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Commissioner Of Income Tax v. Smt. Krishwanti Punjabi And Anr. L.Rs. Of Om Prakash Punjabi
Structured Summary of the Opinion — Reference under Section 256(1) of the Income-tax Act, 1961
Factual and Procedural Background
The opinion arises from a reference under Section 256(1) of the Income-tax Act, 1961 asking whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in holding that the order of assessment for the assessment year 1964-65, made by the Income-tax Officer (ITO), was invalid and illegal.
Facts as stated in the opinion:
- The assessee is an individual. For assessment year 1964-65 the ITO computed the total income at Rs. 13,086 after making an addition of Rs. 11,000 as income from other sources; that sum was found to have been invested by the assessee in the firm M/s. Mahabir Prosad Om Prakash in which he was a partner.
- The assessee appealed to the Appellate Assistant Commissioner (AAC). The AAC set aside the assessment on the ground that the assessment was completed without giving proper opportunity to the assessee and ignoring evidence on record, and directed the ITO to dispose of the matter in accordance with law. The assessee also argued that the assessment had become time-barred because the ITO did not sign the demand notice nor the order within time; the AAC rejected that submission.
- The assessee appealed to the Appellate Tribunal. The assessee contended that although the assessment order was signed, the demand notice, challan and Form No. I.T.30 did not bear the ITO's signature and therefore the assessment order was invalid. The assessee relied on the scope of "assessment" under Section 143(3) and on certain decisions.
- The Tribunal found the notice of demand was unsigned (though it bore the official seal) and treated that as a curable defect; observed the assessment order was passed within the prescribed time (before 31 March 1969). The Tribunal, however, found that Form No. I.T.30 was not signed by the ITO and, relying on earlier decisions including Sushil Chandra Ghose and B.K. Gooves, held that I.T.30 ought to have been signed and, since it had not been signed before 31 March 1969, the assessment was invalid and illegal; the Tribunal set aside and cancelled the assessment.
- As a result, the aforesaid question was referred to this court for determination.
Legal Issues Presented
- Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in holding that the order of assessment for assessment year 1964-65, made by the ITO, was invalid and illegal.
- Whether Form No. I.T.30 or other papers (demand notice, challan) require the signature of the ITO as a statutory prerequisite to the completion of an assessment under Section 143(3) of the Income-tax Act, 1961.
- Whether, for purposes of time-limitation under Section 153, the assessment was completed within the time contemplated by that section (i.e., whether an actual determination of tax payable by the ITO occurred within the stipulated period), irrespective of signatures on statutory or administrative forms.
Arguments of the Parties
Assessee's Arguments
- The assessment order was invalid because although the assessment order was signed, the demand notice, challan and Form No. I.T.30 did not bear the ITO's signature.
- The term "assessment" has a comprehensive meaning and omissions at any stage in completing the assessment (including unsigned documents mentioned under Section 143(3)) render the assessment illegal and void if the statutory time-limit for completion has expired before rectification.
- Relied on prior decisions (several were cited before the Tribunal) to support the proposition that a signature on the computation in I.T.30 is required.
Revenue's Arguments
- The absence of the ITO's signature on the demand notice or other papers was merely an irregularity which could have been cured by the ITO; proper opportunity should have been given to cure that defect.
- The ITO had computed the income and the Tribunal should not treat unsigned ancillary papers as rendering the assessment time-barred or invalid without examining whether the tax was, in fact, determined within the statutory period.
