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1998 Supreme(Mad) 1030
High Court of Judicature at Madras
THE HONOURABLE MRS. JUSTICE A. SUBBULAKSHMY & THE HONOURABLE MR. JUSTICE R. JAYASIMHA BABU
Thanthi Trust - Appellant
Versus
Commissioner of Income Tax - Respondents
Tax Case No. 251 of 1981
Decided On : 04 August 1998
The period during which the assessment proceeding is stayed by an order or injunction of any Court, shall be excluded while computing the period of limitation for the purposes of section 153 of the Income-tax Act, 1961. The definition of 'assessment' under section 2(8) of the Act includes reassessment proceeding.
Headnote:
INCOME TAX - Reassessment - Limitation - Explanation 1(ii) to section 153 of the Income-tax Act, 1961 - Applicability to reassessment proceedings - Stay of proceedings by Court order - Period of stay to be excluded while computing period of limitation - Definition of 'assessment' under section 2(8) of the Act - Includes reassessment proceeding - Assessee's conduct - Failure to file return despite notice and opportunity - No prejudice caused - Reassessment based on certificate of Audit Bureau of Circulation - Validity - Inclusion of sum treated as deposit in original assessment - Not permissible in reassessment proceedings under section 147(a) - Bar under section 147(b).
Fact of the Case:
The assessee, a charitable trust engaged in the business of publishing newspapers, was granted exemption under section 4(3)(1) of the Indian Income-tax Act, 1922 for the assessment year 1957-58. Subsequently, the Assessing Officer served a notice on the assessee under section 148 of the Act proposing to re-open the assessment. The assessee challenged the notice by filing a writ petition, which was dismissed by the High Court. The reassessment was completed on 22-4-1997. The assessee appealed to the Commissioner and then to the Tribunal, which gave relief to the extent of Rs. 80, 000. The assessee filed a reference to the High Court.
Finding of the Court:
The High Court held that: (i) The period during which the assessment proceeding was stayed by an order or injunction of any Court, shall be excluded while computing the period of limitation for the purposes of section 153 of the Act. (ii) The definition of assessment in section 2(8) of the Act includes reassessment proceeding. (iii) The assessee's conduct in failing to file a return despite notice and opportunity did not cause any prejudice to the assessee. (iv) The reassessment based on the certificate of Audit Bureau of Circulation was valid. (v) The inclusion of a sum treated as deposit in the original assessment was not permissible in reassessment proceedings under section 147(a) due to the bar under section 147(b).
Issues: 1. Whether the period of stay of proceedings by Court order is to be excluded while computing the period of limitation for reassessment proceedings under section 153 of the Income-tax Act, 1961? 2. Whether the definition of 'assessment' under section 2(8) of the Act includes reassessment proceeding? 3. Whether the assessee's conduct in failing to file a return despite notice and opportunity caused any prejudice to the assessee? 4. Whether the reassessment based on the certificate of Audit Bureau of Circulation was valid? 5. Whether the inclusion of a sum treated as deposit in the original assessment was permissible in reassessment proceedings under section 147(a)?
Ratio Decidendi: 1. The Explanation 1(ii) to section 153 of the Income-tax Act, 1961, which provides for the exclusion of the period during which the assessment proceeding is stayed by an order or injunction of any Court, while computing the period of limitation for the purposes of section 153, is applicable to reassessment proceedings as well. 2. The definition of 'assessment' under section 2(8) of the Act includes reassessment proceeding. 3. The assessee's conduct in failing to file a return despite notice and opportunity did not cause any prejudice to the assessee, as the assessee had ample time to file the return and seek any clarification from the assessing authority. 4. The reassessment based on the certificate of Audit Bureau of Circulation was valid, as the assessee did not challenge the competence and reliability of the certificate or demonstrate that the figures given in the certificate were incorrect. 5. The inclusion of a sum treated as deposit in the original assessment was not permissible in reassessment proceedings under section 147(a), as there was a bar under section 147(b).
Final Decision: The High Court answered the questions in favour of the revenue and partly in favour of the assessee. The addition made to the extent of Rs. 3, 40, 000 minus Rs. 2, 25, 200 was held to be valid and not required to be deleted. A sum of Rs. 2, 25, 200 out of the sum of Rs. 3, 40, 000 added by the Tribunal was ordered to be deleted.
Babu, J.
The assessee is a charitable trust engaged in the business of publishing newspapers. For the assessment year 1957-58, exemption under section 4(3)(1) of the Indian Income-tax Act, 1922 was granted while completing the assessment on 23-2-1966. Subsequently, on 29-10-1969, the Assessing Officer served a notice on the assessee under section 148 of the Act proposing to re-open the assessment. That notice along with other notice was challenged by the assessee. That writ petition, insofar as it related to the assessment year 1957-58 was concerned, was dismissed by this Court on 21-12-1972. The decision of this Court is in Thanthi Trust v. ITO. Thereafter, the reassessment was completed on 22-4-1997. The ITO computed the income at Rs. 4, 20, 000 and levied the tax thereon. The Commissioner to whom the assessee had appealed upheld the order of the Assessing Officer. The assessee went up in further appeal to the Tribunal. The Tribunal gave relief to the extent of Rs. 80, 000. The assessee being aggrieved by the finding of the Tribunal that the re-opening of the assessment was barred by limitation; that the assessee had not been given sufficient opportunity before the order came to be made and that the finding that the Assessing Officer could include a sum of Rs. 2, 25, 000 in the assessed income, although that amount had been treated as deposit in the original assessment and there were no new facts and that no notice had been issued under section 147(b) of the Act, have caused this reference to be made.
2. The first submission of the learned counsel for the assessee was that the proceedings were barred by limitation, as the proceedings were not completed within four years from the end of the assessment year in which the notice under section 148 was served on the assessee. It is not in dispute that the notice was served on 29-10-1969 and the period of limitation would end on 1-4-1974 and that the Explanation to section 153 of the Act had been invoked by the assessing authority; it is the case of the assessee that that explanation is unavailable to the authority. It was also sought to be contended that the period of limitation fixed is four years, that it commences on the last date of the assessment year in which the notice was issued and ends at the expiry of the period of four years from the date. Section 153(2) fixes the time-limit within which period the proceedings should be concluded. It does not impose a bar on the officer from continuing the proceeding till the assessment year in which he issued the notice had come to an end. The entire period commencing from the date of issue of a notice till the expiry of the period of four years from the last date of the assessment year in which that notice was served is available to the authority for completing the proceeding.
3. The contention of the assessee that the word 'assessment' used in the Explanation to section 153 should be read as being applicable only to assessment and not to reassessment, though superficially attractive, cannot be accepted.
Section 153 deals with the time-limit for completion of assessments and reassessments. Sub-section (1) refers to orders of assessment under section 143 or 144, sub-section (2) refers to orders of assessment, reassessment or recomputation under section 147, sub-section (2A) which was later introduced with effect from 1-4-1971 overrides sub-sections (1) and (2) in respect of orders made under the provisions mentioned therein for which a special period of limitation is provided for in the sub-section. Sub-section (3) provides that sub-sections (1) and (2) are not applicable to the classes of assessments, reassessments and recomputations mentioned in sub-clauses (i) to (iii) of section 153(3). The Explanation comes thereafter and the Explanation is applicable to the entire section and not to any one part. The Explanation 1 opens with the words 'In computing the period of limitation for the purposes of this section :-'. Sub-clause
