THE COMMISSIONER OF INCOME TAX vs. NUTHERN (P) LTD.

ITR/42/1999HC GujaratGJHC24025200199904 September 2006Author: HONOURABLE MR. JUSTICE D.H.WAGHELA,HONOURABLE MR. JUSTICE R.S.GARG5 pages
AI SummaryAllowed

What were the facts?

The assessee, NUTHERN (P) LTD., had an accounting period from July 1, 1983, to June 30, 1984, for Assessment Year 1985-86. The Assessing Officer passed an order under Section-143(3) on January 4, 1988. The Commissioner of Income Tax (CIT) initiated proceedings under Section-263, believing income of Rs.3,83,170/- for the period July 1, 1984, to December 31, 1984, should be assessed for AY 1985-86, not AY 1986-87. The CIT set aside the assessment order and directed a fresh assessment. The assessee appealed to the ITAT, which allowed the appeal, holding the CIT was not justified under Section-263. The Revenue's reference to the High Court (Income Tax Reference No. 213 of 1994) was dismissed on October 20, 2005, upholding the ITAT's decision. Meanwhile, the Assessing Officer proceeded with a fresh assessment based on the Section-263 order. This fresh assessment was challenged before the CIT and then the ITAT, which held it could not survive as the Section-263 order was quashed.

What did the High Court hold?

The High Court held that when the very foundation for making a fresh assessment, which was the order passed by the CIT under Section-263, has been set aside by the Tribunal and confirmed by the High Court, the fresh assessment order cannot survive. The Court reasoned that if the order conferring jurisdiction on the Assessing Officer to make a fresh assessment is nullified, then the Assessing Officer has no legal basis to proceed with such assessment. Consequently, the earlier order passed under Section-143(3) would revive. The High Court answered the reference in favour of the assessee and against the Revenue, disposing of the reference. No issue was expressly left undecided.

What were the issues?

1. Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was right in law in canceling the order of the assessing officer passed in pursuance of CIT's order u/s. 263 of the Act with regard to the accounting period of 12 months? (Question of law) Assessee's Contention: The assessee argued that since the order passed by the CIT under Section-263 was set aside by the ITAT and confirmed by the High Court, the foundation for the fresh assessment was removed. Therefore, the fresh assessment proceedings could not survive, and the earlier order under Section-143(3) should revive. Revenue's Contention: The Revenue contended that the fresh assessment order, passed in pursuance of the CIT's order under Section-263, should be upheld. They sought a reference to the High Court on the ITAT's decision to cancel this fresh assessment order.

Which sections of the Income-tax Act were involved?

Section 143(3),Section 263,Section 256(1)

AI-generated summary — verify with the full judgment below

ITR/42/1999 1/5 JUDGMENT IN THE HIGH COURT OF GUJARAT AT AHMEDABAD INCOME TAX REFERENCE NO. 42 OF 1999 For Approval and Signature: HONOURABLE MR.JUSTICE R.S.GARG HONOURABLE MR.JUSTICE D.H.WAGHELA ========================================================= 1 Whether Reporters of Local Papers may be allowed to see the judgment ? 2 To be referred to the Reporter or not ? 3 Whether their Lordships wish to see the fair copy of the judgment ? 4 Whether this case involves a substantial question of law as to the interpretation of the Constitution of India, 1950 or any order made thereunder ? 5 Whether it is to be circulated to the Civil Judge? ========================================================= THE COMMISSIONER OF INCOME TAX - Applicant(s) Versus NUTHERN (P) LTD. - Opponent(s) ========================================================= Appearance : MR. MANISH R. BHATT for Applicant(s). NONE for the Respondent(s) though served. ========================================================= CORAM : HONOURABLE MR.JUSTICE R.S.GARG and HONOURABLE MR.JUSTICE D.H.WAGHELA Date : 04/09/2006 ORAL JUDGMENT (Per : HONOURABLE MR.JUSTICE R.S.GARG)

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