Transitional income-tax law required assessment to continue under the old Act, making the new Act assessment invalid.

Where a return for assessment year 1960-61 was filed in response to a notice under the 1922 Act before the commencement of the Income-tax Act, 1961, the assessment proceedings had to be continued under the old Act by virtue of section 297(2)(a). The Tribunal treated the use of section 143(3) of the 1961 Act as application of the wrong statute, not a mere clerical misdescription, because the return and original assessment both arose under the repealed law. The assessment framed under the 1961 Act was therefore invalid and cancelled, and the reference application was refused and dismissed.

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Issues: Whether, where a return for assessment year 1960-61 had been filed in pursuance of notice under section 22(2) of the Income-tax Act, 1922, the assessment proceedings could validly be completed under section 143(3) of the Income-tax Act, 1961, or whether section 297(2)(a) required the proceedings to be dealt with only under the old Act.

Analysis: The return was filed before the commencement of the 1961 Act pursuant to notice under the 1922 Act, and the original assessment had also been framed under section 23(3) of the old Act. Section 297(2)(a) provided that where a return had been filed before the commencement of the 1961 Act, the assessment proceedings for that year could be taken and continued as if the new Act had not been passed. On that basis, the Tribunal held that the proceedings had to continue under the old Act and that framing the assessment under section 143(3) of the 1961 Act was not permissible. The Tribunal treated the case as one of proceedings under the wrong Act, not merely a misquotation of a provision, and followed the binding transitional principle applied in the cited authorities.

Conclusion: The assessment under section 143(3) of the Income-tax Act, 1961 was held to be bad and was cancelled; the reference application was rightly refused and dismissed.

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