AUTO AND METAL ENGINEERS VS UNION OF INDIA
1998 P T D 2124
[229 I T R 399]
[Supreme Court of India]
Present: S. C. Agrawal, K. T. Thomas and D. P. Wadhwa, JJ
AUTO AND METAL ENGINEERS and others
versus
UNION OF INDIA and others
Civil Appeals Nos.2739 to 2747 of 1981, decided on 23/04/1997.
Income-tax---
----Assessment---Limitation---Making of order of assessment---An integral part of process of assessment---"Assessment proceeding" in Expln. 1 to 5.153---Comprehends entire process of assessment starting from stage of tiling of return under 5.139 or issuance of notice under S.142(1) till making of order of assessment under S.143(3) or 5.144---Order staying the passing of final order of assessment is nothing but an order staying the assessment proceeding---Period during which stay order was in operation to be excluded for computing period of limitation for making order of assessment---Indian Income Tax Act, 1961, Ss. 139, 142, 143, 144, 153(1), Expln. 1 & 156.
The appellants were a firm and its partners. On April 24, 1971, a search was conducted at the business premises of the firm as well as the residential premises of the partners and certain documents and papers were seized during the course of the search. The partners of the firm filed writ petitions in the Delhi High Court challenging the validity of the search and seizure. The High Court passed an interim order on November 23, 1971. directing the Union of India to proceed in pursuance of the notice but that no final order was to be passed during the pendency of the writ petitions, after taking into account the plea of the Union of India that the matter was urgent as the assessment was liable to be tithe-barred by March, 1972. The said interim order continued till August 12, 1974, when the writ petitions were dismissed by the Delhi High Court. Thereafter, the Income-tax Officer issued notices to the firm as well as its partners under sections 142(1), 143(2) and 143(3) of the Income Tax Act, 1961, in respect of the assessment years 1967-68, 1968-69 and 1969-70. The reply to the said notices was submitted by the appellants on November 21, 1974. Thereafter, the appellants filed writ petitions in the Punjab and Haryana High Court and contended that under the interim order, dated November 23, 1971, passed by the Delhi High Court, there was no stay of the assessment proceedings and that Explanation 1 to section 153 of the Income Tax Act, 1961, could not be invoked and that after expiry of the period prescribed in section 153, the Income-tax Officer was not competent to issue the notice in the assessment proceedings against the appellants. A Single Judge of the High Court rejected the contention of the appellants on the ground that the expression "assessment proceedings" in Explanation 1 to section 153 would include the passing of an order of assessment and since the passing of the order of assessment had been stayed by the Delhi High Court, there was a stay of the assessment proceedings by the High Court, that in view of the stay order passed by the Delhi High Court, the period from November 23; 1971 to March 31, 1972 (the last date for completing the assessment), i.e., the period of 4 months and eight days was available to the Income-tax Officer to complete the assessment after the dismissal of the writ petition by the Delhi High Court on August 12, 1974, and that the assessments could be completed up to December 20, 1974. The Single Judge therefore dismissed the writ petitions filed by the appellants (see (1981) 129 ITR 482). The appellants filed letters patent appeals against the judgment of the Single Judge which were dismissed by a Division Bench of the High Court. On appeals by special leave to the Supreme Court against the order of the Division Bench:
Held, dismissing the appeal, that under the provisions of sections 139 to 158, the process of assessment involves (i) filing of the return of income under section 142(1); (ii) inquiry by the Assessing Officer in accordance with the provisions of sections 142 and 143; (iii) making of the order of assessment by the Assessing Officer under section 143(3) or section 144; and (iv) issuing of the notice of demand under section 156 on the basis of the order of assessment. The process of the assessment thus commences with the filing of the return or when the return is not filed, by the issuance by the Assessing Officer of the notice to file the return under section 142(1) and it culminates with the issuance of the notice of demand under section 156. The making of the order of assessment is, therefore, an integral part of the process of assessment. Having regard to the fact that the object underlying Explanation 1 to section 153 is to extend the period prescribed for making the order of assessment, the expression "assessment proceeding" in Explanation 1 must be construed to comprehend the entire process of assessment starting from the stage of filing of the return under section 139 or issuance of notice under section 142(1) till the making of the order of assessment under section 143(3) or 144. Since the making of the order of assessment under section 143(3) or section 144 of the Act is an integral part of the assessment proceeding, it is not possible to split the assessment proceedings and confine it up to the stage of inquiry 'under sections 142 and 143 and exclude the making of the order assessment from its ambit. An order staying the passing of the final order of assessment is nothing but an order staying the assessment proceeding. Since the passing of the final order of assessment has been stayed by the Delhi High Court by its order, dated November 23, 1971, in the writ petitions, it must be held that there was a stay of the assessment proceedings for the purpose of Explanation 1 to section 153. The High Court was right in holding that the period during which the said stay order passed by the Delhi High Court was in operation had to be excluded for the purpose of computing the period of limitation for making the order of assessment.
