2006 (1) TMI 89 - HC - Income Tax

High Court returns unanswered reference on validity of tax return and cancellation order

The High Court returned the reference unanswered in a case involving the validity of a return filed by the assessee on December 14, 1977, and the ... '1. Whether Tribunal was right in vacating the finding of the Commissioner of Income-tax (Appeals), Ludhiana, that the return filed by the assessee on December 14, 1977, was not valid and no regular assessment could be made on the basis of the same? 2. Whether, Tribunal was right in cancelling the order by which 'revised' return filed by the assessee, on December 14, 1977, was ignored by the Income-tax Officer - in the absence of a specific challenge by the Revenue to the correctness of the finding of the Tribunal on the issue of service of notice under section 139(2) of the Act, it would not be proper for us to go into this aspect of the matter although the factum of issue of notices under section 142(1) of the Act, heavily relied upon by the Tribunal, may not be conclusive on the question of service of notice under section 139(2). - keeping in view the fact that by now a fresh assessment must have been framed, which information learned counsel for the Revenue was unable to obtain from the Department, despite sufficient time having been granted for the purpose, we should prefer the latter option Issues:1. Validity of the return filed by the assessee on December 14, 1977.2. Cancellation of the order of the Income-tax Officer passed on March 26, 1979.Issue 1 - Validity of the return filed on December 14, 1977:The case involved a dispute regarding the validity of the return filed by the assessee on December 14, 1977, declaring a substantial loss. The Income-tax Officer had ignored this 'revised' return, stating it was invalid due to being filed after more than two years from the end of the assessment year. The Commissioner of Income-tax (Appeals) upheld this decision. However, the Tribunal reversed this decision, emphasizing that a notice under section 139(2) of the Income-tax Act had been issued, making the proceedings valid. The Tribunal directed the Income-tax Officer to proceed with reassessment under section 146(1) of the Act, leading to the reference of questions to the High Court.Issue 2 - Cancellation of the order of the Income-tax Officer:The second issue revolved around the cancellation of the order passed by the Income-tax Officer on March 26, 1979. The Income-tax Officer had disregarded the return filed on December 14, 1977, leading to a dispute that reached the Tribunal. The Tribunal, disagreeing with the Income-tax Officer, held that the notice under section 139(2) had been issued, making the subsequent proceedings valid. Consequently, the Tribunal directed the filing of the return submitted on December 14, 1977, and ordered the Income-tax Officer to proceed with reassessment under section 146(1) of the Act.The High Court, after hearing arguments from both sides, noted the lack of a specific challenge by the Revenue to the Tribunal's finding on the service of notice under section 139(2) of the Act. Due to incomplete information and missing material in the case statement, the High Court decided to return the reference unanswered. This decision was based on the preference to avoid unnecessary delays and uncertainties, considering that a fresh assessment might have already been completed by that time.