1991 (4) TMI 184 - AT - Income Tax

Summary

Issues Involved:
1. Question of limitation regarding the assessment based on the return submitted on 11-9-1987.
2. Validity of the assessment made on 7-9-1988.
3. Authority of the CIT(A) to set aside an assessment deemed bad in law and direct a fresh assessment.
4. Consideration of the income-tax return filed on 15-3-1988.

Detailed Analysis:

1. Question of Limitation:
The primary issue was whether the assessment based on the return submitted on 11-9-1987 was barred by limitation. The assessment year involved was 1985-86, and the return was filed on 11-9-1987. According to section 153(1)(c), the assessment could be completed before the expiry of one year from the date of filing the return. Since the assessment was made on 7-9-1988, it was within the permissible time frame and not barred by limitation. The Tribunal rejected the assessee's contention that the assessment was bad in law due to being time-barred.

2. Validity of the Assessment Made on 7-9-1988:
The assessee argued that the assessment made under section 144 was invalid as the conditions for such an order were absent. The CIT(A) had set aside the assessment on the grounds of procedural defects, such as the non-service of notices under sections 143(2) and 142(1). However, the Tribunal upheld the CIT(A)'s decision to set aside the assessment for fresh disposal, stating that the assessment made by the assessing officer was not bad in law and the direction given by the CIT(A) was maintainable.

3. Authority of the CIT(A) to Set Aside and Direct Fresh Assessment:
The Tribunal emphasized that the appellate authority has the power to set aside an order and direct the recommencement of proceedings from the stage where irregularity or illegality crept in. Citing the Supreme Court's decision in Kapurchand Shrimal v. CIT, the Tribunal affirmed that the CIT(A) acted within his authority by setting aside the assessment and directing a fresh assessment. The CIT(A) had correctly considered the revised return filed by the assessee and directed the assessing officer to issue a notice under section 143(2) based on the revised return.

4. Consideration of the Income-Tax Return Filed on 15-3-1988:
The assessee contended that the return filed on 15-3-1988, which was based on audited accounts, should have been considered. The CIT(A) treated the return filed on 11-9-1987 as a valid return under section 139(1) and allowed the assessee to revise it. The Tribunal agreed with this view, noting that the revised return cured the defects of the original return and did not obliterate it. The Tribunal concluded that the CIT(A)'s direction to the assessing officer to consider the revised returns was valid and removed any bar of limitation.

Conclusion:
The Tribunal dismissed the appeal by the assessee, upholding the CIT(A)'s decision to set aside the assessment and direct a fresh assessment. The Tribunal found no merit in the assessee's arguments regarding the limitation and validity of the assessment and affirmed the CIT(A)'s authority to address procedural defects and direct a new assessment.