143(2). The court clarified that the assessment could proceed based on the original return filed on 25-7-1973.

3. Justification in Not Setting Aside the Assessment Order:
The third issue was whether the Tribunal was justified in not setting aside the assessment order dated 25-3-1974 and directing the ITO to make a fresh assessment. The High Court concluded that the Tribunal erred in not setting aside the assessment order. The court pointed out that the assessee was not given an effective opportunity to be heard, as the ITO was out of station on the date fixed for hearing. Therefore, the Tribunal should have directed the ITO to make a fresh assessment in accordance with the law, ensuring compliance with the principles of natural justice.

4. Opportunity of Being Heard:
The fourth issue was whether the Tribunal's conclusion that no effective opportunity of being heard was given to the assessee for the original return filed on 25-7-1973 was unreasonable and perverse. The High Court agreed with the Tribunal's finding that the assessee was not given an effective opportunity to be heard on the last date of hearing since the ITO was out of station. The court emphasized that further opportunity should have been given to the assessee to comply with the notice under section 143(2), thereby upholding the principles of natural justice.

Conclusion:
The High Court concluded that:
1. The return filed on 14-3-1974 was not a valid return under section 139(2) or section 139(5).
2. The assessee was not entitled to receive a notice under section 143(2) based on the return filed on 14-3-1974.
3. The Tribunal was in error in not directing the ITO to make a fresh assessment in accordance with the law.
4. The assessee should have been given a further opportunity to be heard even in respect of the original return filed on 25-7-1973.

The court ordered that there would be no order as to costs.