1994 (11) TMI 28 - HC - Income Tax

Tribunal Invalidates Assessment for Incorrect Year, Emphasizes Limitation Period

The Tribunal determined that the return filed by a private limited company on September 20, 1973, was for the assessment year 1973-74, not 1974-75. ... Assessment Year, High Court, Question Raised Before Tribunal Issues Involved:1. Whether the return filed on September 20, 1973, was for the assessment year 1973-74 or 1974-75.2. Whether the assessment made on such a return was barred by limitation.3. Interpretation of the term 'assessment' and the relevant period for reckoning limitation.Summary:Issue 1: Assessment Year of the Return FiledThe assessee, a private limited company, filed a return on September 20, 1973, admitting a total income of Rs. 1,81,071, showing the assessment year as 1973-74. The Income-tax Officer treated this return as relating to the assessment year 1974-75 and completed the assessment on a total income of Rs. 3,92,310 after making certain disallowances u/s 40A(3) of the Income-tax Act, 1961. The Tribunal held that the return filed by the assessee on September 20, 1973, cannot be construed to be a return for the assessment year 1974-75 and, therefore, the return was non est in the eye of law, consequently canceling the assessment made for 1974-75.Issue 2: Limitation for AssessmentThe assessee contended that since the return was for the assessment year 1973-74, the order of assessment was time-barred. The Tribunal failed to address whether the assessment was barred by limitation, which should have been deemed to have been dealt with by it. The court reframed the question to include whether the assessment was barred by limitation and whether a fresh assessment for the assessment year 1973-74 as well as 1974-75 is permissible.Issue 3: Interpretation of 'Assessment' and Limitation PeriodThe court emphasized the importance of correctly interpreting 'assessment' to reckon the period of limitation from the date of filing the return. It clarified that the period of limitation for assessment should be computed from the date on which the Income-tax Officer forwarded the draft order u/s 144B to the assessee and ended with the date on which the Income-tax Officer received directions from the Inspecting Assistant Commissioner. The court noted that the Tribunal correctly decided that the order of assessment was void due to a fundamental mistake by the Income-tax Officer but erred in not remanding the case for a fresh hearing and assessment for the assessment year 1973-74.Conclusion:The Tribunal rightly held that the return should have been assessed for the assessment year 1973-74 and not for 1974-75. However, it erred in not remanding the case to the Income-tax Officer for a fresh hearing and assessment for the assessment year 1973-74. Since fresh proceedings have been initiated and completed during the pendency of the reference, no specific order for further enquiry is made. The reference is answered accordingly, with no costs.