1985 (4) TMI 18 - HC - Income Tax

Summary

Issues involved:
The issues involved in this case are related to the validity of the assessment made by the Income-tax Officer, the consideration of revised returns filed by the assessee, the time-limit for completion of assessment, and the authority of the Appellate Assistant Commissioner to direct a fresh assessment.

Validity of Assessment:
The Income-tax Officer completed the assessment based on the original return filed on July 7, 1966, ignoring the revised returns filed on May 16, 1970, and July 8, 1970. The Appellate Assistant Commissioner set aside the assessment, directing a fresh assessment based on the revised returns. The Tribunal held that the assessment made by the Income-tax Officer was not legal due to the expiry of the time-limit for completion of assessment with reference to the revised return filed on July 7, 1970.

Time-limit for Completion of Assessment:
The Tribunal observed that the assessment based on the revised return filed on July 7, 1970, should have been completed by July 6, 1971, as per section 139(5) of the Income-tax Act, 1961. However, the Income-tax Officer completed the assessment on March 6, 1971, and the Appellate Assistant Commissioner passed an order on July 27, 1973, after the time-limit had expired under section 153(1)(c) of the Act.

Authority of Appellate Assistant Commissioner:
The Appellate Assistant Commissioner has the power to set aside an assessment and direct the Income-tax Officer to make a fresh assessment if the original assessment is not in conformity with the law or procedure. The Appellate Assistant Commissioner's direction for a fresh assessment does not extend the period of limitation under section 153(1)(c) of the Act.

Legal Interpretation:
The assessment made by the Income-tax Officer, ignoring the revised returns, may be erroneous but not a nullity if completed within the period of limitation. The revised return does not invalidate the original return and only cures defects. The Appellate Assistant Commissioner's direction for a fresh assessment is within the scope of section 153(3)(ii) of the Act, raising the bar of limitation.

Conclusion:
The High Court held that the Tribunal erred in canceling the assessment, as the original assessment was completed within the normal period of limitation. The direction given by the Appellate Assistant Commissioner for a fresh assessment was necessary for the disposal of the appeal, and the defect pointed out did not affect the jurisdiction of the Income-tax Officer. Therefore, the Tribunal's decision to cancel the assessment was not justified, and the question was answered in favor of the Revenue.