Limitation for reassessment cannot be extended by an invalid late return, and compromise does not waive the time-bar objection.

Assessment orders for an earlier assessment year were held time-barred because the limitation under the 1922 Act had already expired before the 1961 Act came into force, and a later assessment could not be saved by section 153(1)(c) since that provision required a valid return under section 139(4) or section 139(5). A voluntary return filed after the statutory period could not extend the time for assessment or validate the barred proceedings. The assessee was also not precluded by compromise or by filing such a return from challenging limitation in writ jurisdiction, as there was no clear and express waiver of that objection. The demand notices therefore could not stand.

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Issues: (i) Whether the assessment orders made in 1966 for the assessment year 1953-54 were barred by limitation under the Indian Income-tax Act, 1922 and the Income-tax Act, 1961; (ii) whether the assessee was precluded by the compromise and voluntary return from challenging the limitation of the assessment in writ proceedings.

Issue (i): Whether the assessment orders made in 1966 for the assessment year 1953-54 were barred by limitation under the Indian Income-tax Act, 1922 and the Income-tax Act, 1961

Analysis: The assessment year in question was governed initially by section 34(3) of the Indian Income-tax Act, 1922, under which assessment had to be completed within the prescribed period, and the period had already expired before the Income-tax Act, 1961 came into force. The subsequent assessment under section 143 of the Income-tax Act, 1961 could not be supported by section 153(1)(c) because that clause contemplated a valid return under section 139(4) or section 139(5). The voluntary return filed in 1966 was itself beyond the period allowed by section 139(4), and therefore invalid for extending the time for assessment.

Conclusion: The assessment orders were barred by limitation and were invalid.

Issue (ii): Whether the assessee was precluded by the compromise and voluntary return from challenging the limitation of the assessment in writ proceedings

Analysis: A compromise may bind a party to what was expressly agreed, but the material did not show any concession that the return filed would be a valid return within section 139 or that the assessee waived the right to object to a time-barred assessment. The case was also distinguishable from authorities where a party had accepted a settlement or specifically abandoned a contention. The existence of a voluntary return and the compromise did not amount to an admission that a barred assessment could lawfully be made, and the petition was not liable to be rejected on that ground or on the ground of alternative remedy.

Conclusion: The assessee was not precluded from challenging limitation in writ jurisdiction.

Final Conclusion: The assessment orders and the consequential demand notices could not stand, and the connected writ petitions succeeded.

Ratio Decidendi: A return filed beyond the statutory period cannot validate or extend the time for assessment, and a compromise does not waive a challenge to an assessment that is otherwise barred by limitation unless such waiver is clearly and expressly shown.

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