ORDER
--Not dealt by Tribunal.
Ratio & Held :
The question of limitation which the assessee had raised before the Tribunal, but the Tribunal has failed to deal with it must be deemed to have been dealt with by it and is, therefore, one arising out of its order and can be considered by the High Court.
Case Law Analysis :
CIT v. Scindia Steam Navigation Co. Ltd. (1961) 42 ITR 589 (SC) applied.
Application :
Also to current assessment years.
A. Y. :
1973-74 and 1974-75
Income Tax Act 1961 s.256
Words and phrases--ASSESSMENT--For computation of period of limitation.
Ratio :
The meaning of `assessment' for the purpose of computation of period of limitation, depends upon the type of assessment made.
Held :
From the scheme of the law for computing the period of limitation, the meaning of assessment will be one where after assessment, a notice of demand is served upon the assessee under section 143(2)(a) of the Income Tax Act and another in a case falling under section 144, clause (b) of sub-section (2) of section 143 and yet another in a case falling under some other provisions of the Act including section 144B of the Act. It will be a mistake to accept for all purposes, the return as one filed by the assessee under sub-section (1) of section 139 of the Act as the starting point of limitation for the completion of the assessment as a return, which is not complete in all respects and as regards the return furnished by the assessee, doubts exist whether a return filed under sub-section (4)(a) of section 139 may be the relevant return and in case any omission in the return furnished is discovered by the assessee and a revised return is filed, the same may be the relevant return. In section 153 in this behalf, a mention of section 143 clearly reckons a return on which assessment is made and a demand notice is issued under clause (a) of sub-section (2) of section 143. A return for this purpose is a return under section 139(1), section 139(4) as well as section 139(5) of the Act. An assessment in terms of section 143, it is obvious, is an assessment on the basis of the return in one case under clause (a) of sub-section (1) of section 143 and in another case under sub-section (3) of section 143 of the Act. In the case of best judgment assessment where there is no return filed by the assessee and where the assessee has not responded to any enquiry before assessment under section 142 of the Act, the period of limitation for assessment will reckon only in terms of the default of the assessee which is contemplated under section 144 of the Act.
Application :
Also to current assessment years.
A. Y. :
1973-74 and 1974-75
Income Tax Act 1961 s.139
Income Tax Act 1961 s.144
Income Tax Act 1961 s.154
Mishra J.
1. The proceedings subsequent to the reference show that for the year ending April 30, 1973, the assessee has been subjected to a best judgment assessment, the assessment year being 1974-75 and the proceedings for the said assessment have concluded with the order of the Tribunal in I.T.A. No. 168/Mds/1978-79 dated March 13, 1980. The question of law thus referred to this court has become academic. We proceed, however, to answer the same because in some aspects which are not fully indicated in the question formulated by the Tribunal, the issues involved are of far-reaching consequence and assume importance particularly for the reason of certain specified provisions for reckoning limitation for assessment in the Income-tax Act, 1961.