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| Sushil Chandra Ghose v. ITO [1959] 35 ITR 379 (Cal) | The Calcutta High Court's observations that the original computation in Form I.T.30 "requires the signature of the Income-tax Officer" (as noted by the Calcutta Chief Justice in that report). | The Tribunal relied on this decision to support its view that Form I.T.30 should have been signed and, because it was not signed before 31 March 1969, the assessment was invalid. The present court treated those observations as obiter in that case and found no statutory requirement that I.T.30 must be signed by the ITO. |
| B. K. Gooves v. CIT [1966] 62 ITR 109 (Cal) | Decision concerned with whether a notice under Section 34 of the 1922 Act had to be signed by the ITO in order to be a regular notice; certain observations at pages 114–115 were relied upon. | The Tribunal referred to this decision in support of requiring signatures on assessment-related papers. The present court noted the decision but said it was not necessary to refer to it for the present matter and did not adopt a signature requirement based on it. |
| C.A. Abraham v. ITO | Supreme Court observations that the expression "assessment" is sometimes used in the widest possible sense; referenced CIT v. Khemchand Ramdas. | The opinion cites this case to show that "assessment" has been judicially used in a wide sense; but the court declined to resolve the wider amplitude because Section 153 specifically refers to assessment as contemplated by Section 143. |
| CIT v. Khemchand Ramdas [1938] 6 ITR 414 | Referenced in C.A. Abraham as an authority for the wide use of the expression "assessment". | The court noted the reference but did not embark on construing the full amplitude of "assessment" on that basis, preferring to interpret assessment in terms of Section 143(3) and the statutory scheme. |
| S. Mubarik Shah Naqshbandi v. CIT | Contains observations emphasising that assessment includes determination of the tax payable. | The present court observed that the context of that decision was different, but accepted that the proposition that assessment includes determination of tax payable follows from Section 143(3). |
| CIT v. Balkrishna Malhotra | Invoked for the proposition that long-understood judicial constructions of expressions in Income-tax law should not lightly be departed from. | The assessee relied upon the principle; the court noted the point but proceeded to interpret the statute (Section 143(3) and Section 153) and declined to treat the absence of a statutory signature requirement as decisive without first determining whether tax had been determined within the statutory period. |
Court's Reasoning and Analysis
The court's reasoning proceeded through these principal steps, based on the material and statute quoted in the opinion:
- The court examined the statutory text of Section 143 (particularly Sub-section (3)) which provides that on the day specified in the notice the ITO "shall, by an order in writing, assess the total income or loss ... and determine the sum payable by him or refundable to him on the basis of such assessment." The court emphasized that under Section 143(3) an assessment must determine not only total income but also the tax payable.
- The court reviewed Section 153 (time limits for assessment under Sections 143 and 144) and concluded that the relevant inquiry for limitation purposes is whether the assessment contemplated by Section 143(3) was completed within the time stipulated by Section 153.
- Having noted the statutory requirement that assessment includes a determination of tax payable, the court considered whether there is any statutory requirement that the ITO must sign Form No. I.T.30 (the computation) or other papers (demand notice, challan). The court found no statutory provision or rule requiring that the determination of tax payable be evidenced by the ITO's signature on Form I.T.30.
- The court analyzed the decisions relied on by the Tribunal and the assessee. It found that the observations in Sushil Chandra Ghose that Form I.T.30 "requires the signature of the Income-tax Officer" were obiter in the context of that case; although the I.T.30 in that case had been signed, the present court had not been shown a statutory rule requiring such signature.
- The court observed that the Tribunal had proceeded solely on the basis that Form I.T.30 was required to be signed and had not made a determination whether, within the period prescribed by Section 153, there had been an actual determination of the tax payable by the ITO. Because Section 153 refers to the order of assessment as contemplated by Section 143, the decisive question is whether the assessment (meaning an order determining income and the tax payable) was completed within the statutory period.
- Accordingly, the court concluded that the Tribunal's approach was incomplete: it erred in treating the absence of a signature on Form I.T.30 as dispositive without first determining whether an actual determination of tax payable occurred within the time allowed by Section 153.
- For those reasons the court remanded the matter to the Tribunal with an express direction to determine whether, within the time stipulated under Section 153, there was an actual determination by the ITO of the tax payable, and to prepare and submit a further statement of the case to the court irrespective of whether Form No. I.T.30 was signed by the ITO. The Tribunal was directed to give both parties an opportunity to adduce such further evidence as it considered fit and to submit the fresh statement within six months from service of the order.
The court expressly stated that it found no statutory requirement for the ITO to sign Form No. I.T.30 and treated the Tribunal's reliance on the absence of such signature as insufficient to sustain cancellation of the assessment without the additional inquiry mandated above.
Holding and Implications
Holding: The court did not uphold the Tribunal's cancellation of the assessment solely on the ground that Form No. I.T.30 was unsigned. Instead, the court remitted the matter to the Tribunal to determine whether, within the time stipulated by Section 153, there was an actual determination by the ITO of the tax payable in terms of Section 143(3). The Tribunal was directed to make a fresh statement of the case to the court after giving parties an opportunity to adduce evidence and to submit that statement within six months.
