1985 (8) TMI 67 - HC - Income Tax

Summary

Issues Involved:
1. Whether the limitation provision u/s 149 of the Income-tax Act, 1961, requires only the issuance of a notice or its actual service on the assessee.
2. Whether the assessment for the assessment year 1961-62 was barred by limitation.
3. Whether the Tribunal was justified in cancelling the penalty u/s 271(1)(a) for the assessment year 1961-62.

Summary:

Issue 1: Limitation Provision u/s 149
The court examined whether the limitation provision u/s 149 of the Income-tax Act, 1961, necessitates only the issuance of a notice or its actual service on the assessee. The court noted the legislative history and the significant changes from the 1922 Act to the 1961 Act, highlighting that Parliament deliberately omitted the phrase "served on the assessee" in the new section 149. It emphasized that the word "issued" in section 149 should not be interpreted to mean "served," as this would violate the sound canon of construction and the legislative intent to curb tax evasion. The court concluded that section 149 envisages only the issuance of a notice within the prescribed period of limitation.

Issue 2: Barred by Limitation
The court addressed whether the assessment for the assessment year 1961-62 was barred by limitation. The Tribunal had annulled the reassessment and penalty proceedings, holding that the notice served after the limitation period was void. However, the court disagreed, stating that the issuance of the notice within the limitation period was sufficient, and actual service was not required within the same period. Therefore, the assessment was not barred by limitation.

Issue 3: Cancellation of Penalty u/s 271(1)(a)
The court examined whether the Tribunal was justified in cancelling the penalty u/s 271(1)(a) for the assessment year 1961-62. Since the reassessment was held to be valid based on the issuance of notice within the limitation period, the court found that the penalty proceedings were also valid. Consequently, the Tribunal was not justified in cancelling the penalty.

Conclusion:
The court answered both questions referred to it in the negative:
1. The Tribunal was not correct in law in holding that the assessment for the assessment year 1961-62 was barred by limitation.
2. The Tribunal was not justified in cancelling the penalty u/s 271(1)(a) for the assessment year 1961-62.

The judgment favored the Revenue, and costs were awarded to the Revenue.