1987 (5) TMI 64 - AT - Income Tax

Summary

Issues Involved:
1. Validity of the initial return and assessment.
2. Legality of the notice issued under section 148.
3. Applicability of section 154 for rectification.
4. Limitation period for assessment.
5. Applicability of section 292B to cure defects in the return or assessment.

Detailed Analysis:

1. Validity of the Initial Return and Assessment:
The initial return filed by the assessee on 22-5-1968 was neither in the prescribed form nor verified, making it invalid under sections 139/140 and rule 12. Despite this, the Income-tax Officer (ITO) accepted it under section 143(1) and made an assessment accordingly. The High Court later upheld that an unverified return is invalid and no assessment can be framed on such a return.

2. Legality of the Notice Issued under Section 148:
The ITO issued a notice under section 148 on 7-4-1969, while a return filed by the assessee on 10-1-1969 was pending. The assessee argued that the notice under section 148 was invalid because a return was already pending. The Tribunal found that at the time of issuing the notice, the original assessment order was valid, and the ITO had a prima facie reason to believe that some income had escaped assessment. Therefore, the notice was not wholly bad in law.

3. Applicability of Section 154 for Rectification:
The assessee filed an application under section 154 to amend the assessment order, arguing that the notice under section 148 was a mistake apparent from the record. The ITO rejected this application, stating that such issues could only be challenged in an appeal and that the application was barred by time. The Tribunal agreed that the points raised were debatable and not suitable for rectification under section 154.

4. Limitation Period for Assessment:
The Appellate Assistant Commissioner (AAC) annulled the assessment, stating it was barred by limitation under section 153(1)(a)(ii). However, the Tribunal noted that the return filed on 28-2-1973 was a revised return under section 139(5). The assessment made within one year of this revised return was valid. The Tribunal also highlighted that the assessment could be made within eight years under section 153(b) due to the applicability of section 271(1)(c).

5. Applicability of Section 292B:
Section 292B, inserted by the Taxation Laws (Amendment) Act, 1975, states that no return, assessment, notice, or proceeding shall be invalid merely due to any mistake, defect, or omission if it is in substance and effect in conformity with the intent and purpose of the Act. The Tribunal concluded that the assessment was in conformity with the Act's intent and purpose, and any technical irregularities were cured by section 292B.

Conclusion:
The Tribunal allowed the revenue's appeal, setting aside the AAC's order and restoring the ITO's order. The assessment was deemed valid despite technical irregularities, as it was in substance in conformity with the Act's provisions. The application under section 154 was rightly rejected as the issues were debatable and not apparent mistakes.