1982 (10) TMI 27 - HC - Income Tax

Court rules in favor of assessee for 1964-65 assessment; Revenue wins for 1965-66 due to time limit.

The High Court ruled in favor of the assessee for the assessment year 1964-65, stating that the application under section 154 was timely due to ... Limitation, Rectification Issues involved: Determination of the timeliness of the assessee's applications under section 154 of the Income Tax Act for the assessment years 1964-65 and 1965-66.Assessment Year 1964-65:The original assessment was completed on March 29, 1965, with reassessment proceedings initiated and completed on December 3, 1968. The application for relief under section 80-I was made on December 30, 1970. The Income Tax Appellate Tribunal held that the application made by the assessee on December 30, 1970, was within the time limit prescribed under section 154(7) as the reassessment proceedings wiped out the earlier assessment. The Tribunal relied on the Supreme Court's decision in V. Jaganmohan Rao v. CIT [1970] 75 ITR 373, emphasizing that once valid proceedings are initiated under section 34, the previous under-assessment is set aside, and assessment proceedings start afresh. The High Court agreed that the application for the assessment year 1964-65 was timely.Assessment Year 1965-66:The original assessment was made on February 24, 1966, and the Commissioner's order dated August 23, 1968, allowed a deduction of Rs. 4,800. The assessee contended that the entire order of the Income Tax Officer merged with the Commissioner's order, thus the limitation for the application under section 154 should be computed from the date of the Commissioner's order. However, the High Court held that the revisional power under section 264 is limited and not as wide as the appellate authority's power under section 251. The doctrine of merger was considered, and it was concluded that the order of assessment passed by the ITO did not merge with the Commissioner's order. Therefore, the application under section 154 for the assessment year 1965-66 was deemed time-barred.Conclusion:The High Court ruled in favor of the assessee for the assessment year 1964-65, stating that the application under section 154 was timely. However, for the assessment year 1965-66, the ruling was in favor of the Revenue, determining that the application was beyond the prescribed time limit. The parties were directed to bear their own costs.