Implications:
- Direct effect: The Tribunal's order that had set aside and cancelled the assessment on the basis that Form I.T.30 was unsigned could not stand without the Tribunal first determining whether the assessment (including determination of tax payable) was completed within the statutory period under Section 153. The matter is remitted for that determination.
- The court declined to hold that there is a statutory requirement that the ITO must sign Form No. I.T.30; it found no such requirement in the Act or Rules as shown in the record. Thus, absence of signature on I.T.30 is not ipso facto fatal to an assessment; the decisive question is whether the statutory assessment was in fact completed within the time allowed.
- The court required the Tribunal to allow both parties to adduce further evidence before making the fresh statement of the case, and fixed a six-month time for the Tribunal's further statement after service of this order.
- The opinion records that there will be no order as to costs.
Judgment authored by Sudhindra Mohan Guha, J.; the other judge recorded agreement.
1. In this reference under Section 256(1) of the I.T. Act, 1961, the following question has been referred to this court:
" Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in holding that the order of assessment for the assessment year 1964-65, made by the Income-tax Officer, was invalid and illegal?"
The assessee is an individual and the relevant assessment year was 1964-65. The ITO computed the total income at Rs. 13,086, after making an addition of Rs. 11,000 as income from other sources. This sum was found to have been invested by the assessee in the firm of M/s. Mahabir Prosad Om Prakash in which he was a partner.
2. Being aggrieved by the order of assessment, the assessee went up in appeal before the AAC. Finding that the assessment was completed without giving proper opportunity to the assessee and ignoring the evidence already on record, the AAC set aside the assessment with the direction to the ITO to dispose of the matter in accordance with law. On behalf of the assessee, a ground was taken that the assessment appealed against had become time-barred by operation of law as the ITO did not sign the demand notice nor the order within time. The AAC did not agree with this submission. According to him, as the ITO had computed the income, the question of limitation would not arise merely because the demand notice and the challan were not signed by the ITO in time.
3. Being dissatisfied with the aforesaid order of the AAC, the assessee preferred a further appeal before the Appellate Tribunal. It was contended by the assessee that though the assessment order was signed, the demand notice, challan and assessment Form No. I.T. 30 did not bear any signature of the ITO and, hence, the assessment order was invalid. According to the assessee, the expression " assessment " had a comprehensive meaning and if there was any omission at any stage in the completion of the assessment, in terms of the provisions of Section 143(3) of the I.T. Act, 1961, which included the signing of the papers mentioned above, namely, the demand notice, chal-lan and assessment form, such an assessment should be held to be illegal and void provided the necessary time-limit for completion of such assessment expired before the rectification of the lapses so committed by the ITO. In support of this contention, reliance was placed on certain decisions, to some of which our attention was drawn, and which we shall presently note. On the other hand, on behalf of the Revenue, it was urged that the absence of signature of the ITO was merely an irregularity which could have been made good by him and proper opportunity should have been given to him for so doing in view of certain decisions to which references were made before the Tribunal.
4. The Tribunal observed after considering the rival contentions that, in the instant case, the notice of demand was not signed by the ITO though it bore the official seal. According to the Tribunal, this was a curable defect in the sense that there was no time-limit prescribed under the law for issuing a notice of demand after the completion of the relevant assessment and, hence, if the assessee so wanted, he could have demanded a notice of demand duly signed by the ITO, This was not done in this case. On the other hand, an appeal was preferred to the AAC by meeting all procedural formalities except for the notice of demand. As to the validity of the assessment, the Tribunal observed as follows :
" There was no dispute that the relevant assessment order was passed within the time-limit prescribed under the law, that is to say, before March 31, 1969."
As we shall presently notice, from the narration of the subsequent facts, the Tribunal was not using the expression " assessment order " in the strict sense of the term under Section 143(3) of the Act, otherwise the relevancy of the question in the subsequent controversy becomes irrelevant. The Tribunal, further, observed that non-signing of the notice of demand or the challan did not in any manner make the assessment order illegal and invalid because this could have been cured. The Tribunal was of the view that the important aspect of the issue rested with the signing, of the assessment form, namely, I.T. 30. The claim so put forward by the assessee that I.T. 30 was not signed by the ITO was not controverted by the Revenue and on inspection of the record it was found that Form No. I.T. 30 was not duly signed by the ITO. A reference was made to certain decisions to which we shall also refer. The Tribunal held that in view of the decision of this court in the case of B.K. Gooyec v. CIT [1966] 62 ITR 109, it was obligatory that the Form No. I.T. 30 should have been signed by the ITO because, according to the Tribunal, otherwise it could not be held that the relevant assessment was completed before March 31, 1969, and also because the ITO after that date could not rectify the mistake so committed. The Tribunal was further of the view that the aforesaid decision supported the holding of the AAC regarding the competency of the appeal. The Tribunal considered whether it was incumbent upon the ITO to sign the I.T. 30, the assessment form, for completing the relevant assessment.
