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Issues: Stay order clarification for assessment proceedings, extension of limitation under section 153(3) of the Income-tax Act, 1961
Stay Order Clarification for Assessment Proceedings: The case involved a partnership concern where the business premises and residential premises of the partners were searched by the Income-tax Department, resulting in the seizure of records and documents. The partners and the general manager of the firm filed separate writ petitions in the Delhi High Court to challenge the raid and seizure, obtaining a stay order on further assessment proceedings. The issue arose regarding the scope of the stay order, whether it applied only to the partners or also to the assessee-firm. Multiple applications were filed seeking clarification on the stay order's applicability, which were eventually confirmed by the Delhi High Court. The final dismissal of the writ petitions in 1974 led to the Income-tax authorities proceeding with the assessments. Extension of Limitation under Section 153(3) of the Income-tax Act, 1961: Upon resuming the assessments, the assessee raised objections, contending that there was no stay for the assessment year 1970-71 and that since no writ petition was filed on behalf of the firm, the limitation period was not extended during the stay. These objections were rejected by the Tribunal, which analyzed the various applications and orders passed by the Delhi High Court. The Tribunal concluded that the stay applied to the assessment year 1970-71 and also to the firm. Subsequently, the assessee sought reference of questions to the High Court, with the Tribunal ultimately referring a single question regarding the extension of limitation under section 153(3) of the Act. Analysis and Conclusion: The High Court, in its judgment, noted that the stay order issued by the Delhi High Court clearly indicated that it applied to the firm as well. As a result, the Income-tax authorities were unable to proceed with the assessment, leading to an extension of the limitation period under section 153(3) of the Act for the firm. The Court upheld the Tribunal's decision, stating that the limitation was indeed extended in the firm's case. Despite the absence of the assessee during the proceedings, the Court answered the referred question in favor of the Revenue, denying any order as to costs.
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