2. The statement of the case and the facts that are disclosed from the order of the Tribunal reveal that the assessee is a private limited company carrying on business as transport contractors for the Tamil Nadu Dairy Development Corporation. It filed a nil return for the assessment year 1971-72, showing in the return the previous or accounting year ending with April 30, 1970. It filed a return thereafter for the assessment year 1973-74 showing nil as the income for the purpose of tax and disclosed the previous year ending with March 31, 1972. It filed, however, on September 20, 1973, a return for the year ended April 30, 1973, admitting a total income of Rs. 1,81,071. In the said return, the assessment year was shown as 1973-74. The Income-tax officer took the said return as relating to the year 1974-75 as it was for the period ended April 30, 1973, and completed the assessment on a total income of Rs. 3,92,310 after making certain disallowances under section 40A(3) of the Act as relating to the assessment year 1974-75. The assessee appealed and contended before the Appellant Assistant Commissioner that its return was for the assessment year 1973-74 as noted by it and not for 1974-75 as taken by the Income-tax Officer and since it was a return for the assessment year 1973-74, the order of assessment was time barred. It also disputed several additions and disallowances made by the Income-tax Officer. The Appellate Assistant commissioner found that for the assessment year 1973-74, the assessee had declared its previous year as ending on April 30, 1972, which was accepted by the Income-tax Officer and similarly for the assessment year 1971-72, the assessee filed the return for the previous year ending on April 30, 1970, and, therefore, the assessee would suddenly turn around and say that the return filed on September 20, 1973, was for the assessment year 1973-74 and the Income-tax Officer should have treated the return as pertaining to 1973-74. He also held that the assessment made by the Income-tax Officer was not time barred. However, regarding several additions made by the Income-tax Officer, he found that they required greater scrutiny and hence set aside the order of the Income-tax Officer and remitted the matter back to him for fresh consideration. The assessee appealed to the Tribunal. The Tribunal has held that the return filed by the assessee on September 20, 1973, cannot be construed to be a return for the assessment year 1974-75, and, therefore, the return was non est in the eye of law and, consequently, the assessment made for 1974-75 based on such invalid return had to be cancelled.
3. The Supreme Court has in the case of CIT v. Scindia Steam Navigation Co. Ltd. : [1961]42ITR589(SC) spoken on the scope of a reference and settled the law which is stated in some detail in a Full Bench judgment of the patna High Court delivered by one of us as the judge of the said court in the case of Jamunadas Mannalal v. CIT : [1985]152ITR261(Patna) in these words (at page 266) :
'Until the decision of the Supreme Court in the case of CIT v. Scindia Steam Navigation Co. Ltd. : [1961]42ITR589(SC) , there was no judgment of the Supreme Court as to what precisely may be the meaning and import of the words 'any question of law arising out of' the Tribunal's order. A wide divergence of judicial opinion required a review of the various judgments of the High Courts and, accordingly, after doing so, the Supreme Court said (at page 606) :
'It will be seen from the foregoing review of the decisions that all the High Courts are agreed that section 66 creates a special jurisdiction, that the power of the Tribunal to make a reference and the right of the litigant to require it, must be sought within the four corners of section 66(1), that the jurisdiction of the High Court to hear references is limited to questions which are properly referred to it under section 66(1), and that such jurisdiction is purely advisory and extends only to deciding questions referred to it. The narrow ground over which the High Courts differ is as regards the question whether it is competent for the Tribunal to refer, or the High Court to decide, a question of law which was not either raised before the Tribunal or decided by, it, where it arises on the facts found by it.' The Supreme Court noticed that one view was that the words 'any question of law arising out of the order of the Tribunal signify that the question must have been raised before the Tribunal and considered by it, and the other view was that all questions of law arising out of the facts found would be questions of law arising out of the order of the Tribunal. The Supreme Court summed up as follows (at page 611) :
'(1) When a question is raised before the Tribunal and is dealt with by it, it is clearly one arising out of its order.
(2) When a question of law is raised before the Tribunal but the Tribunal fails to deal with it, it must be deemed to have been dealt with by it and is, therefore, one arising out of its order.
(3) When a question is not raised before the Tribunal but the Tribunal deals with it, that will also be a question arising out of its order.
(4) When a question of law is neither raised before the Tribunal nor considered by it, it will not be a question arising out of its order notwithstanding that it may arise on the findings given by it.
Stating the position compendiously, it is only a question that has been raised before or decided by the Tribunal that could be held to arise out of its order.'
