1989 (6) TMI 32 - HC - Income Tax

Summary

Issues Involved:
1. Whether the assessment order was time-barred under section 153 of the Income-tax Act, 1961.
2. Application of section 144B and section 129 of the Income-tax Act, 1961.
3. Exclusion of time periods under Explanation 1 to section 153 of the Income-tax Act, 1961.

Detailed Analysis:

Issue 1: Whether the assessment order was time-barred under section 153 of the Income-tax Act, 1961.
The primary issue was whether the assessment order for the year 1978-79 was time-barred under section 153 of the Income-tax Act, 1961. The assessee filed the return on July 30, 1978, and the assessment should have been completed by March 31, 1981. However, due to the variation between the income returned and the income proposed to be assessed, the Income-tax Officer forwarded a draft assessment order to the assessee on May 3, 1979, which was received on May 8, 1979. The assessee filed objections on May 29, 1979, and the matter was referred to the Inspecting Assistant Commissioner. The assessment was eventually completed on May 13, 1982. The Tribunal concluded that the assessment was within the time limit, considering the exclusions under section 153.

Issue 2: Application of section 144B and section 129 of the Income-tax Act, 1961.
Section 144B was invoked due to a variation exceeding Rs. 1,00,000 between the income returned and the proposed assessment. The Income-tax Officer forwarded the draft assessment order to the assessee, who filed objections. These were then referred to the Inspecting Assistant Commissioner, who issued directions after granting a personal hearing on November 16, 1979. Due to a change in the incumbent of the Income-tax Office, the Inspecting Assistant Commissioner offered a fresh hearing to the assessee, which was availed on October 15, 1981. The Tribunal held that the period for rehearing under section 129 and the time taken for the Inspecting Assistant Commissioner to consider the draft assessment under section 144B were rightly excluded from the limitation period.

Issue 3: Exclusion of time periods under Explanation 1 to section 153 of the Income-tax Act, 1961.
The Tribunal and the High Court examined the exclusions under Explanation 1 to section 153. The maximum period of 180 days for the Inspecting Assistant Commissioner to consider the draft assessment and the time taken for rehearing (9 months and 21 days) were excluded from the limitation period. The Tribunal concluded that these periods are not mutually exclusive but independent and should be considered in reckoning the time within which the assessment must be completed. The High Court upheld this view, stating that "the various periods enumerated in Explanation I to section 153 are not mutually exclusive but are independent of each other."

Conclusion:
The High Court answered the question in the affirmative, in favor of the Revenue and against the assessee. The Tribunal was correct in concluding that the assessment order was not time-barred under section 153 of the Income-tax Act, 1961. The periods specified in Explanation 1 to section 153 are independent and should be excluded in computing the time limit for completing the assessment. The judgment emphasized that having elected to avail of the opportunity for a rehearing, the assessee cannot later contend that such an opportunity should not be considered for the purpose of removing the bar of limitation.