2004 (12) TMI 621 - AT - Income Tax

Summary

Issues:
1. Validity of assessment order under section 144 read with section 148.
2. Barred by limitation - Notice under section 148 issued after valid return filed.
3. Interpretation of Explanation 2(b) of section 147.
4. Disposal of return under section 143(1)(a) or section 143(3).
5. Applicability of previous court decisions.
6. Cross objection regarding directions given by CIT(A).

Issue 1: Validity of assessment order under section 144 read with section 148
The appeal and cross objection were against the order passed by CIT(A)-I, Agra annulling the assessment order framed under section 144 read with section 148 of the Income-tax Act, 1961. The CIT(A) held that the order was barred by limitation as the notice under section 148 was issued after a valid return was filed, making the assessment void ab initio.

Issue 2: Barred by limitation - Notice under section 148 issued after valid return filed
The first ground of appeal was regarding the assessment being treated as barred by limitation. The Assessing Officer issued notice under section 148 after a valid return was filed, which was considered illegal. The CIT(A) highlighted that the notice under section 148 itself was bad in law and liable to be quashed, leading to the annulment of the assessment order.

Issue 3: Interpretation of Explanation 2(b) of section 147
The third ground of appeal questioned the validity of the notice under section 148 based on Explanation 2(b) of section 147. The Assessing Officer had information and time to issue notice under section 143(2) for assessment under section 143(3). The issuance of notice under section 148 was deemed illegal and invalid ab initio as the return was still alive and no assessment had been made.

Issue 4: Disposal of return under section 143(1)(a) or section 143(3)
The disagreement arose regarding whether a return filed under section 142(1) must be assessed under section 143(3) or could be disposed of under section 143(1)(a). The Tribunal held that if there was no scope for additional claims or deductions, the return could be processed under section 143(1)(a) without the necessity of assessment under section 143(3).

Issue 5: Applicability of previous court decisions
The CIT(A) referred to various court decisions to support the annulment of the assessment order. The Tribunal dismissed the ground of appeal citing the inapplicability of a specific High Court decision to the case at hand, affirming the correctness of the decision made based on relevant legal precedents.

Issue 6: Cross objection regarding directions given by CIT(A)
The cross objection raised concerns about the directions given by the CIT(A) allowing the Assessing Officer to take necessary steps to correct the situation despite the assessment being barred by limitation. The Tribunal held that any illegal order cannot be legalized, and the Assessing Officer cannot be asked to legitimize the assessment order once it has been annulled due to being time-barred.

In conclusion, the Tribunal dismissed the appeal of the revenue and allowed the cross objection of the assessee, emphasizing that an assessment order passed under section 144 read with section 148, which was barred by limitation, cannot be legalized or extended beyond the statutory limits.