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Andhra Pradesh High Court
Judges : K.RAMASWAMY, P.A.CHOUDHARY
Mohd.i Begum - Appellant
Versus
Commissioner of Income Tax - Respondent
Decided On : 01-29-85
INCOME TAX - Assessment - Limitation - Reassessment - Fresh assessment - Section 153(3) - Commissioner's direction to make fresh assessment - Whether barred by limitation - Whether direction is positive and necessary for disposal of revision petition - Whether direction is prejudicial to assessee - Whether first order without notice is void.
Fact of the Case:
The assessee, Hafeezunnissa Begum, had her minor children admitted to the benefits of partnership. The Income-tax Officer completed the assessment under section 143(1) of the Income-tax Act, 1961, and included the share income of the minors in her assessment. He followed the same process for the assessment year 1965-66. But, in no case, he gave notice to the assessee. Hafeezunnissa Begum filed a revision before the Commissioner of Income-tax under section 264 contending that the Income-tax Officer should not have completed the assessment under section 143(1) of the Income-tax Act, by including the share income of the minors, without notice to her. The Commissioner of Income-tax, agreeing with this contention, passed orders under section 264, setting aside both the assessments and directing the Income-tax Officer to make fresh assessments in accordance with law. Pursuant to those directions, the Income-tax Officer issued a notice under section 143(2) of the Income-tax Act and completed the assessments on 8/02/1973. The assessee had, therefore, objected before the Income-tax Officer that he had no jurisdiction to assess in the year 1973, because they were barred by time. The Income-tax Officer did not agree with this contention and completed the reassessments including the share income of the minors under section 143(2) of the Act.
Finding of the Court:
The court held that the reassessments made by the Income-tax Officer in the year 1973 were not barred by limitation and were saved by the provisions of section 153(3) of the Income-tax Act. The court further held that the Commissioner's direction to make fresh assessment was positive and necessary for the disposal of the revision petition and was not prejudicial to the assessee. The court also held that the first order passed by the Income-tax Officer without notice to the assessee was not a void order.
Issues: 1. Whether, on the facts and in the circumstances of the case, the assessments for the assessment years 1964-65 and 1965-66 are barred by limitation and are, therefore, invalid ? 2. If the answer to question No. 1 is in the negative, whether, on the facts and in the circumstances of the case, the Income-tax Officer was correct in including in the total income of the assessee under section 64 (ii) of the Income-tax Act, 1961, the share income arising to the assessees minor children by reason of their admission to the benefits of partnership ?
Ratio Decidendi: 1. Section 153(3) of the Income-tax Act, 1961, lifts the bar of limitation in certain circumstances. Clauses (i) and (ii) of section 153(3) lay down that the provisions of sub-sections (1) and (2) shall not apply to assessments, reassessments and recomputations which may be completed at any time- (i) where a fresh assessment is made under section 146; (ii) where the assessment, reassessment or recomputations is made on the assessee or any person in consequence of or to give effect to any finding or direction contained in an order under section 264 (or in an order of any court in a proceeding otherwise than by way of appeal or reference under the Act ). 2. A bare perusal of the language of sub-section (3) of section 153 would show that where the assessment was made in order to give effect to any finding or direction made under section 264 of the Income-tax Act, such an order cannot be hit by the provisions of limitation contained in sub-sections (1) and (2) of section 153 of the Act. 3. The Commissioner's direction to make fresh assessment was positive and necessary for the disposal of the revision petition. The direction did not leave any discretion to the Income-tax Officer, and it did not mean that the Income-tax Officer has been left with any discretion to decide whether he may or may not make a fresh assessment as per the provisions of law. 4. The first order passed by the Income-tax Officer without notice to the assessee was not a void order. An order passed by the Income-tax Officer in violation of the principles of natural justice is still an order under the Act though liable to be corrected for the reason of its having been passed in violation of the principles of natural justice.
Final Decision: The court answered the first question in favor of the Revenue and against the assessee. The court also answered the second question in favor of the Revenue and against the assessee.
( 1 ) THE assessee is a partner of a firm called M/s. Karkhana Zinda Tilismath. The assessee, Hafeezunnissa Begum, had her minor children-Hashimuddin and Asgharunnisa-admitted to the benefits of partnership. In the return filed for the assessment year 1964-65, she did not include the share income of the minors. The Income-tax Officer completed the assessment under section 143 (1) of the Income-tax Act, 1961, and included the share income of the minors in her assessment. He followed the same process for the assessment year 1965-66. But, in no case, he gave notice to the assessee. Hafeezunnissa Begum filed a revision before the Commissioner of Income-tax under section 264 contending that the Income-tax Officer should not have completed the assessment under section 143 (1) of the Income-tax Act, by including the share income of the minors, without notice to her. The Commissioner of Income-tax, agreeing with this contention, passed orders under section 264, setting aside both the assessments and directing the Income-tax Officer to make fresh assessments in accordance with law. Pursuant to those directions, the Income-tax Officer issued a notice under section 143 (2) of the Income-tax Act and completed the assessments on 8/02/1973. The assessments for the years 1964-65 and 1965-66 ought to have been completed by 31/03/1969, and M 31/03/1970, respectively. The assessee had, therefore, objected before the Income-tax Officer that he had no jurisdiction to assess in the year 1973, because they were barred by time. The Income-tax Officer did not agree with this contention and completed the reassessments including the share income of the minors under section 143 (2) of the Act. The Income-tax Officer did the same in the case of Mohammadi Begum, the second assessee in this case. Having been aggrieved by the orders of assessments passed by the Income-tax Officer, the assessees went up in appeal before the Appellate Assistant Commissioner and, finally, to the Income-tax Appellate Tribunal. They unsuccessfully contended before these authorities that the reassessments made by the Income-tax Officer in the year 1973 were barred by limitation of four years prescribed by section 153 (1) of the Act. This argument has been rejected by the Appellate Tribunal and, at the instance of the assessees, the following questions of law have been referred to this court for its opinion : "1. Whether, on the facts and in the circumstances of the case, the assessments for the assessment years 1964-65 and 1965-66 are barred by limitation and are, therefore, invalid ? 2. If the answer to question No. 1 is in the negative, whether, on the facts and in the circumstances of the case, the Income-tax Officer was correct in including in the total income of the assessee under section 64 (ii) of the Income-tax Act, 1961, the share income arising to the assessees minor children by reason of their admission to the benefits of partnership ?"
( 2 ) THE facts which have been stated above are just sufficient to answer the questions which have been referred for the opinion of this court. This is a case where the assessees total income should include the income of the minors under section 64 (iii) of the Act. There is no dispute about that. What the Income-tax Officer has done is exactly what section 64 requires him to do. But, in doing so, he committed a procedural error. He has failed to give notice to the assessees which is required of him under section 143 (2) of the Act. It was for that reason that the assessee made complaints to the Commissioner under section 264 of the Act. The Commissioner, by his order dated 15/07/1971, had not only set aside the assessments complained against by Hafeezunnissa Begum, but also directed the Income-tax Officer to make fresh assessments as per the provisions of law. It is in pursuance of those directions, the Income-tax Officer had made the assessments. some time in the year 1973, which is the subject-matter of this case.
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