While applying the abovesaid law to the facts of the case before them, the Supreme Court further observed (at page 611) :
'Now, the only question on which the parties where at issue before the income-tax authorities was whether the sum of Rs. 9,26,532 was assessable to tax as income received during the year of account 1945-46. That having been decided against the respondents, the Tribunal referred on their application under section 66(1), the question whether the sum of Rs. 9,26,532 was properly included in the assessee-company's total income for the assessment year 1946-47, and that was the very question which was argued and decided by the High Court. Thus it cannot be said that the respondents had raised any new question before the court. But the appellant contends that while before the income-tax authorities the respondents disputed their liability on the ground that the amount in question had been received in the year previous to the year of account, the contention urged by them before the court was that even on the footing that the income had been received in the year of account, the proviso to section 10(2)(vii) had no application, and that it was a new question which they were not entitled to raise. We do not agree with this contention. Section 66(1) speaks of a question of law that arises out of the order of the Tribunal. Now, a question of law might be a simple one, having its impact at one point, or it may be a complex one, trenching over an area with approaches leading to different points therein. Such a question might involve more than one aspect, requiring to be tackled from different stand-points. All that section 66(1) requires is that the question of law which is referred to the court for decision and which the court is to decide must be the question which was in issue before the Tribunal. Where the question itself was under issue, there is no further limitation imposed by the section that the reference should be limited to those aspects of the question which had been argued before the Tribunal. It will be an over-refinement of the position to hold that each aspect of a question is itself a distinct question for the purpose of section 66(1) of the Act. That was the view taken by this court in CIT v. Ogale Glass Works Ltd. : [1954]25ITR529(SC) and in Zoraster and Co. v. CIT : [1960]40ITR552(SC) , and we agree with it. As the question on which the parties were at issue, which was referred to the court under section 66(1), and decided by it under section 66(5) is whether the sum of Rs. 9,26,532 is liable to be included in the taxable income of the respondents, the ground on which the respondents contested their liability before the High Court was one which was within the scope of the question, and the High Court rightly entertained it.'
The Supreme court thus clarified that a question of law in issue should not be taken to be inhibited by the grounds or contentions which are raised before the Tribunal. If the question framed by the Tribunal has got the effect of narrowing down the controversy to only one of the several contentions which can be raised to question the validity of the imposition of penalty under section 27(1)(a), applying the law laid down by the Supreme Court, it must be held that the real issue may escape if other or alternative contentions are not permitted to be raised. As the question referred to us in the inhibited form covers only a part of the real controversy, it is pertinent and reasonable to argue that the question should be reframed, so that the real issue arising out of the order of the Tribunal may be decided. Some contentions like the one to which I shall presently advert, although arise out of the order of the Tribunal were not argued before it. The real controversy relates to the question as to whether the assessee is liable to penalty under section 271(1)(a) or not. Merely because some contentions were not raised before the Tribunal, the assessee cannot be denied the opportunity to raise such contentions.'
4. The Full Bench judgment has also extracted observations in Addl. CIT v. Dongarsidas Biharilal : [1979]116ITR897(Patna) , a Bench decision of the said court in these words (at page 269 of 152 ITR) :
'In the words of one of the distinguished judges of this court :
'It is an accepted principle of law that where the question referred for opinion did not cover the real controversy in issue, the High Court could reframe the question and decide the real controversy. It cannot be gainsaid that a controversy may involve different approaches for its solution. Where the real controversy is whether the penalty levied under section 271(1)(a) was legal and valid, it can be viewed from different angles'.'
5. Thus, the question of limitation in the instant case which the assessee had raised before the Tribunal, but the Tribunal has failed to deal with It as observed by the Supreme Court 'it must be deemed to have been dealt with by it and is, therefore, one arising out of its order' and as we have found that unless a proper meaning of 'assessment' to reckon the period of limitation from the date of the filing of the return and a proper meaning of the expression 'return' to reckon the limitation are given, the law on the subject shall remain in controversy and confusion shall prevail. We have accordingly chosen to reframe the question referred by the Tribunal, viz.,
'Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in holding that the return filed on September 20, 1973, for the assessment year 1974-75 was non est in law and, therefore, the assessment made on such invalid return is not sustainable in law ?' to reread as, 'Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in holding that the return filed on September 20, 1973, for the assessment year 1974-75 was non est in law and, therefore, the assessment made on such invalid return is not sustainable in law and whether having found that the assessment was non est in law', the Tribunal ought to have decided whether the assessment was barred by limitation and whether a fresh assessment for the assessment year 1973-74 as well as 1974-75 is permissible ?'
