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C.I.T. v. K.S. Ganga Samiti Ltd. - INCOME TAX REFERENCE No. 118 of 1981  RD-AH 682 (31 August 2004)
Income Tax Reference No.118 of 1981
Commissioner of Income Tax, Lucknow v. M/s Krashak
Sahkari Ganna Samiti Ltd., Lakhimpur Kheri
Hon'ble R.K.Agrawal, J.
Hon'ble K.N.Ojha, J.
(Delivered by R.K.Agrawal, J.)
The Income Tax Appellate Tribunal, Allahabad has referred the following questions of law under Section 256(1) of the Income Tax Act, 1961 (hereinafter referred to as "the Act") for opinion to this Court:-
"Whether on the facts and in the circumstances of the case, the Appellate Tribunal was right in law in holding that the assessment made by the ITO on the basis of the revised return, was vitiated under law and the very order of assessment was liable to be quashed?"
Briefly stated, the facts giving rise to the present reference are as follows:-
The reference relates to the Assessment Year 1974-75. The respondent assessee is a cooperative society established with a specific objects mentioned in paragraph 4 of the Pratiman Upvidhiyan. The main object of the society consisted of (i) sugarcane cultivation on specific lines; (ii) obtaining profitable pries for sugar cane growers; (iii) expeditious supply of sugarcane to Sugar Mills, and (iv) expeditious payments by Sugar Mills. It derives its incomes from various sources. For the Assessment Year under consideration, the return of income under Section 139(1) was due on 30th June 1974 but it as filed on 6th July 1974, showing Rs.535/- as income from the house property and Rs.255/- as income from other sources, the total being Rs.790/-. The respondent filed another return of income on 27th September 1974 showing the same total income as was disclosed in the original return though the income under the various heads was varied. It has claimed a sum of Rs.118203/- to be exempt from tax as the said amount represented interest received from its members. The Assessing Officer did not grant exemption under Section 80-P of the Act by holding that it was not carrying the business of banking providing credit facility to its members. However, after allowing the deduction of Rs.20000/- under Section 80-P(2)(c) of the Act, the income from interest included in its income, was worked out at Rs98204/- and the total income was assessed at Rs.103419. The order was passed on 27th July 1977 after obtaining the approval of the Inspecting Assistant Commissioner under Section 144B of the Act. The first appeal preferred by the respondent was dismissed. In second appeal, the Tribunal accepted the plea taken by the respondent that the return was revised under Section 139(5) of the Act and as per the provisions of law applicable for the year under consideration, the assessment having been completed beyond two years, was vitiated under law and consequently it quashed the assessment order.
We have heard Sri Dhananjaya Awasthi, the learned Standing Counsel for the Revenue. No body has put in appearance on behalf of the respondent.
It is not in dispute that the return for the Assessment Year 1974-75 was due under Section 139(1) of the Act on 30th June 1974. The respondent had filed the return on 6th July 1974, which was not under Section 139(2) of the Act, as it is not the case that the said return was filed upon issuance of a notice by the Assessing Officer. Thus, the aforesaid return is to be treated as one having been filed under Section 139(4) of the Act as held by the Apex Court in the case of Kumar Jagdish Chandra Sinha v. Commissioner of Income Tax, (1996) 220 ITR 67, and the revised return which has been filed by the respondent on 27th September 1974, is not a valid return and has to be ignored altogether.
Under Section 153(1) of the Act, as it stood during the relevant Assessment Year, an order of assessment could have been made within two years from the end of the Assessment Year. The relevant section is reproduced below :-
S.153. Time limit for completion of assessments and reassessments. - (1) No order of assessment shall be made under section 143 or section 144 at the Assessment Year 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 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 eight 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; or
(d) the expiry of six months from the end of the month in which an application under clause (a) of sub-section (2) of section 143 is made by the assessee,
whichever is latest."
Clause (iv) of Explanation 1 to Section 153 excluded certain period while computing the limitation. It reads as follows :-
�?xplanation 1. - In computing the period of limitation for the purposes of this section -
(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
shall be excluded."
The plea of limitation was raised, for the first time, before the Tribunal, which had been upheld. It is not in dispute that the assessment order was passed after obtaining the approval of the Inspecting Assistant Commissioner under Section 144B of the Act. In view of clause (iv) of the Explanation, period not exceeding 180 days commencing the date on which the Income Tax Officer forwards the draft order under sub-section (1) of Section 144B to the assessee and ending on the date the Income Tax Officer receives the directions from the Inspecting Assistant Commissioner under sub-section (4) of that section, or, where no objections to the draft order are received from the assessee, a period of thirty days, has to be excluded. The Tribunal has not considered the implication of clause (iv) of Explanation 1 to Section 153 of the Act. Thus, the order of the Tribunal cannot be sustained. The Tribunal is directed to reconsider the matter in the light of the observations made above.
As the Tribunal had not considered the implication of clause (iv) of Explanation 1 to Section 153 of the Act and had quashed the assessment order as barred by limitation, it is not possible for us to give our opinion to the question of law referred to us and accordingly we return the reference unanswered. In the interest of justice, we direct the Tribunal to reconsider the matter in the light of the observations made above.
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