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IN THE HIGH COURT OF ALLAHABAD
K. N. Seth and R. R. Rastogi, JJ.
COMMISSIONER OF INCOME-TAX - Appellant
Versus
GOEL BROTHERS - Respondents
Income-tax Reference 203 Of 1978
Decided On : 02/11/1982
Income-tax Act - Assessment - Section 148, Section 147, Section 149, Section 150, Section 153 - The court discussed the provisions of Section 148, Section 147, Section 149, Section 150, and Section 153 of the Income-tax Act, 1961, and their interpretations in the context of reopening of assessment and time limitations. The court emphasized the conditions for the initiation of proceedings, exceptions to time limits, and the scope of assessments, reassessments, and recomputations in consequence of or to give effect to any finding or direction contained in an order passed by any authority in any proceeding under the Act.
Fact of the Case:
The case involved the reopening of income-tax assessment for M/s. Goel Brothers for the assessment years 1958-59 to 1960-61. The Income Tax Officer (ITO) issued notices under Section 148 of the Income-tax Act, 1961, to M/s. Goel Brothers for assessment on the ground that the income for these years had escaped assessment. The assessee challenged the validity of the assessment proceedings, and the matter was brought before the Tribunal.
Finding of the Court:
The court found that the notices issued by the ITO under Section 148 were not saved by limitation, and therefore, the proceedings initiated by the issuance of a notice under Section 148 of the Act were incompetent being barred by time. The court also highlighted that the department did not take any step to keep the assessments alive, and as Section 150 (1) was not applicable to the case, the proceedings were deemed incompetent.
Issues: The key issues revolved around the validity of the assessment proceedings, the time limitations for reopening of assessments, and the applicability of Section 150 (1) in the context of the notices issued under Section 148 of the Income-tax Act, 1961.
Ratio Decidendi: The court's decision was based on the interpretation of the provisions of Section 148, Section 147, Section 149, Section 150, and Section 153 of the Income-tax Act, 1961, and their application to the facts of the case. The court emphasized the importance of complying with the conditions and exceptions laid down in the Act for the initiation of proceedings and the completion of assessments, reassessments, and recomputations.
Final Decision: The question referred was answered in the affirmative, against the department and in favor of the assessee. The assessee was entitled to costs which were assessed at Rs. 250.
( 1 ) THE Income-tax Appellate Tribunal under Section 256 (2) of the I. T. Act, has referred the following question to this court for opinion :
"whether, on the facts and in the circumstances of the case, the Tribunal was legally justified in holding that the notice issued under Section 148 of the Income-tax Act, 1961, to the assessee was barred by time ?"
The question relates to the income-tax assessment of M/s. Goel Brothers for the assessment years 1958-59, 1959-60 and 1960-61. M/s. Goel Brothers had filed income-tax return for the aforesaid years in the status of a firm. The ITO took the view that the business carried on in the name of M/s. Goel Brothers actually belonged to M/s. Kanodia Brothers and, consequently, the income returned by M/s. Goel Brothers was included in the income of Kanodia Brothers while making their assessments. Protective assessments were, however, made on M/s. Goel Brothers for all these years in the status of an unregistered firm.
( 2 ) M/s. Kanodia Brothers as well as M/s. Goel Brothers filed appeals to the AAC. M/s. Kanodia brothers pleaded that there was no justification for holding that the business carried on by M/s. Goel Brothers was theirs M/s. Goel Brothers claimed that having assessed their income in the hands of M/s. Kanodia Brothers. there was no justification for assessing the same income in their hands. The AAC upheld the finding of the ITO that the business carried on in the name of M/s. Goel Brothers was in fact the business of M/s. Kanodia Brothers. The AAC accepted the contention of M/s. Goel Brothers that there was no justification for assessing the same income again in their hands and accordingly annulled the assessments made on M/s. Goel Brothers for the aforesaid three years.
( 3 ) M/s. Kanodia Brothers challenged the order of the AAC before the Tribunal. By its order dated September 29, 1969, the Tribunal held that the income of M/s. Goel Brothers could not be included in the income of M/s. Kanodia Brothers.
( 4 ) AFTER the decision of the Tribunal the ITO on July 23, 1973, issued notices under Section 148 of the Act to M/s. Goel Brothers for assessment for the years 1958-59 to 1960-61 on the ground that the income for these years had escaped assessment. The assessee challenged the validity of the assessment proceedings. The objections raised by the assessee were rejected by the ITO taking the view that the proceedings could be initiated at any time and the conditions laid down in the Act for the initiation of proceedings were satisfied. He, accordingly, made fresh assessments for all the three years. On appeal by the assessee, the AAC annulled the assessments made by the ITO. On appeal by the department, the Tribunal held that the notices issued by the ito under Section 148 were not saved by limitation and upheld the order of the AAC.
( 5 ) IT is not disputed that in the present case the reopening of the assessment could be only under clause (b) of Section 147, It is further not disputed that the initiation of proceedings would be barred by time unless the case is covered by Sub-section (1) of Section 150.
( 6 ) SUB-SECTION (1) of Section 150 provides:
"notwithstanding anything contained in Section 149, the notice under Section 148 may be issued at any time for the purpose of making an assessment or reassessment or recomputation in consequence of or to give effect to any finding or direction contained in an order passed by any authority in any proceeding under this Act, by way of appeal, reference or revision. "
In order to appreciate the ambit and scope of the aforesaid provisions it would be necessary to refer to Sub-section (3) of Section 153. The relevant parts of that provision are I"153. (3)The provisions of Sub-sections (1) and (2) shall not apply to the following classes of assessments, reassessments and recomputations which may, subject to the provisions of sub-section (2a), be completed at any time. . . (ii) where the assessment, reassessment or recomput
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