Auto and Metal Engineerings v. Union of India (1981) 129 ITR 482 (P & H) ref.
Puneet Bali and J.D. Jain, Advocates for Appellants.
Ranbir Chandra, B.K. Prasad, C. Radhakrishna and Anil Shrivastava, Advocates for Respondents.
JUDGMENT
The short question that falls for consideration in these appeals relates to the interpretation. of the expression "assessment proceedings" in Explanation 1 in section 153 of the Income-tax Act, 1961 (hereinafter referred to as "the Act").
Civil Appeals Nos.2739-41 of 1981 have been filed by Auto and Metal Engineers, a partnership firm, and its partners while Civil Appeals y742-44 of 1981 and Civil Appeals Nos.2745-47 of 1981 have been filed by Sunanda Rani Jain end Karuna Rani Jain, the two partners of the assessee-firm in their individual capacity. The appeals relate to assessment years 1967-68, 1968-69 and 1969-70. On April 24, 1971, a search was conducted at the business premises of the assessee-firm as well as at the residential premises of the partners and certain documents and papers were seized during the course of search. The partners of the assessee-firm filed writ petitions in the Delhi High Court wherein they challenged the validity of the said search and seizure. The said writ petitions were admitted by the High Court on October 26, 1971. In the said writ petitions an interim order was passed on November 23, 1971, by Rajinder Sachar, J. (as he then was) in the following terms. (see (1981) 129 ITR 482, 483):
"After hearing the counsel of the parties I direct that the respondents may proceed on in pursuance of the notice but no final order be passed till the pendency of this writ petition. Mr. Sharma, counsel for the respondents informed me that the matter is urgent as the assessment is liable to be time-barred by March, 1972. 1 am informed that the case is complete inasmuch as the return of the respondents and rejoinder by the petitioner have already been filed. Let the matter be heard in the second week of January, 1972."
The said interim order was continued till August 12, 1974, when the writ petitions were dismissed by the Delhi High Court. Thereafter, the Income-tax Officer issued notices to the assessee-firm as well as its partners under sections 142(1), 143(2) and 143(3) of the Act in respect of the assessment years mentioned above. The reply to the said notices was submitted by the assessee on November 21, 1974. Soon thereafter the writ petitions, which have given rise to these appeals, were filed by the appellants in the High Court of Punjab and Haryana. In tire said writ petitions the case of the appellants was that under the interim order dated, November 23, 1971 passed by the Delhi High Court there was no stay of the assessment proceedings and that Explanation 1 to section 153 of the Act could not be invoked and that after the expiry of the period prescribed under section 153, the Income Tax Officer was not competent to issue the notice in the assessment proceedings against the appellants. The said contention of the appellants was rejected by the learned Single Judge on the view that the expression "assessment proceeding" in Explanation 1 in section 153 would include the passing of the order of assessment and since the passing of the order of assessment had been stayed by the Delhi High Court, there was a stay of assessment proceedings by the High Court. The learned Single Judge held that in view of stay order passed by the Delhi High Court the period from November 23, 1971, to March 31, 1972 (the last date for completing the assessment), i.e., the period of four months and eight days, was available to the Income-tax Officer to complete the assessment after the dismissal of the writ petition by the Delhi High Court on August 12, 1974, and that the assessments could be completed up to December 20, 1974. The learned Single Judge, therefore, dismissed that writ petitions filed by the appellants (Auto and Metal Engineerings v. Union of India (1981) 129 ITR 482 (P&H) Letter patent appeals filed by the appellants against the judgment of the learned Single Judge were dismissed by the Division Bench of the High Court by order, dated December 11, 1980. Feeling aggrieved by the said order of the Division Bench, the appellants have filed these appeals by special leave.
