1988 (10) TMI 22 - HC - Income Tax

Summary

Issues Involved:
1. Whether the assessment was barred by limitation.
2. Whether the successor Income-tax Officer was required to hear the assessee afresh.
3. Whether the Revenue was entitled to the extended period of limitation under section 153(1)(b).
4. Whether the assessee had concealed its income within the meaning of section 271(1)(c).

Issue-wise Detailed Analysis:

1. Whether the assessment was barred by limitation:
The Tribunal accepted the preliminary objection of the assessee that the assessment was time-barred. The assessment should have been made before February 8, 1973, under section 153(1)(c) of the Act. The Tribunal rejected the contention of the Revenue that the time for completion of the assessment was extended under section 153(1)(b) of the Act. The Tribunal noted that the Income-tax Officer did not invoke or apply section 153(1)(b) before the assessment became time-barred on February 8, 1973. The Tribunal also noted that the penalty proceedings initiated on March 21, 1973, were routine and the said penalty proceedings were ultimately dropped, concluding the issue against the Revenue.

2. Whether the successor Income-tax Officer was required to hear the assessee afresh:
The Tribunal rejected the conclusion of the Appellate Assistant Commissioner that the period from September 6, 1972, to March 31, 1973, should be excluded due to the change in the incumbent of office. The Tribunal held that the successor Income-tax Officer could legally continue the proceeding at the stage left by his predecessor and was under no obligation to reopen the previous assessment or rehear the assessee unless demanded by the assessee. In this case, there was no such demand from the assessee.

3. Whether the Revenue was entitled to the extended period of limitation under section 153(1)(b):
The Tribunal found no prima facie evidence that the assessee was guilty of concealment within the meaning of section 271(1)(c). The Tribunal noted that the assessee's return of income was on an estimate basis, which was also adopted by the Income-tax Officer. A difference in estimate does not lead to the conclusion of prima facie concealment. The penalty proceedings initiated on March 21, 1973, were routine and after the assessment became time-barred. The Tribunal concluded that the Revenue was not entitled to the extended period of limitation under section 153(1)(b).

4. Whether the assessee had concealed its income within the meaning of section 271(1)(c):
The Tribunal noted that the returns filed by the assessee were not accompanied by complete and correct statements of accounts, the audit report was delayed, and the books of account were withheld. However, these do not constitute valid reasons for holding that the assessee had concealed its income within the meaning of section 271(1)(c). The Tribunal held that there was nothing on record to indicate that the assessee was guilty of concealment of income. The Tribunal also noted that the penalty proceedings against the assessee were ultimately dropped.

Conclusion:
The High Court affirmed the Tribunal's decision, holding that the assessment was time-barred and the Revenue was not entitled to the benefit of the extended period of limitation under section 153(1)(b). The successor Income-tax Officer was not required to rehear the assessee unless demanded. The Tribunal's findings of fact were not challenged by the Revenue, and the assessment was thus invalid. The question referred was answered in the affirmative and in favor of the assessee, with no order as to costs.