6. Section 4 of the Income-tax Act enables to charge for any assessment year at any rate or rates, income-tax subject to the other provisions thereof only where any Central Act enacts that income-tax shall be charged for any assessment years. Income-tax thus is chargeable for any assessment year only when the Central Act generally called the Finance Act of a particular assessment year creates the charge and not otherwise. Once such a charge is created by the Central Act, the mechanism for realisation of taxes gets activated and assessment for levy of tax and realisation of tax follows. Section 139 of the Income-tax Act provides for filling of a return of income by every person whose total income or the total income of any other person in respect of which he is assessable under the Act during the previous year exceeded he maximum amount which is not chargeable to income-tax. The return which hie is required to furnish under sub-section (1) of section 139 says, shall include his income or the income of such other person during the previous year in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed.
7. Clause (a) to sub-section (1) of section 139 reads as follows :
'In the case of every person whole total income, or the total income of any other person in respect of which he is assessable under this Act, includes any income from business or profession, before the expiry of four months from the end of the previous year or where there is nor than one previous year, from the end of the previous year which expired last before the commencement of the assessment year, or before the 30th day of June of the assessment year, whichever is later.'
8. In the case of the assessee before us, since the income in respect of which it is assessable, included income from business, the above provision is attracted. This provisions enable it to file the return of the income before the expiry of four months from the end of the previous year. In the instant case, it is alleged that the assessee filed a return on September 20, 1973, for the assessment year 1973-74. Assessment year is defined under section 2(9) to mean the period of 12 months commencing on the 1st day of April Every year. 'Previous year', however, is defined under section 3 to mean,
I. the financial year immediately preceding the assessment year; or
II. if the account of the assessee have been made up to a date within the said financial year, then, at the option of the assessee, the twelve months ending on such date; or
III. in the case of any person or business or class of persons or business not falling within clause (a) or clause (b), such period as may be determined by the Board or by any authority authorised by the Board in this behalf; or
IV. in the case of a business or profession newly set up in the said financial year, the period beginning with the date of the setting up of the business or profession, and -
(1) ending with the said financial year, or
(2) if the accounts of the assessee have been made up to a date within the said financial year, then, at the option of the assessee, ending on that date, or
(3) ending with the period, if any, determined by the Board or by authority authorised by the Board in this behalf, as the case may be;
V. in the case of a business or profession newly set up in the twelve months immediately preceding the said financial year -
(i) if the accounts of the assessee have been made up to a date within the said financial year and the period from the date of the setting up of the business or profession to such date does not exceed twelve months, then, at the option of the assessee, such period, or
(ii) if any period has been determined by the Board or by any authority authorised by the Board in this behalf, then the period beginning with the date of the setting up of the business or profession and ending with that period, as the case may be;
VI. where the assessee is a partner in a firm and the firm has been assessed as such, then, in respect of the assessee's share in the income of the firm, the period determined as the previous year for the assessment of the income of the firm; or
VII. in respect of profits and gains from life insurance business, the year immediately preceding the assessment year for which annual accounts are required to be prepared under the Insurance Act, 1938, or under that Act read with section 43 of the Life Insurance Corporation Act, 1956.'
9. The financial year immediately preceding the assessment year thus is the previous year for the purpose of section 139(1)(a) of the Act and if the accounts of the assessee have been made up to a date within the said financial year, then, at the option of the assessee, the twelve months' period ending on such date. It is on record that the assessee had closed his accounts of the year 1972-73 on April 30, 1973. The return filed by it on September 20, 1973, for the year ending April 30, 1973, was calculated thus on the basis of the year ending April 30, 1973. The return filed by it was beyond the expiry of four months from the end of the previous year and attracted thus the proviso to section 139(1) of the Act, which reads as follows :
'Provided that, on an application made in the prescribed manner, the Income-tax Officer may, in his discretion, extend the date for furnishing the return, and, notwithstanding that the date is so extended, interest shall be chargeable in accordance with the provisions of sub-section (8).'
