1983 (1) TMI 162 - AT - Income Tax

Summary

Issues:
- Assessment year 1974-75
- Barred by time limit
- Merits of the assessment

Analysis:
The judgment pertains to a departmental appeal concerning the assessment year 1974-75 of a broker in gold ornaments. The Assessing Officer (AO) made substantial additions to the returned income, which were later deleted by the Appellate Assistant Commissioner (AAC) on the grounds of being time-barred and lacking merits. The primary issue revolves around the time limitation for assessment. The assessee filed its return on 26-12-1975, and ordinarily, the assessment should have been completed by 31-3-1977. However, the AO made a best judgment assessment on 20-12-1975, which was cancelled by the AAC due to procedural irregularities, specifically the absence of a valid notice under sections 139(2) and 142(1) of the Income-tax Act, 1961.

The crux of the matter lies in whether the best judgment assessment made in December 1975 was void. The tribunal concurred with the assessee's argument that the assessment was indeed void due to the lack of a valid notice under section 139(2). Consequently, all subsequent appellate proceedings against the void assessment were deemed irrelevant and had to be disregarded. The tribunal cited legal precedents to support this position, emphasizing that a void order cannot be cured through appellate proceedings. As a result, the assessment made on 26-5-1981 was considered time-barred, as the return filed by the assessee on 26-12-1975 was treated as a return under section 139(4), necessitating completion of assessment by 30-3-1977.

Moreover, the tribunal dismissed the departmental appeal, highlighting that even the assessee's application to the Settlement Commission, submitted after the time limit had expired, could not salvage the situation for the department. The judgment underscores the significance of procedural compliance and the consequences of conducting assessments beyond the statutory time frame, ultimately leading to the dismissal of the appeal based on the limitation issue.