Shri Puneet `Bali, learned counsel appearing for the appellants, has submitted that the High Court was in error in holding that there was a stay of assessment proceedings by the Delhi High Court under order, dated November 23, 1971. The submission of learned counsel is that by the said order, only the passing of the final order of assessment had been stayed but the assessment proceedings had not been stayed and it was open to the Income-tax Officer to proceed with the assessment proceedings during the pendency of the writ petitions and that since he failed to do so he could not take any step in the assessment proceedings by issuing notice under sections 142 and 143 of the Act after March 31, 1972. In our opinion, there is no merit in the said contention urged by learned counsel.
The relevant provisions of section 153 of the Act as it stood at that time may be reproduced as under:
"153.(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 an 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...
Explanation 1.---In computing the period of limitation for the purposes of this section, the time taken in reopening the whole or any part of the proceedings or in giving an opportunity to the assessee to be reheard under the proviso to section 129 or any period during which the assessment proceeding is stayed by an order or injunction of any Court, shall be excluded."
Subsection (1) of section 153 prescribed the period of limitation within which an order of assessment could be passed. For the assessment years in question the last date for making the order of assessment under the said provision was March 31, 1972. By Explanation 1 to section 153 the period of limitation prescribed under subsection (1) for making the order of assessment was extended by the period during which the assessment proceeding was stayed by an order or injunction of any Court. The object of the Explanation seems to be that if the Assessing Officer was unable to complete the assessment on account of an order or injunction staying the assessment proceeding passed by a Court the period during which such order or injunction was in operation should be excluded. for the purpose of computing the period of limitation for making the assessment order.
In the Act the provisions regarding procedure for assessment are contained in Chapter XIV (sections 139 to 158). Under the said provisions the process of assessment involves (i) filing of the return of income under section 139 or under section 142 in response to a notice issued under section 142(1); (ii) inquiry by the Assessing Officer in accordance with the provisions of sections 142 and 143; (iii) making of the order of assessment by the Assessing Officer under section 143(3) or section 144; and (iv j issuing of the notice of demand under section 156 on the basis of the order of assessment. The process of assessment thus commences with the filing of the return or where the return is not filed, by the issuance by the Assessing Officer of notice to file the return under section 142(1) and it culminates with the issuance of the notice of demand under section 156. The making of the order of assessment is, therefore, an integral part of the process of assessment. Having regard to the fact that the object underlying the Explanation is to extend the period prescribed for making the order of assessment, the expression " assessment proceeding" in the Explanation must be construed to comprehend the entire process of assessment starting from the stage of filing of the return under section 139 or issuance of notice under section 142(1) till the making of the order of assessment under section 143(3) or section 144. Since the making of the order of assessment under section 143(3) or section 144 of the Act is an integral part of the assessment proceeding, It is not possible to split the assessment proceedings and confine it up to the stage of inquiry under sections 142 and 143 and exclude the making of order of assessment from its ambit. An order staying the passing of the final order of assessments is nothing but an order staying the assessment proceeding. Since the passing of the final order of assessment had been stayed by the Delhi High Court by its order, dated November 23, 1971, in the writ petitions, it must be held that there was a stay of assessment proceedings for the purpose of Explanation 1 to section 153. The High Court, in our opinion, was right in holding that the period during which the said stay order passed by the Delhi High Court was in operation has to be excluded for the purpose of computing the period of limitation for making the order of assessment and the appeals are liable to be dismissed.
Keeping in view the fact that after the judgment of the learned Single Judge dismissing the writ petitions the appellants had obtained a stay order from the High Court in the letters patent appeals that were filed by them and after the dismissal of the said appeals a stay order was obtained from this Court which order has been in operation during the pendency of these appeals, we grant four months' time to the Assessing Officer to complete the assessment proceedings and pass the orders of assessment on the basis of the impugned notices issued by him. The appeals are dismissed with these directions. No orders as to costs.
M.B.A./1807/FC???????????????????????????????????????????????????????????????????????????????? Appeals dismissed.