10. In any case, however, sub-section (4) of section 139 is attracted, which say :
'(a) Any person who has not furnished a return within the time allowed to him under sub-section (1) or sub-section (2) may, before the assessment is made, furnish the return for any previous year at any time before the end of the period specified in clause (b), and the provisions of sub-section (8) shall apply in every such case;
(b) the period referred to in clause (a) shall be -
(i) where the return relates to a previous year relevant to any assessment year commencing on or before the 1st day of April, 1967, four years from the end of such assessment year;
(ii) where the return relates to a previous year relevant to the assessment year commencing on the 1st day of April, 1968, three years from the end of the assessment year;...'
11. Since it is stated as a fact that the assessee had filed a nil return disclosing the previous year ended April 30, 1972, followed by another return for the said year of assessment on September 20, 1973, it was only proper and correct for the Income-tax Officer to accept the return for the assessment year 1973-74 for the previous year 1972-73. In any case, there was no law under which any impost existed for the assessment year 1974-75. The Finance Act in operation on September 20, 1973, was relevant and applicable for the assessment year 1973-74 only. For the late or default in filing the return by the assessee or any apprehension of suppression of income or misrepresentation in the return filed by him for the assessment year 1973-74, other actions could be taken in accordance with law. In no case, however, the return filed on September 20, 1973, could be treated as a return for the assessment year 1974-75. The Tribunal for that reason has correctly decided that the order of assessment for the reason of a fundamental mistake on the part of the Income-tax Officer was/is void.
12. It is on record that the assessee had first filed a nil return for the assessment year 1971-72 as well as for the year 1972-73, followed by a return of income of Rs. 1,81,071 on September 20, 1973, for the assessment year 1973-74. While proceeding for assessment under section 143 of the Act, the Income-tax Officer could proceed without requiring the presence of the assessee of the production by him of any evidence in support of the return, to make an assessment of the total income or loss of the assessee after making such adjustments to the income or loss declared in the return such as rectifying any arithmetical error, etc., and allowing or disallowing deduction, etc., as contemplated under clause (a) of sub-section (1) of section 143 of the Income-tax Act, and the assessment having been made as above, serve a notice of demand as contemplated under clause (b) of sub-section (2) of section 143 or whether or not, an assessment had been made under sub-section (1); if he considered necessary or expedient to verify the correctness and completeness of the return by requiring the presence of the assessee or the production of evidence in this behalf, serve a notice upon the assessee requiring him on a date to be specified, either to attend at the Income-tax Officer's office or to produce or to cause to be produced any evidence on which the assessee could rely in support of the return. The assessee in response to the notice of demand, could make an application to the Income-tax Officer objecting to the assessment and in the case of his being called to produce any evidence or to appear to do so and as contemplated under sub-section (3) of section 143, on the date specified in the notice or as soon afterwards as could be, after hearing such evidence as the assessee could produce and such other evidence, the Income-tax Officer required on specified points, and after taking into account all relevant material which he had gathered in a case where no assessment had been made under sub-section (1), he, by an order in writing, could make an assessment of the total income or loss of the assessee, and determine the sum payable by him or refundable to him on the basis of such assessment and in a case where an assessment had been made under sub-section (1), if either such assessment had been objected to by the assessee by an application or the Income-tax Officer was of the opinion that such assessment was incorrect, inadequate or incomplete in any material respect, he could, by an order in writing, make a fresh assessment of the total income or loss of the assessee, and determine the sum payable by the assessee or refundable to him on the basis of such assessment.
