1969 (9) TMI 11 - HC - Income Tax

Summary

Issues Involved:
1. Whether the assessment was barred by time.
2. Whether the voluntary return filed by the petitioner was valid.
3. Whether the petitioner could raise the question of limitation despite filing a voluntary return under a compromise.
4. Preliminary objections regarding the delay in filing the petitions and the availability of an alternative remedy.

Issue-wise Detailed Analysis:

1. Whether the assessment was barred by time:
The petitioner argued that the assessment for the year 1953-54, made on April 1, 1966, was barred by time. Under section 34(3) of the Indian Income-tax Act, 1922, ordinarily, assessment had to be completed within four years from the end of the relevant assessment year, with a possible extension to eight years under special circumstances. Since the eight-year period expired on March 31, 1962, and the Income-tax Act, 1961, came into force on April 1, 1962, the assessment had become barred by time under the 1922 Act.

2. Whether the voluntary return filed by the petitioner was valid:
The assessment orders were passed under section 143 of the Income-tax Act, 1961, which prescribes a time limit for completion of assessment under section 153. The relevant clauses (a) and (b) of section 153(1) were clearly beyond time. The department relied on clause (c) of section 153(1), which allows assessment within one year from the filing of a return under section 139. However, the return filed by the petitioner in 1966 was beyond the four-year limit prescribed by section 139(4), making it invalid. Consequently, the assessment order based on an invalid return was also beyond limitation.

3. Whether the petitioner could raise the question of limitation despite filing a voluntary return under a compromise:
The department argued that the petitioner could not raise the question of limitation because she filed a voluntary return under a compromise. However, the court noted that the compromise only indicated that the petitioner would file a voluntary return and did not concede that the return would be valid under section 139. The court distinguished this case from other precedents where the doctrine of election was applied, noting that the petitioner did not clearly agree to an assessment for the year 1953-54. Therefore, the petitioner could still argue that the assessment was barred by time.

4. Preliminary objections regarding the delay in filing the petitions and the availability of an alternative remedy:
The department raised two preliminary objections: the petitions were filed late, and the petitioner had an alternative remedy. The petitioner explained that the delay was due to prosecuting a revision before the Commissioner of Income-tax, which was dismissed on May 21, 1968. The writ petition was filed shortly after receiving the dismissal order. Although the petitioner had an alternative remedy of filing an appeal to the Appellate Assistant Commissioner, the court decided not to dismiss the petitions on this ground, given that the Income-tax Officer lacked jurisdiction to pass the assessment order.

Conclusion:
The court concluded that the assessment orders dated April 1, 1966, were barred by limitation and invalid. Consequently, the notices demanding various sums from the petitioners based on these assessment orders were also invalid. The court quashed the four assessment orders and directed the opposite parties not to make any demands based on these orders. Each petitioner was awarded costs of Rs. 100.