1984 (7) TMI 109 - AT - Income Tax

Assessed Income, Assessment Order, Assessment Year, Question Of Law, Reference To IAC, Revised Return, Time Limit For Completion

Issues Involved:
1. Legality of assessment under section 143(3) without compliance with section 144B.
2. Admissibility of additional grounds of appeal.
3. Validity of assessment orders for the assessment years 1977-78 and 1978-79.
4. Computation of tax and inclusion of calculation sheet.
5. Limitation period for completing assessments.

Detailed Analysis:

1. Legality of Assessment under Section 143(3) Without Compliance with Section 144B:
The appeals pertain to the assessment years 1977-78 and 1978-79. The primary issue is whether the Income Tax Officer (ITO) erred by not following the mandatory provisions of section 144B when the variation between the returned income and the assessed income exceeded Rs. 1,00,000. The Tribunal found that the ITO did not comply with section 144B, making the assessment void. The Commissioner (Appeals) annulled the assessment for 1977-78 on these grounds, which was contested by the department. The Tribunal upheld that the variation indeed exceeded Rs. 1,00,000, affirming the applicability of section 144B.

2. Admissibility of Additional Grounds of Appeal:
The department sought to introduce an additional ground at the hearing, arguing that non-compliance with section 144B was a procedural irregularity. The Tribunal admitted the additional ground, emphasizing that it was a pure question of law and did not require factual investigation. The Tribunal referenced the Special Bench decision in Shivaji Park Gymkhana, which held that procedural non-compliance did not nullify the assessment but required a fresh assessment.

3. Validity of Assessment Orders for the Assessment Years 1977-78 and 1978-79:
For 1977-78, the Tribunal directed the ITO to make a fresh assessment after complying with section 144B, following the precedent set by Shivaji Park Gymkhana. For 1978-79, the Tribunal found that the assessment was completed in compliance with section 144B, as the draft assessment order was forwarded, and the IAC's directions were incorporated. The Tribunal held that the assessment was valid and within the statutory period.

4. Computation of Tax and Inclusion of Calculation Sheet:
The Tribunal addressed the issue of whether the assessment order must include the tax computation. The Jammu and Kashmir High Court in S. Mubarik Shah Naqshbandi held that failure to compute tax in the assessment order invalidates it. However, the Tribunal, referencing the Special Bench in Highway Construction Co. (P.) Ltd., held that the omission to forward the calculation sheet was a curable defect under section 292B and did not invalidate the assessment.

5. Limitation Period for Completing Assessments:
The Tribunal examined the limitation period under section 153(3) and Explanation 1(iv). The assessment for 1978-79 was completed within the statutory period, even considering the exclusion of time taken for section 144B proceedings. The Tribunal clarified that the period to be excluded cannot exceed 180 days, and the assessment completed on 24-9-1981 was within time.

Conclusion:
The Tribunal allowed the departmental appeals for both assessment years, directing the ITO to make fresh assessments for 1977-78 and upholding the validity of the 1978-79 assessment. The cross-objections by the assessee were also allowed, with the Commissioner (Appeals) directed to consider the grounds of appeal on merits afresh.

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