13. There are other provisions in the Act for best judgment assessment or for assessment of the income escaping assessment, time limit for notice where income had escaped assessment, etc., and section 153 of the Act had contemplated the time limit for completion of assessments and reassessments in these words :
'(1) No order of assessment shall be made under section 143 or section 144 at any time after -
(a) the expiry of -
(i) four years from the end of the assessment year in which the income was first assessable, where such assessment year is an assessment year commencing on or before the 1st day of April, 1967;
(ii) three years from the end of the assessment year in which the income was first assessable, where such assessment year is the assessment year commencing on the 1st day of April, 1968;
(iii) two years from the end of the assessment year in which the income was first assessable, where such assessment year is an assessment year commencing on or after the 1st day of April, 1969; or
(b) the expiry of either years from the end of the assessment year in which the income was first assessable, in a case falling within clause (c) of sub-section (1) of section 271; or
(c) the expiry of one year from the date of the filing of a return or a revised return under sub-section (4) or sub-section (5) of section 139,
whichever is latest.
(2) No order of assessment, reassessment or recomputation shall be made under section 147 -
(a) where the assessment, reassessment or recomputation is to be made under clause (a) of that section, after the expiry of four years from the end of the assessment year in which the notice under section 148 was served;
(b) where the assessment, reassessment or recomputation is to be made under clause (b) of that section, after -
(i) the expiry of four years from the end of the assessment year in which the income was first assessable, or
(ii) the expiry of one year from the date of service of the notice under section 148.
whichever is later.
(2A) Notwithstanding anything contained in sub-sections (1) and (2), in relation to the assessment year commencing on the 1st day of April, 1971, and any subsequent assessment year, an order of fresh assessment under section 146 or in pursuance of an order under section 250, section 254, section 263 or section 264, setting aside or cancelling an assessment, may be made at any time before the expiry of two years from the end of the financial year in which the order under section 146 cancelling the assessment is passed by the Income-tax Officer or the order under section 250 or section 254 is received by the Commissioner or, as the case may be, the order under section 263 or section 264 is passed by the Commissioner.
(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 -
(i) where a fresh assessment is made under section 146;
(ii) where the assessment, reassessment or recomputation 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 250, 254, 260, 262, 263 or 264 or in an order of any court in a proceeding otherwise than by way of appeal or reference under this Act;
(iii) where, in the case of a firm, an assessment is made on a partner of the firm in consequence of an assessment made on the firm under section 147.
Explanation 1. - In computing the period of limitation for the purposes of this section -
(i) the time taken in reopening the whole or any part of the proceeding or in giving an opportunity to the assessee to be reheard under the proviso to section 129, or
(ii) the period during which the assessment proceeding is stayed by an order or injunction of any court, or
(iii) the period commencing from the date on which the Income-tax Officer directs the assessee to get his accounts audited under sub-section (2A) of section 142 and ending with the date of which the assessee furnishes a report of such audit under that sub-section, or
(iv) the period (not exceeding one hundred and eighty days) commencing from the date on which the Income-tax Officer forwards the draft order under sub-section (1) of section 144B to the assessee and ending with the date on which the Income-tax Officer receives the directions from the Inspecting Assistant Commissioner under sub-section (4) of that section, or, in a case where no objections to the draft order are received from the assessee, a period of thirty days, or
(v) in a case where an application made before the Income-tax Settlement Commission under section 245C is rejected by it or is not allowed to be proceeded with by it, the period commencing from the date on which such application is made and ending with the date on which the order under sub-section (1) of section 245D is received by the Commissioner under sub-section (2) of that section,
shall be excluded.
Explanation 2. - Where, by an order referred to in clause (ii) of sub-section (3), any income is excluded from the total income of the assessee for an assessment year, then, an assessment of such income for another assessment year shall, for the purposes of section 150 and this section, be deemed to be one made in consequence of or to give effect to any finding or direction contained in the said order.
Explanation 3. - Where, by an order referred to in clause (ii) of sub-section (3), any income is excluded from the total income of one person and held to be the income of another person, then, an assessment of such income on such other person shall, for the purpose of section 150 and this section, be deemed to be one made in consequence of or to give effect to any finding or direction contained in the said order, provided such other person was given in opportunity of being heard before the said order was passed.'
