2013 (10) TMI 288 - HC - Income Tax

Limitation Notice for penalty u/s 271(1)(c) of the Income Tax Act Held that - Notice under Section 271(1)(c) of the Act was not served on the assessee on 17.03.1988 as claimed by the department found the assessment to be barred by limitation under Section 153(1)(a) of the Act - In view of the reasons recorded by revenue for reaching the conclusion that the notice under Section 271(1)(c) of the Act was handed over to the counsel on 13.03.1989, and by then, the time available for completion of assessment was already over on 31.03.1988 and that the department was not entitled for extended period of limitation under Section 153(1)(b) of the Act - Counsel for the appellant has failed to point out any perversity either in the findings recorded by the learned Tribunal or from the original record, which was summoned by this Court Decided against the Revenue.

Summary

Issues:
1. Whether the assessment framed on 31st March, 1989 for the assessment year 1985-86 was barred by Limitation under Section 153(1)(a) and not governed by Section 153(1)(b)?

Analysis:
The High Court addressed the issue of whether the assessment framed on 31st March, 1989 for the assessment year 1985-86 was barred by Limitation under Section 153(1)(a) and not governed by Section 153(1)(b). The facts revealed that a search was conducted under Section 132 of the Income Tax Act on 24.08.1984, and subsequent assessments were made by the Assessing Officer leading to multiple appeals by the assessee. The primary contention was that the assessment had become barred by limitation. The CIT(A) initially rejected the plea, but the Tribunal revisited the issue. The Tribunal scrutinized the material available, including affidavits and documents, to determine if the assessment was time-barred. The Tribunal concluded that the assessment framed on 31.03.1989 was indeed barred by limitation, as the Assessing Officer had not satisfied the conditions under Section 271(1)(c) of the Act, rendering the notice invalid.

The Tribunal's decision was based on the fact that the Assessing Officer had not determined the concealed income or inaccurate particulars before issuing the notice, which was crucial for invoking the extended period of limitation under Section 153(1)(b) of the Act. The Tribunal emphasized the importance of the Assessing Officer's satisfaction regarding concealment or inaccurate particulars to validate the notice under Section 271(1)(c) and subsequent penalty under the Act. As a result, the Tribunal held that the assessment was time-barred and did not delve into other grounds raised by the assessee on merits, ultimately allowing both appeals.

The High Court analyzed the provisions of Section 153(1) of the Act before and after the amendment made by the Finance Act, 1989. It highlighted the timelines for completing assessments based on the applicable clauses, emphasizing the significance of adherence to the specified timeframes. The Court upheld the Tribunal's finding that the assessment was barred by limitation under Section 153(1)(a) due to the invalidity of the notice issued under Section 271(1)(c) of the Act. The Court found no reason to interfere with the Tribunal's detailed analysis and conclusion on the issue, dismissing the appeal and ruling in favor of the assessee.

In conclusion, the High Court's judgment focused on the issue of limitation regarding the assessment framed on 31st March, 1989 for the assessment year 1985-86. The Court upheld the Tribunal's decision that the assessment was time-barred under Section 153(1)(a) due to the invalidity of the notice issued by the Assessing Officer. The judgment emphasized the importance of adherence to statutory timelines and the necessity for the Assessing Officer to establish concealment or inaccurate particulars before invoking extended periods of limitation under the Act.