1994 (1) TMI 77 - HC - Income Tax

Assessment, Draft Assessment Order U/S 144B, Forwarding, Limitation For Completing Assessment

Summary

Issues:
1. Whether the assessment for the assessment year 1979-80 was barred by limitation?
2. Whether a draft order made within the period of limitation should be forwarded to the assessee within the same period for a valid assessment?
3. Whether annulling the order of assessment for the assessment year 1979-80 was legally justified?

Analysis:
The case involved a partnership firm that filed returns for the assessment year 1979-80, which were disputed by the Income-tax Officer. The Officer concluded that the income of the firm should be part of another entity's total income. A draft assessment order was made on March 16, 1982, but it was forwarded to the assessee on April 8, 1982. The issue arose whether this delay in forwarding the draft order rendered the assessment barred by limitation. The Commissioner of Income-tax (Appeals) held that since the draft order was made within the financial year 1981-82, the assessment was not time-barred. However, the Tribunal disagreed, noting that the actual forwarding of the draft order was on April 8, 1982, after the limitation period had expired. The Tribunal emphasized the importance of the term "forward" in the context of transmission, stating that the mere direction to forward without actual transmission did not meet the statutory requirements.

The Revenue contended that the draft order was prepared on March 16, 1982, with a direction to forward it to the assessee, and the actual act of forwarding on April 8, 1982, was within the stipulated period. The Tribunal's decision was based on the interpretation of the term "forward" in the relevant provisions. The Court agreed with the Tribunal, emphasizing that the actual act of forwarding the draft order was essential for compliance with the statutory requirements. Merely making a direction without the physical act of transmission did not constitute forwarding as mandated by the law. The purpose of providing the assessee an opportunity to respond to the proposed assessment required the actual transmission of the draft order.

The Court's analysis focused on the legislative intent behind the provisions of section 144B and Explanation 1 of section 153, highlighting the significance of the term "forward" in the context of transmitting the draft order to the assessee. The judgment concluded that the delay in forwarding the draft order rendered the assessment barred by limitation. Therefore, the Court answered the first question in favor of the assessee and against the Revenue. Consequently, the second and third questions were also answered in favor of the assessee based on the same reasoning. The reference application was disposed of with no costs, and both judges concurred with the decision.