14. We have information that in the case of the assessee, recourse had been taken to section 144B and a proposal had been sent to the assessee by the Income-tax Officer that there would be variations in the income. There is nothing on record to show that there was any irregularity in the procedure in this behalf and thus in the case of the assessee, clause (iv) of Explanation 1 to section 153 is attracted. The period of limitation in the case of the assessee commenced not from the date of filing of the return, but from the date on which the Income-tax Officer forwarded the draft order under sub-section (1) of section 144B to the assessee and ended with the date on which the Income-tax Officer received the directions from the Inspecting Assistant Commissioner under sub-section (4) of that section, or, in a case where there was no objection to the draft order received from the assessee, within a period of thirty days.
15. There has been, it appears, a complete misapprehension thus at both ends, that is, in the mind of the assessees as well as the taxing authorities, as to the correct meaning of the word 'assessment'. It flows clearly from the scheme of the law as we have been that for computing the period of limitation, the meaning of assessment will be one where after assessment, a notice of demand is served upon the assessee under section 143(2)(a) of the Income-tax Act and another in a case falling under section 144, clause (b) of sub-section (2) of section 143 and yet another in a case falling under some other provisions of the Act including section 144B of the Act. It will be a mistake to accept for all purposes, the return as one filed by the assessee under sub-section (1) of section 139 of the Act as the starting point of limitation for the completion of the assessment as a return, which is not complete in all respects and as regards the return furnished by the assessee, doubts exist whether a return filed under sub-section (4) (a) of section 139 may be the relevant return and in case any omission in the return furnished is discovered by the assessee and a revised return is filed, the same may be the relevant return. In section 153 in this behalf, a mention of section 143 clearly reckons a return on which assessment is made and a demand notice is issued under clause (a) of sub-section (2) of section 143. A return for this purpose is a return under section 139(1), section 139(4) as well as section 139(5) of the Act. An assessment in terms of section 143, it is obvious, is an assessment on the basis of the return in one case under clause (a) of sub-section (1) of section 143 and in another case under sub-section (3) of section 143 of the Act. In the case of best judgment assessment where there is no return filed by the assessee and where the assessee has not responded to any enquiry before assessment under section 142 of the Act, the period of limitation for assessment will reckon only in terms of the default of the assessee which is contemplated under section 144 of the Act.
16. We have referred to some of these provisions only to clarify that filing of a return is a statutory duty of the assessee and assessment of the income on the basis of the return is an administrative act of the officers of the Revenue. There are certain enquiries contemplated before the assessment is made such as an enquiry under section 142 of the Act and in a case where doubt exists as to the veracity of the return filed by the assessee under sub-section (3) of section 143 of the Act, which it appears, is supplemented by section 144B of the Act. Section 144B, we have already noticed, has contemplated forwarding of a draft proposed order of assessment to the assessee after enquiry under sub-section (3) of section 143 of the Act that is for a further enquiry after the enquiry under sub-section (3) of section 143. Parliament has taken care to introduce a provision in this behalf and extend the period for completing the assessment by stating in the Explanation to add the period not exceeding 180 days commencing from the date on which the Income-tax Officer forwarded the draft order under sub-section (1) of section 144B to the assessee and ending with the date on which the Income-tax Officer received the directions from the Inspecting Assistant Commissioner under sub-section (4) of that section, or, in a case where no objection is received from the assessee, by a period of thirty days.
17. Before thus deciding whether the assessment is barred by limitation, it will be necessary to see :
(1) Whether the Income-tax Officer has proceeded to make the order of assessment on the basis of the return under section 139(1) or 139(4) or 139(5) and issued notice of demand under section 143(2)(a) of the Act. In such a case, the assessment will be deemed to have been completed before the notice is issued by the Income-tax Officer. In such a situation, any enquiry under sub-section (3) of section 143 of the Act on the objections of the assessee will not postpone the making of the order of assessment and the enquiry will be only for the purpose of examining whether there was any mistake in the order of assessment.
