1976 (11) TMI 36 - HC - Income Tax

Act Of 1922, Act Of 1961, Appellate Assistant Commissioner, Assessment Order, Income Tax, Provisional Assessment, Regular Assessment

Issues Involved:
1. Legality and validity of the fresh assessment proceedings initiated by the Income-tax Officer.
2. Validity of the provisional tax assessment and its refund.
3. Jurisdiction of the Appellate Assistant Commissioner to direct a fresh assessment.
4. Competence of the Income-tax Officer to rectify the order of refund.

Detailed Analysis:

1. Legality and Validity of the Fresh Assessment Proceedings:
The petitioner filed his return for the assessment year 1960-61 under section 22(2) of the Indian Income-tax Act, 1922. The Income-tax Officer initially completed the assessment under section 143(3) of the Income-tax Act, 1961, on March 24, 1965. The Appellate Assistant Commissioner set aside this assessment on the grounds that it should have been completed under the 1922 Act and directed the Income-tax Officer to complete a fresh assessment from the return stage. The petitioner argued that this direction was invalid as the period for assessment had expired. The court held that the Appellate Assistant Commissioner was competent to issue such a direction under section 251(1)(a) of the 1961 Act and section 31(3)(b) of the 1922 Act. The fresh assessment was saved by section 150 of the 1961 Act and the second proviso to section 34(3) of the 1922 Act, which state that the limitation of time does not apply to assessments made in consequence of an appellate order.

2. Validity of the Provisional Tax Assessment and Its Refund:
The petitioner paid provisional tax based on a provisional assessment under section 23B of the 1922 Act. After the regular assessment was set aside, the Income-tax Officer refunded the provisional tax. Later, the Income-tax Officer rectified this refund, arguing that the provisional assessment was still valid. The court agreed, stating that provisional assessment is distinct from regular assessment and does not merge into it. The provisional tax paid remains valid even if the regular assessment is set aside. This view was supported by the Supreme Court in Jaipur Udyog Ltd. v. Commissioner of Income-tax and the Allahabad High Court in Jagannath Rameshwar Prasad v. Income-tax Officer.

3. Jurisdiction of the Appellate Assistant Commissioner to Direct a Fresh Assessment:
The petitioner contended that the Appellate Assistant Commissioner had no jurisdiction to direct a fresh assessment after the limitation period had expired. The court disagreed, stating that the original assessment was not a nullity but suffered from a technical defect. The Appellate Assistant Commissioner had the authority to direct a fresh assessment, which was not barred by the limitation period due to the provisions of section 150 of the 1961 Act and the second proviso to section 34(3) of the 1922 Act.

4. Competence of the Income-tax Officer to Rectify the Order of Refund:
The Income-tax Officer initially refunded the provisional tax, thinking it was in compliance with the Appellate Assistant Commissioner's order. He later rectified this refund, considering it a mistake. The court held that the refund was a result of confusing the provisional assessment with the regular assessment. Since the provisional assessment was still valid, the refund was a patent mistake and could be rectified under section 154 of the 1961 Act.

Conclusion:
Both writ petitions were dismissed with costs. The court upheld the validity of the fresh assessment proceedings and the rectification of the refund order. The Appellate Assistant Commissioner was deemed competent to direct a fresh assessment, and the provisional tax paid remained valid despite the setting aside of the regular assessment.

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