5. Reliance was placed on several decisions about the meaning of the expression "assessment". Also a reference was made to the decision of the Calcutta High Court in the case of Sushil Chandra Ghose v. ITO [1959] 35 ITR 379. The Tribunal was of the view that the effect of the said decision, by implication, is that the ITO should sign the computation of tax in the form known as I.T. 30, and as in the instant case this was not done, according to the Tribunal, before March 31, 1969, the relevant assessment order was invalid and illegal and, therefore, the Tribunal set aside and cancelled the assessment. In that view of the matter, the Tribunal felt itself not obliged to go into the merits of the ground pertaining to the addition of Rs. 11,000. In the aforesaid background, the aforesaid question, "which we have indicated before, has been referred to this court.
6. In order to determine this question, it would be necessary to refer to the provisions of s, 143 of the I.T. Act, 1961, which reads as follows :
" 143. Assessment.--(1) Where a return has been made under Section 139 and the Income-tax Officer is satisfied without requiring the presence of the assessee or the production by him of any evidence that the return is correct and complete, he shall assess the total income or loss of the assessee, and shall determine the sum payable by him or refundable to him on, the basis of such return.
(2) Where a return has been made under Section 139 but the Income-tax Officer is not satisfied without requiring the presence of the assessee or the production of evidence that the return is correct and complete, he shall serve on the assessee a notice requiring him, on a date to be therein specified, either to attend at the Income-tax Officer's office or to produce, or to cause to be there produced, any evidence on which the assessee may rely in support of the return.
(3) On the day specified in the notice issued under Sub-section (2), or as soon afterwards as may be, the Income-tax Officer, after hearing such evidence as the assessee may produce and such other evidence as the Income-tax Officer may require on specified points, and after taking into account all relevant material which the Income-tax Officer has gathered, shall, by an order in writing, assess 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."
Reference may also be made in this connection to Section 153 of the Act, Sub-section (1) of which provides that:
"(1) No order of assessment shall be made under Section 143 or Section 144 at any time after-
(a) the expiry of--.. " and thereafter certain time-limits of different clauses have been mentioned. Therefore, the question is whether the order of assessment under Section 143 or Section 144 in this case had been made within the time contemplated by Section 153 of the Act.
In this connection reference may be made to Section 23 of the Indian I.T. Act, 1922, as well as to Section 34 of the said Act. Sub-section (3) of Section 23 provides as follows :
"Section 23(3). On the day specified in the notice issued under subsection (2), or as soon afterwards as may be, the Income-tax Officer, after hearing such evidence as such person may produce, and such other evidence as the Income-tax Officer may require, on specified points, shall, by an order in writing, assess the total income of the assessee, and determine the sum payable by him on the basis of such assessment."
Similarly, Sub-section (3) of Section 34 is on the following terms :
" Sub-section (3) of Section 34. No order of assessment or reassessment, other than an order of assessment under Section 23 to which Clause (c) of Sub-section (1) of Section 28 applies or an order of assessment or reassessment in cases falling within clause (a) of sub-section (1) or sub-section (1a) of this section shall be made after the expiry of four years from the end of the year in which the income, profits or gains were first assessable ;
Provided that where a notice under Clause (b) of Sub-section (1) has been issued within the time therein limited, the assessment or reassessment to be made in pursuance of such notice may be made before the expiry of one year from the date of the service of the notice even if at the time of the assessment or reassessment the four years aforesaid have already elapsed :
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."
