1995 (3) TMI 30 - HC - Income Tax

Summary

Issues Involved:
1. Validity of Tribunal's decision to set aside the Commissioner of Income-tax (Appeals) order, annul the assessment order, and restore the matter to the Inspecting Assistant Commissioner.
2. Tribunal's decision on the Inspecting Assistant Commissioner's directions being a time-buying tactic.
3. Revival of assessment proceedings beyond the prescribed time under section 153 of the Income-tax Act.
4. Revival of assessment despite being barred by time and contravention of sections 144B and 144A.
5. Tribunal's refusal to annul the assessment order despite being time-barred.

Issue-wise Detailed Analysis:

1. Validity of Tribunal's Decision to Set Aside the Commissioner of Income-tax (Appeals) Order:
The Tribunal found that the Inspecting Assistant Commissioner denied the assessee a reasonable opportunity to be heard while giving directions under section 144A, which is a procedural lapse. The Tribunal followed the precedent set in Guduthur Brothers [1960] 40 ITR 298 (SC), which allows for correcting procedural irregularities by continuing proceedings from the stage where the irregularity occurred. Thus, the Tribunal set aside the Commissioner's order annulling the assessment and directed the Inspecting Assistant Commissioner to re-examine the case afresh.

2. Tribunal's Decision on the Inspecting Assistant Commissioner's Directions Being a Time-Buying Tactic:
The Tribunal concluded that the Inspecting Assistant Commissioner's directions were not merely to buy time but were in the interest of both the Revenue and the assessee, ensuring that the matter could be examined thoroughly under section 144B. The Tribunal noted that the Inspecting Assistant Commissioner reduced the proposed additions significantly after hearing the assessee, indicating a genuine examination rather than a time-buying tactic.

3. Revival of Assessment Proceedings Beyond the Prescribed Time Under Section 153:
The Tribunal held that the initial proceedings were initiated in time, and any procedural irregularity that occurred later could be rectified. Since the draft assessment order was framed within the prescribed time and the final assessment was completed within the extended period allowed under section 144B, the assessment was not barred by limitation.

4. Revival of Assessment Despite Being Barred by Time and Contravention of Sections 144B and 144A:
The Tribunal found that the procedural lapse under section 144A, where the assessee was not given an opportunity to be heard, was rectified during the section 144B proceedings. The Tribunal emphasized that providing an opportunity to the assessee during the section 144B proceedings achieved the objective of ensuring no order was passed without hearing the assessee. Therefore, the assessment was valid and not barred by time.

5. Tribunal's Refusal to Annul the Assessment Order Despite Being Time-Barred:
The Tribunal determined that the assessment order dated August 28, 1981, was framed within the time prescribed, considering the procedural extensions allowed under section 144B. The Tribunal concluded that the assessment was not barred by limitation and that the procedural irregularity under section 144A had been adequately addressed.

Conclusion:
The High Court upheld the Tribunal's decision on all issues, concluding that the procedural lapses were rectifiable and did not invalidate the assessment. The questions raised were answered in favor of the Revenue and against the assessee. No order as to costs was made.