1986-VIL-382-CAL-DT

Equivalent Citation: [1986] 160 ITR 408, 51 CTR 349, 26 TAXMANN 542

CALCUTTA HIGH COURT

Date: 07.01.1986

COMMISSIONER OF INCOME-TAX

Vs

MOHINI THAPAR CHARITABLE TRUST

BENCH

Judge(s)  : MUKUL GOPAL MUKHERJEE., SATISH CHANDRA 

JUDGMENT

SATISH CHANDRA C.J.-The question raised in this reference relates to the interpretation of the second proviso to section 34(3) of the Indian Income-tax Act, 1922.

The question relates to the assessment year 1955-56, the accounting period for which ended on March 31, 1955. During this accounting period, the assessee, which is a charitable trust, received a sum of Rs. 82,053 from M/s. Karam Chand Thapar & Bros. (Coal Sales) Ltd., as commission/ brokerage. It appears that the company had deducted the tax payable on this commission at source. In April, 1956, the assessee-trust filed an application before the Income-tax Officer under section 48 of the Indian Incometax Act, 1922, for the refund of the tax deducted at source. Its plea was that the assessee was a charitable trust not liable to tax. This plea was repelled by the Income-tax Officer, who in view of the C.B.R.'s order No. FN 20/20162-I.T. (Al) dated August 9, 1962, brought this amount of Rs. 82,053 to tax; and after taking into account the amount deducted at source in respect of tax payable on it, raised a demand of Rs. 14,921.99. He directed that this amount has been adjusted with the refund due to the trust for the assessment year 1956-57.

Being aggrieved, the assessee went up in appeal. At the hearing of the appeal, it was submitted that the Income-tax Officer had no jurisdiction to pass an assessment order on an application for refund made under section 48 of the Act of 1922. No notice under section 23 of the Act was served on the assessee nor any opportunity of hearing afforded to the assessee. The Appellate Assistant Commissioner accepted this submission. He set aside the impugned order and directed the Income-tax Officer to make fresh assessment according to law.

After remand, the Income-tax Officer issued a notice under section 23(2) of the Act which was served on the assessee on November 28, 1970. The assessee, however, did not appear in response to the notice which required it to produce certain documents. The Income-tax Officer, under the circumstances, made an assessment to the best of his judgment. He held that the assessee was not exempted under section 4(3)(i) of the Act and that the amount in question was the business income of the assessee liable to tax. He accordingly passed an assessment order under section 23(3) of the Act of 1922.

The assessee-trust went up in appeal.. It was, inter alia, submitted before the Appellate Assistant Commissioner that the assessment was barred by limitation. The assessment was for the year 1955-56 for which the period of limitation came to an end on March 31, 1960. The assessment order was passed on December 10, 1970. The submission was accepted by the Appellate Assistant Commissioner. He held that the assessment was barred by limitation and was void. The assessment was cancelled. Being aggrieved, the Department went up in appeal to the Tribunal, but failed.

At the instance of the Revenue, the following question of law had been referred for our opinion:

" Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the saving provision in the second proviso to section 34(3) of the Indian Income-tax Act, 1922, was not applicable and the assessment was barred by limitation, the same not having been made within the period specified in the main paragraph of the said section 34(3) ? "

The second proviso to section 34(3) of the Act of 1922 is as follows:

" Section 34(3) ......

Provided further that nothing contained in this section limiting the time within which any action may be taken or any order, assessment or reassessment may be made, shall apply to a reassessment made under section 27 or to an assessment or reassessment 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 31, section 33, section 33A, section 33B, section 66 or section 66A. "

The question is whether the remand order made by the Appellate Assistant Commissioner on August 4, 1964, was an order within the meaning of the aforesaid proviso so as to obviate the application to the provision limiting the time within which the assessment order could be passed, namely, sub-section (3) of section 34, under which an assessment order cannot be made after the expiry of four years from the end of the year.

The counsel for the Department has invited our attention to a decision of this court in Katihar Jute Mills (P.) Ltd. v. CIT [1979] 120 ITR 861. In that case, it was observed (at p. 871):

" The order of the Appellate Assistant Commissioner, if read as a whole, in its proper context would clearly show that it was neither the intent nor the purpose nor the import of the order that the whole assessment was set aside and everything is kept at large so as to allow the Income-tax Officer to make a fresh assessment on all the aspects of the matter and give a free hand to the assessee to make all claims and all arguments in that assessment. "

It is apparent that the intent, purpose or import of the finding or direction in the appellate order will determine the character, scope and limitations of the reassessment proceedings. In the present case, the Appellate Assistant Commissioner held as follows :

" I have admitted the additional ground taken up by the appellant's representative as it raises a pure question of law. It appears that the Income-tax Officer has passed the order under section 48 though no such section has been mentioned in the order at all. I am also in agreement with the appellant's stand that if the Income-tax Officer wanted to bring the amount of Rs. 82,053 to tax, he should have passed an order under section 23(3) after fulfilling all the requisite formalities and following the procedure laid down in the Act. He has not done so and hence the assessment has not been properly made. In the order also, the Incometax Officer has not given any reason for treating the amount of Rs. 82,053 as assessable to tax. In short, neither the assessment has been made in accordance with law nor has the appellant been provided with a proper opportunity to present its case before the Income-tax Officer. 1, therefore, set aside the assessment and direct the Income-tax Officer to make afresh assessment according to law.

In the result, the assessment, is set aside."

It will be seen that the Appellate Assistant Commissioner held that the Income-tax Officer bad not followed the procedure laid down in the Act for making an assessment. He did not issue any notice nor afforded an opportunity of hearing to the assessee. He was directed to pass an order under section 23(3) after fulfilling all the requisite formalities and following the procedure laid down in the Act and to make a fresh assessment according to law.

This order left the entire matter at large. The Income-tax Officer was directed to look into all aspects, procedural as well as pertaining to substantive law, relevant to the assessment in question. Ex hypothesi the Income-tax Officer was directed to keep in mind the provisions of the Income-tax Act including the provisions prescribing periods of limitation as well as other applicable provisions of law.

It is true that the question whether the assessment as originally made was barred by limitation or the question whether the reassessment that may follow after the remand will also be barred by limitation was not raised before the Appellate Assistant Commissioner. The Appellate Assistant Commissioner did not apply his mind or advert to this aspect of the matter. On the other hand, he left the entire matter open including the question of limitation. He specifically directed that the fresh assessment order may be passed after fulfilling all the requisite formalities and following the procedure laid down in the Act and to make the fresh assessment according to law. This was not a case where it could be held that the reassessment was absolved of the period of limitation prescribed by section 34(3) of the Act. Admittedly, the assessment order was made long after the period of limitation prescribed therefor had expired. The Tribunal, in our opinion, was justified in taking the view that the reassessment order was barred by limitation.

The question referred to us is answered in the affirmative, in favour of the assessee and against the Department.

There will be no order as to costs.

MUKUL GOPAL MUKHERJI J.-I agree.

 

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