1972 (4) TMI 19 - HC - Income Tax

Whether the Tribunal, having held that the order of assessment for the year 1961-62 made under section 143(3) of the Income-tax Act, 1961, was invalid, could restore the case to the file of the Income-tax Officer and direct him to proceed from the return stage and make fresh assessment according to law under the Income-tax Act, 1922 - question has to be answered in favour of the assessee - Reference answered in the negative

Summary

Issues:
1. Validity of assessment under the Income-tax Act, 1961.
2. Jurisdiction of the Income-tax Appellate Tribunal to direct fresh assessment under the old Act.

Analysis:
The High Court of Delhi addressed the issue of the validity of an assessment under the Income-tax Act, 1961, and the jurisdiction of the Income-tax Appellate Tribunal to direct a fresh assessment under the old Act. The case involved an individual assessed as a Hindu undivided family, with various sources of income including director's remuneration and fees. The assessment was initially made under section 143(3) of the Income-tax Act, 1961. The Appellate Assistant Commissioner upheld the assessment, including the director's remuneration and fees in the family's assessment. The Tribunal, however, found the assessment invalid as it was made under the new Act, contrary to the old Act. The Tribunal set aside the orders and directed the Income-tax Officer to proceed from the return stage and make a fresh assessment under the old Act.

The Court considered the limitation period under section 34(3) of the old Act, which required assessments to be completed within four years from the end of the relevant year. The Tribunal's order was issued after the expiration of this period, raising the question of whether the Tribunal had the power to direct a fresh assessment beyond the limitation period. The Court examined relevant case law, including a Madras High Court decision and a Supreme Court judgment, to determine the scope of the Tribunal's authority in such matters.

The Court noted the distinction between the powers of the Appellate Assistant Commissioner under section 31(3) and the Income-tax Appellate Tribunal under section 33(4) of the old Act. While the Tribunal's powers were broad, the question remained whether it could confer jurisdiction on the Income-tax Officer to proceed with a fresh assessment after the limitation period had expired. The Court rejected the revenue's argument that the assessment was not invalid solely due to the use of the wrong section, emphasizing that corrections could only be made within the prescribed time frame.

Ultimately, the Court found in favor of the assessee, concluding that the assessment was invalid under the new Act, rendering the Tribunal's direction for a fresh assessment under the old Act untenable. The Court highlighted the confusion in the Tribunal's order but clarified that the assessment was deemed non-existent. The reference was answered in the negative, with no order as to costs.

Both judges, HARDAYAL HARDY C.J. and PRAKASH NARAIN J., concurred with the decision, resolving the issues raised regarding the assessment's validity and the Tribunal's jurisdiction in directing a fresh assessment under the old Act.