1994 (10) TMI 42 - HC - Income Tax

Summary

Issues:
1. Validity of the return filed on December 31, 1986.
2. Validity of the return filed on March 11, 1987.
3. Requirement of notices under sections 142 and 143 of the Income-tax Act, 1961.
4. Imposition and cancellation of penalty.
5. Questions of law referred for determination by the court.

Validity of Returns:
The case involved a petition arising from an assessment made on the respondent-assessee for the assessment year 1986-87. The Income-tax Appellate Tribunal held that the return filed on December 31, 1986, was not valid, while the return filed on March 11, 1987, was deemed as the only valid return. The Tribunal concluded that the non-issuance of notices under sections 142 and 143 of the Act for the completion of assessment was an irregularity that could be cured. Consequently, the Tribunal set aside the Commissioner (Appeals) order and remitted the matter back to the assessing authority for a proper assessment process.

Imposition and Cancellation of Penalty:
Penalty was imposed on the assessee based on the initial assessment, which was later remitted back to the assessing authority by the Tribunal. As the quantum appeal was allowed, the Tribunal determined that the penalty imposed based on the initial assessment could not stand. Therefore, the penalty was canceled, and the Department was given liberty to initiate penalty proceedings if deemed necessary.

Questions of Law:
The Revenue sought to have specific questions of law referred for determination by the court, related to the validity of returns and the cancellation of penalty. The court refrained from delving into the merits of the controversy regarding the returns' validity and emphasized the need to focus solely on whether any referable question of law arose from the Tribunal's orders. The court concluded that the questions raised were not covered by direct decisions from higher courts and decided to refer the questions raised by the Revenue for consideration.

Conclusion:
The court directed the Tribunal to state a case and refer the questions of law raised by the Revenue for the court's decision under section 256(2) of the Income-tax Act, 1961. The court emphasized the importance of addressing all aspects of the questions raised by the Revenue in their reference application. The judgment highlighted the significance of following proper legal procedures and ensuring that assessments and penalties are imposed in accordance with the law.