Gujarat High Court
Commissioner Of Income-Tax vs Purshottamdas T. Patel on 25 August, 1993
Equivalent citations: [1994]209ITR52(GUJ)
JUDGMENT G.T. Nanavati, J.
1. The following question has been referred to this court by the Income-tax Appellate Tribunal under section 256(1) of the Income-tax Act, 1961 :
"Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was right in law in holding that the assessment order is time-barred as no tax payable was determined in the assessment order and holding that there was no indication that the tax was worked out ?"
2. For the assessment year 1973-74, the Income-tax Officer passed an order on March 30, 1976, whereby he assessed the total income of the assessee. On April 28, 1976, he issued a demand notice calling upon the assessee to pay Rs. 11,739 as tax determined on the basis of the assessed total income.
3. The assessee challenged the assessment of total income and the notice of demand by preferring an appeal to the Appellate Assistant Commissioner. The validity of the assessment and the issuance of the notice was challenged on the ground that as the Income-tax Officer had failed to determine the sum payable by him as tax along with the assessment of the total income, the whole assessment had become time-barred. According to the Appellate Assistant Commissioner, for the purpose of section 153 prescribing the time-limit, assessment would mean the computation of income and the tax payable thereon. Therefore, the demand notice issued in this case was beyond the time-limit. He was, however, of the view that that by itself did not invalidate the assessment and, therefore, dismissed the appeal on this point.
4. The assessee then approached the Tribunal by way of further appeal. The Tribunal was of the view that determination of tax is a substantive part of the assessment and, as admittedly, that was not done within the prescribed time, the assessment was not in conformity with the provisions of the Act. On this basis, the assessment order was held to be time-barred. The Revenue felt aggrieved by the said order of the Tribunal and, therefore, called upon it to refer the abovestated question to this court.
5. What is contended by learned counsel for the Revenue is that an order of assessment is required to be made within the time prescribed by section 153. Determination of the sum payable is only an administrative work and that could be done later on by the Assessing Officer. He submitted that it is not necessary that the order of assessment should contain, on the same sheet of paper, calculations as regards the amount of tax payable by the assessee. In support of his contention, he relied upon the decision of the Supreme Court in Kalyankumar Ray v. CIT [1991] 191 ITR 634. Therein, the Supreme Court has held as under (headnote) :
"'Assessment' is one integrated process involving not only the assessment of the total income but also the determination of the tax. The latter is as crucial as the former. The Income-tax Officer has to determine, by an order in writing, not only the total income but also the net sum which will be payable by the assessee for the assessment year in question and the demand notice has to be issued under section 156 of the Income-tax Act, 1961, in consequence of such an order. The statute does not, however, require that both the computations (i.e. of the total income as well as of the sum payable) should be done on the same sheet of paper, the sheet that is superscribed 'assessment order'. It does not prescribe any form for the purpose. Once the assessment of the total income is complete with indications of the deductions, rebates, reliefs and adjustments available to the assessee, the calculation of the next tax payable is a process which is mostly arithmetical but generally time-consuming. If, therefore, the Income-tax Officer first draws up an order assessing the total income and, indicating the adjustments to be made, directs the office to compute the tax payable on that basis and then approves of it, either immediately or some time later, no fault can be found with the process, though it is only when both the computation sheets are signed or initialled by the Income-tax Officer that the process described in section 143(3) will be complete."
6. In our opinion, this decision, far from helping the Revenue, goes against it. The Supreme Court has in terms stated that assessment is one integrated process involving not only the assessment of the total income but also the determination of the tax. It has further observed that the latter is as crucial as the former. Therefore, unless the total income is determined and the determination of tax is also done, it cannot be said that the process of assessment is complete. What section 153 requires is that the assessment should be completed within the prescribed time-limit. The words "order of assessment" cannot be construed to mean assessment of total income only. Those words would mean an order in writing whereby the total income of the assessee is assessed and the tax payable by him is determined. When an order in writing in respect of both these things is passed, it can be said that there is a complete order of assessment. These two steps may be taken simultaneously or separately, but it cannot be gainsaid that both of them will have to be taken within the time prescribed by the Act. Admittedly, in this case the second step was not taken within the prescribed time. After determining the total income, the Income-tax Officer possibly left the matter to his subordinates for the purpose of calculating the tax payable by the assessee on the basis of the assessed total income. Even if we assume in favour of the Assessing Officer that he approved the said calculation when the papers were put before him for signing the demand notice, and that he signed the same, the fact remains that that step was taken by him after the prescribed period was over. The Tribunal was, therefore, right in holding that the assessment in this respect was time-barred.
7. We, therefore, answer the question in the affirmative, i.e. against the Revenue and in favour of the assessee. No order as to costs.