1991 (3) TMI 185 - AT - Income Tax

Assessing Officer, Assessment Proceedings, Compulsory Audit, High Court, Time Limit For Completion, Writ Petition

Summary

Issues Involved:
1. Jurisdiction and limitation of the assessment order.
2. Validity of the revised return under Section 139(5).
3. Impact of the High Court's stay order on the assessment period.

Issue-Wise Detailed Analysis:

1. Jurisdiction and Limitation of the Assessment Order:
The appellant challenged the order dated 26-2-1990 by the CIT (Appeals) on the grounds that it was contrary to facts, erroneous in law, without jurisdiction, and barred by limitation. The original return was filed on 6-12-1974, and a revised return was submitted on 22-3-1977. The ITO issued an order under Section 142(2A) for compulsory audit, which was stayed by the High Court. The stay was vacated on 3-3-1987, but the department was unaware and did not complete the assessment within the prescribed time. The CIT (Appeals) did not address the limitation issue, leading the assessee to appeal to the Tribunal.

2. Validity of the Revised Return under Section 139(5):
The assessee argued that since the original return was filed under Section 139(4), the revised return under Section 139(5) was invalid and could not extend the limitation period for assessment. The Tribunal referenced the Allahabad High Court's decision in Dr. S.B. Bhargava v. CIT, which held that a return under Section 139(4) cannot be revised under Section 139(5). This position was supported by other case laws, including Metal India Products v. CIT and O.P. Malhotra v. CIT. The Tribunal concluded that the revised return filed on 22-3-1977 was invalid and could not extend the assessment period, which should have been completed by 31-3-1977.

3. Impact of the High Court's Stay Order on the Assessment Period:
The Tribunal examined the impact of the High Court's stay order, which was granted on 15-2-1978 and vacated on 3-3-1987. The Tribunal noted that the stay order terminated with the dismissal of the writ petition, as per Order 39 Rule 1 of the CPC. The department's subsequent miscellaneous application did not extend the limitation period. The Tribunal calculated that the assessment should have been completed by 25-4-1987, considering the stay period and the compulsory audit order. Since the assessment was not completed by this date, it was barred by limitation.

Conclusion:
The Tribunal held that the assessment order framed by the ITO was illegal and barred by limitation, making it non est in the eyes of law. Consequently, the order by the CIT (Appeals) to reframe the assessment was also set aside. The appeal was allowed in favor of the assessee.