1. Search and seizure proceedings — Court order staying final assessment order — Dispute over extension of limitation under Explanation I, Section 153, Income Tax Act. (Para 2 , 3 )
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1997 Supreme(SC) 733
SUPREME COURT OF INDIA
AUTO AND METAL ENGINEERS
Vs.
Union of India
Decided on April 23, 1997
Important Points
The expression 'assessment proceeding' under Explanation I of Section 153 of the Income Tax Act, 1961, encompasses the entire process from filing the return to the making of the assessment order. Consequently, a stay on passing the final order of assessment constitutes a stay of assessment proceedings.
Subject
Taxation Law - Assessment Proceedings
Act Referred
Headnote
Income Tax Act, 1961 – Section 153, 144, 142, 143, –"assessment proceeding" – Question that falls for consideration in these appeals relates – CIVIL have been filed by M/s Auto and metal Engineers, a partnership firm, and its partners while Civil and Civil have been filed by Jain, the two partners of the assessee-firm in their individual capacity – Appeals relate to Assessment a search was conducted at the business premises of the assessee-firm as well as at the residential premises of the partners and certain documents and papers were seized during the course of the search – Partners of the assessee-firm filed writ petitions in the Delhi High court wherein they challenged the validity of the said search and seizure – Said writ petitions were admitted by the High court – In the said writ petitions an interim order was passed by (as he then was) in the following terms –Held, Since the making of the order of assessment under section 143 (3 or Section 144 of the Act is an integral part of the assessment proceeding, it is not possible to split the assessment proceeding and confine it up to the stage of inquiry under S. 142 and 143 and exclude the making of the order of assessment from its ambit. An order staying the passing of the final order of assessment is nothing but an order staying the assessment proceeding. Since the passing of the final order of assessment had been stayed by the Delhi High court by its order in the writ petitions, it must be held that there was a stay of assessment proceedings for the purpose of Explanation I in Section 153 – High court, in our opinion, was right in holding that the period during which the said stay order passed by the Delhi High court was in operation has to be excluded for the purpose of computing the period of limitation for making the order of assessment and the appeals are liable to be dismissed – Appeals are dismissed.
Legal Category Hierarchy
Table of Contents
2. Whether a stay on passing the final order of assessment constitutes a stay of the entire assessment proceeding for the purpose of extending the limitation period. (Para 3 , 4 )
3. The court analyzed the assessment process as a sequence where making the order is an integral part of the overall assessment proceeding. (Para 7 )
4. The term assessment proceeding encompasses the entire process from the filing of the return or issuance of notice until the making of the assessment order. (Para 7 )
5. Appeals dismissed; Assessing Officer granted four months to complete assessment proceedings and pass orders. (Para 8 )
6. Does the term 'assessment proceeding' under Section 153 of the Income Tax Act include the passing of the final assessment order?
Yes. The court held that the making of the order of assessment is an integral part of the assessment process, which spans from the filing of the return or issuance of notice until the final order is passed. (Para 7 )
7. What is the effect of a court-ordered stay on the limitation period for making an assessment order under Section 153?
Under Explanation I of Section 153, the period of limitation is extended by the duration during which the assessment proceeding was stayed by an order or injunction of a court. (Para 6 , 7 )
8. What constitutes the process of assessment under the Income Tax Act?
The process involves filing the return of income, inquiry by the Assessing Officer, making the order of assessment, and issuing the notice of demand. (Para 7 )
( 1 ) THE short question that falls for consideration in these appeals relates to the interpretation of the expression "assessment proceeding" in Explanation I in Section 153 of the Income Tax Act, 1961 (hereinafter referred to as "the Act" ).
( 2 ) CIVIL Nos. 2739-41 of 1981 have been filed by M/s Auto and metal Engineers, a partnership firm, and its partners while Civil nos. 2742-44 of 1981 and Civil Nos. 2745-47 of 1981 have been filed by Sunanda Rani Jain and Karuna Rani Jain, the two partners of the assessee-firm in their individual capacity. The appeals relate to Assessment years 1967-68, 1968-69 and 1969-70. On 24/4/1971 a search was conducted at the business premises of the assessee-firm as well as at the residential premises of the partners and certain documents and papers were seized during the course of the search. The partners of the assessee-firm filed writ petitions in the Delhi High court wherein they challenged the validity of the said search and seizure. The said writ petitions were admitted by the High court on 26/10/1971. In the said writ petitions an interim order was passed on 23/11/1971 by Rajinder Sachar, J. (as he then was) in the following terms:
"after hearing the counsel of the parties I direct that the respondent may proceed on in pursuance of the notice but no final order be passed till the pendency of this writ petition. Mr. Sharma, counsel for the respondents, informed me that the matter is urgent as the assessment is 736 liable to be time-barred by March 1972. I am informed that the case is complete inasmuch as the return of the respondents and rejoinder by the petitioner have already been filed. Let the matter be heard in the second week of January 1972. "
( 3 ) THE said interim order was continued till 12/8/1974 when the writ petitions were dismissed by the Delhi High court. Thereafter, the Income tax Officer issued notices to the assessee-firm as well as its partners under sections 142 (1, 143 (2 and 143 (3 of the Act in respect of the assessment years mentioned above. The reply to the said notices was submitted by the assessees on 21/11/1974. Soon thereafter the writ petitions, which have given rise to these appeals, were filed by the appellants in the High court of punjab and Haryana. In the said writ petitions the case of the appellants was that under the interim order dated 23/11/1971 passed by the Delhi High court there was no stay of the assessment proceedings and that Explanation i in Section 153 of the Act could not be invoked and that after the expiry of the period prescribed under Section 153 the Income Tax Officer was not competent to issue the notice in the assessment proceedings against the appellants. The said contention of the appellants was rejected by the learned single Judge on the view that expression "assessment proceeding" in explanation I in Section 153 would include the passing of the order of assessment and since the passing of the order of assessment had been stayed by the Delhi High court, there was a stay of assessment proceedings by the high court. The learned Single Judge held that in view of the stay order passed by the Delhi High court the period from 23/11/1971 to 31/3/1972 (the last date for completing the assessment), i. e. , the period of four months and eight days, was available to the Income Tax Officer to complete the assessment after the dismissal of the writ petition by the Delhi High court on 12/8/1974 and that the assessments could be completed up to 20-12- 1974. The learned Single Judge, therefore, dismissed the writ petitions filed by the appellants. Letters patent appeals filed by the appellants against the judgment of the learned Single Judge were dismissed by the division bench of the High court by order dated 11/12/1980. Feeling aggrieved by the said order of the division bench, the appellants have filed these appeals by special leave.
( 4 ) SHRI Puneet Bali, the learned counsel appearing for the appellants, has submitted that the High cou
