1997 (4) TMI 11 - SC - Income Tax

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

Summary

Issues:
Interpretation of the expression "assessment proceeding" in Explanation 1 of section 153 of the Income-tax Act, 1961.

Analysis:
The case involved appeals filed by a partnership firm and its partners, challenging the validity of a search and seizure conducted at their premises. The partners filed writ petitions in the Delhi High Court, leading to an interim order that was later dismissed. Subsequently, the Income-tax Officer issued notices for assessment under various sections of the Act. The appellants contended that the assessment proceedings were stayed only concerning the passing of the final assessment order, not the entire assessment process. The High Court had held that the period of stay by the Delhi High Court needed to be excluded for computing the limitation period for assessment order. The court agreed that the stay order encompassed the assessment proceedings, including the making of the assessment order, and upheld the High Court's decision.

The relevant provision of section 153 of the Act outlined the limitation period for making an assessment order. Explanation 1 extended this period by the duration of any court-ordered stay on assessment proceedings. The court emphasized that the assessment process, from filing returns to issuing the assessment order, constitutes the assessment proceeding. Therefore, any stay on the final assessment order effectively stays the entire assessment proceeding. As the Delhi High Court's order stayed the passing of the assessment order, it was deemed a stay on the assessment proceedings. Consequently, the period of this stay had to be excluded for calculating the limitation period for assessment order.

Considering subsequent stay orders obtained by the appellants during the appeals, the court granted the Assessing Officer four months to complete the assessment proceedings and issue assessment orders based on the notices. The appeals were dismissed with this direction, and no costs were awarded.

This judgment clarifies that a stay on the passing of the assessment order constitutes a stay on the entire assessment proceeding, as per Explanation 1 of section 153 of the Income-tax Act, 1961. The court's decision ensures that the period of any such stay is excluded when calculating the limitation period for making the assessment order, providing clarity on the interpretation of assessment proceedings in tax law.