Both under Sub-section (3) of Section 23 as well as Section 143(3), the assessment to be completed, must be to determine not only the total income but also the tax payable. Section 153 uses the expression "assessment" as such though it refers to the order of assessment as mentioned in Section 143 and Section 144 of the Act. It appears to us that the correct position seems to be that though the order of assessment as such may not contain an actual determination of the amount of tax payable, yet in order to complete the assessment, there must be a determination of the amount of tax payable and not merely, the determination of the total amount of income. Therefore, essentially it is necessary, to find out whether the assessment, as contemplated under Sub-section (3) of Section 143, has been completed within the time stipulated under Section 153. We have not found any statutory requirement to the effect that there should be a determination of the amount" of tax payable, signed by the ITO, in Form No. I.T. 30, though in the case of Shushil Chandra Ghose v. ITO [1959] 35 ITR 379 (Cal) at page 385, Mr. Justice Sinha, as the learned Chief Justice then was, observed as follows :
" Firstly, the very premises are wrong. The Income-tax Act and the the Rules require that the assessment order together with the computation in a particular form be served upon the assessee. In this form, in which it is served on the assessee, the computation has not to be signed. But the original computation, which is in the form known as I. T. 30, requires the signature of the Income-tax Officer and in this case, it was duly signed. The petitioner, therefore, has been moving under a misconception, thinking that the assessment order as served upon him contains a true copy of the original computation. Why, there should be this discrepancy in these two forms is more than I can say. But, I am satisfied that the assessment order has been made in accordance with law. These are the three points taken in this case or allowed to be taken and they all fail."
These observations in the context of the facts found in that case were obiter so far as the signature on Form No. I.T. 30 is concerned. It is true that in that case the Form No. I.T. 30, was duly signed. It is also true that His Lordship mentioned that the original computation, which was in Form No. I.T. 30, " requires the signature of the Income-tax Officer". We have not been shown any statutory requirement, either in the Act or in the Rules, that Form No. I.T. 30 should be signed by the ITO. As a matter of fact, apart from this, that there should be a computation and determination of the tax payable, there is no reference to the fact that there should be any particular Form No. I.T. 30. Reference was made to the case of C. A. Abraham v. ITO and our attention was drawn to the observations of the Supreme Court at page 429, in aid of the proposition that the expression " assessment " was sometimes used in the widest possible term, where the Supreme Court referred to the decision in the case of CIT v. Khemchand Ramdas [1938] 6 ITR 414. In view of the fact that Section 153 specifically refers to assessment as contemplated by section 143 of the i.t. act, we need not embark upon the question as to in which amplitude the expression " assessment " should be construed. It is sufficient for us to determine whether there was an assessment in terms of Sub-section (3) ot Section 143. In the case of B. K. Gooves v. CIT [1966] 62 ITR 109 (Cal), the court was concerned with the question whether the notice under Section 34 of the 1922 Act, had to be signed by the ITO in order to be a regular notice though we are not concerned with that controversy. In that case, our attention was drawn to certain observations of the court at pages 114-15 of, the report. But, as Section 34 is the very basis of the power of the ITO to reopen the assessment, it is not necessary for us in the present context to refer to the said decision. On the proposition that if an expression, in I.T. law has been understood by judicial decisions for a long time, in a particular manner it should not be departed from, reliance was placed on the case of CIT v. Balkrishna Malhotra . In this connection, learned advocate for the assessee sought to urge that there has been some change in the I.T, Rules, 1962, compared to the 1922 Rules. Under r. 20 of the Indian I.T. Rules, 1922, a notice of demand under Section 29 of the 1922 Act, requires that the amount due and payable should be specified in the notice in the attached form, as indicated in the form to which our attention was drawn. That, it was said, was not the position in the instant case. Our attention was also drawn to certain observations in the case of S. Mubarik Shah Naqshbandi v. CIT . There also, the context in which those observations were made were different. But the court emphasised that the assessment included the determination of the tax payable. This, in our opinion, follows as a statutory requirement in terms of Sub-section (3) of Section 143. The Tribunal, however, have proceeded solely on the basis that the I.T. Form was required to be signed. We have found no such statutory requirement. Therefore, in order to decide whether the tax was determined within the time contemplated minder Section 153, the Tribunal must advert its attention to that question before it could be said whether the assessment was barred or not. As the Tribunal has not done so, we remand the case to the Tribunal to determine whether within the time stipulated under section 153 of the i.t. act, there was an actual determination, by the ITO, of the tax payable and make a further statement of the case to this court irrespective of whether Form No. I.T. 30 was signed by the ITO. The Tribunal will submit a fresh statement of case within the period of six months from the date of service of this order on the Tribunal after giving an opportunity to both parties to adduce such further a vide nee, as the Tribunal consider fit and proper.
7. There will be no order as to costs.
Sudhtndra Mohan Guha, J.
8. I agree.
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