Incorrect assumption of non-filing of return cannot sustain assessment; draft order and corrigendum were set aside.

An assessment founded on the incorrect assumption that no return of income had been filed could not be sustained once the return was actually filed and was on record. The draft assessment order proceeded on that mistaken premise, and the corrigendum only acknowledged the return filing without curing the substantive defect. The Madras HC therefore set aside the draft order and corrigendum and allowed the department to proceed afresh in accordance with law. The Court also noted the limitation position under Section 153(2) of the Income-tax Act, 1961, observing that the time spent prosecuting the writ petition would be excluded while computing limitation.

---

---

Issues: Whether the draft assessment order and corrigendum were unsustainable where the return of income had in fact been filed, and whether the assessment proceedings required reconsideration in the circumstances.

Analysis: The notice under Section 142(1) of the Income-tax Act, 1961 called upon the petitioner to file the return of income for assessment year 2018-19, and the return was filed before the draft assessment order was passed. The draft order proceeded on the incorrect premise that no return had been filed. The subsequent corrigendum only noted the filing of the return but otherwise retained the same conclusions. In these circumstances, the assessment could not proceed on the basis of non-filing of return, and the matter required reconsideration. The Court also noted the limitation position under Section 153(2) of the Income-tax Act, 1961 and observed that the time spent in prosecuting the writ petition would be liable to exclusion while computing limitation.

Conclusion: The draft assessment order and the corrigendum were set aside, and the Income-tax Department was permitted to proceed afresh in accordance with law.

Final Conclusion: The writ petition succeeded to the extent that the impugned assessment action was annulled, but the revenue was left free to recommence proceedings lawfully after taking note of the Court's observations.

Ratio Decidendi: An assessment founded on an incorrect assumption that no return of income was filed cannot be sustained once the return has in fact been filed and brought on record.

---