2007 (9) TMI 32 - HC - Income Tax

Assessment Tribunal rejected the assessment proceeding and allowing the petition on the ground that proceedings initiated by the AO after a lapse of six years from the order date, which is not consider as a reasonable time period

Summary

Issues:
1. Refund claimed by the petitioner for assessment year 1989-1990.
2. Alleged unexplained income addition of Rs.3,96,000/- by the respondent.
3. Validity of impugned communication dated July 23, 2007.
4. Applicability of Section 153 (3) of the Income Tax Act.
5. Delay in initiating proceedings by the respondent.

Analysis:

Refund Claim for Assessment Year 1989-1990:
The petitioner sought a refund for the assessment year 1989-1990, which was not granted by the respondent despite repeated representations and requests. The petitioner, a senior citizen, highlighted his entitlement to the refund, emphasizing the lack of response from the respondent despite multiple attempts to communicate.

Alleged Unexplained Income Addition:
The respondent had added Rs.3,96,000/- as unexplained income during the original assessment, which the petitioner contested. The Income Tax Appellate Tribunal allowed the petitioner's appeal, remanding the matter for fresh consideration by the Assessing Officer. However, the respondent failed to take action on the Tribunal's order for several years, leading to the petitioner's bank account being attached. The petitioner's explanations regarding the source of the income were not accepted initially, resulting in the addition of the said amount to his income.

Validity of Impugned Communication:
The respondent issued a communication on July 23, 2007, requesting the petitioner to furnish details and documents related to the assessment. The petitioner challenged the communication, arguing that it was issued after a significant delay of six years, which rendered it liable to be quashed.

Applicability of Section 153 (3) of the Income Tax Act:
The petitioner contended that even if Section 153 (3) applied to the case, such proceedings should have been initiated within a reasonable time. The respondent, on the other hand, argued that the communication was in line with the Tribunal's direction, implying that no specific time limit applied in such circumstances.

Delay in Initiating Proceedings:
The Court considered the delay of six years in initiating proceedings against the petitioner as unreasonable and unexplained. Despite the importance of tax recovery, the Court emphasized the need for timely action by the tax authorities. Citing relevant legal precedents, the Court held that exercising statutory power within a reasonable time was crucial, and the unexplained delay in this case warranted quashing of the impugned order.

In conclusion, the Court ruled in favor of the petitioner, quashing the impugned order and allowing the writ petition, emphasizing the importance of timely action by tax authorities and the need for due diligence in addressing taxpayer grievances.