(2) In a case where the Income-tax Officer has issued notice to the assessee for verification of the correctness and completeness of the return without making any assessment and enquiry is held under sub-section (3) of section 143, it may be legitimate for the assessee to say that the order of assessment should be made within the period of limitation after such enquiry and verification, but in all cases where the assessment is required to be made under sub-section (3) of section 143, section 144B is required to be complied with and the time consumed for the purpose as envisaged under sub-section (4) of section 144B not exceeding 180 days will get added to the period of limitation in the main parts of section 153 of the Act.
18. It will be proper and it should always be followed in our view, that in a case of enquiry into the correctness and completeness of the return of the assessee, since recourse to section 144B is necessary, care is taken that the enquiry under section 143(3) is completed within the period of limitation for assessment and the draft order is served upon the assessee within the said period. In case the draft order is served upon the assessee within the said period of limitation for assessment, the period for assessment as such which will mature into a demand will stand extended as above for the purpose of sub-section (4) of section 144B of the Act. It will be necessary then to take care that the period which may get added to the period of limitation for the reason of the objection by the assessee to the demand for the purpose of section 144B(4) of the Act is strictly adhered to.
19. There is another mistake, it appears, found in the approach of the assessee to the order of assessment which unfortunately has found acceptance by the Tribunal. It will be correct no doubt to say that the Income-tax Officer had committed a serious error of law and since the error went to the root of the assessment by him, the entire proceeding leading to the order by him for the assessment year 1974-75 was void. That, however, cannot mean that there was no order of assessment at all and removal of such order of assessment from the file will leave the assessee with the so-called return filed by him under section 139(1) of the Act and since no order of assessment for the assessment year 1973-74 was made within the period of limitation, the assessee became free of any charge and ceased to have any liability to pay the tax and if at all illegally assessed, as suggested before us, no liability existed and its realisation became time barred. A person authorised by law to make an order may make a right order as well as a wrong order. Even a superior officer who has found that the order has been wrongly made by any authority subject to its appellate or revisional jurisdiction, cannot take away the very doing of the act by him. It will nullify the order and not the act of making the order. The appellate or revisional order will no doubt substitute the original order. Unfortunately, in the instant case, the Tribunal has made no order of its own and has also not made any order of remand to the Income-tax Officer to treat the return as filed by the assessee for the year of assessment 1973-74. This mistake has benefited the assessee in more than one way. It has almost escaped the assessment for the year 1973-74 in spite of taxable income, which it has itself admitted and which it had not disclosed in its first return. This has confused altogether whether there was any income which could be taxed in the assessment year 1974-75. We have recorded this with concern because the interest of the Revenue in all respects is the interest of the public. Every person chargeable to income-tax is expected to honestly disclose his income and pay the tax. It is only in a case where doubts are raised or returns are filed in irregular manner as in the instant case, the assessee filed a nil return for the same financial year for which later it filed a return of taxable income, public interest is affected and officers are required to exercise this jurisdiction for the certification of the correctness or completeness of the return or best judgment assessment, etc. No honest taxpayer should be asked to pay more, but no one else should be allowed to escape tax by taking recourse to questionable methods. It will be always proper and necessary, therefore, that in case of doubts as to the veracity of the return, while every opportunity is given to the assessee, delays and lapses are avoided, which give benefit to no one except the unscrupulous assessees.
20. We have adverted to the question reframed by us to answer that on the facts of the case, the Tribunal has rightly held that the return of the assessee should have been assessed for the assessment year 1973-74 and not for the assessment year 1974-75, but has erred in not remanding the case to the Income-tax Officer for a fresh hearing and assessment in accordance with law for the assessment year 1973-74 and for subsequent years accordingly in accordance with law. Since, however, after the order of the Tribunal and during the pendency of the reference, which has remained pending inordinately for a long period of time in this court, fresh proceedings have been initiated and completed, no specific order can be made for any further enquiry in the instant proceeding. The reference in answered accordingly. No costs.