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Issues: (i) Whether the assessing authority had jurisdiction under section 36 of the Karnataka Agricultural Income-tax Act, 1957 to reassess the assessee on the basis of voluntary revised returns filed after the original best judgment assessments had attained finality. (ii) Whether the reassessments were barred by limitation under section 36.
Issue (i): Whether the assessing authority had jurisdiction under section 36 of the Karnataka Agricultural Income-tax Act, 1957 to reassess the assessee on the basis of voluntary revised returns filed after the original best judgment assessments had attained finality.
Analysis: Section 36 is a special provision for income escaping assessment and can be invoked only when the assessing authority first forms an opinion that income has escaped assessment or has been assessed at too low a rate, and then proceeds in the manner required by the Act, including the calling for a fresh return under section 18(2). In the present case, the original assessments had been completed on best judgment basis and the returns had been rejected. There was no prior determination of escaped income and no valid reopening process was shown. The mere filing of voluntary revised returns in 1983 did not by itself confer jurisdiction to start a fresh round of assessment under section 36.
Conclusion: The reassessment proceedings were without jurisdiction and are held against the revenue.
Issue (ii): Whether the reassessments were barred by limitation under section 36.
Analysis: Section 36 prescribed a period of three years for initiating action. The last of the original assessments had been concluded in 1979, whereas the fresh assessments were made in 1983. On that chronology, even assuming jurisdiction otherwise existed, the action was commenced beyond the prescribed period and could not be sustained.
Conclusion: The reassessments were time-barred and are held in favour of the assessee.
Final Conclusion: The reassessment orders and the connected appellate orders were set aside, and the revision petitions succeeded.
Ratio Decidendi: Reassessment under the escaped-assessment provision can be sustained only after the statutory precondition of forming an opinion of escapement and proceeding in the manner mandated by the Act is satisfied, and it must also be initiated within the prescribed limitation period.
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