STATE OF KERALA Vs. PRASANNA VIJAYARAGHAVAN THIRUVANANTHAPURAM

JUDGEMENT

(1.) The question raised in the revision case filed by the State is whether the Agricultural Income Tax Appellate Tribunal was justified in holding that the revised ATT assessment completed in the respondent-assessee's case for the assessment year 1986-87 on September 14, 1996, is time barred. The assessee did not file the return for the relevant assessment year and the officer did not issue any notice proposing the assessment of escaped income under Section 35 of the Income Tax Act, 1950 until it was repealed and substituted by the Income Tax Act, 1991. Notice for the first time was issued purportedly under Section 41(1) of the new Act on 9-8-1996, against which the assessee filed the return. Even though objection was raised against the completion of assessment beyond time limit, the assessing officer overruled the same on the ground that 10 years time is available to him to complete assessment of escaped income under Section 41(1) of the new Income Tax Act. If limitation under Section 41(1) is available in this case, then of course the assessment is valid. On the other hand, if the limitation under Section 35 of the old Act is applicable, then of course the assessment or even the proposal for the assessment are time barred The Tribunal though accepted the departmental stand that Section 41(1) applies to the respondent-assessee's case, still allowed the appeal holding the assessment is time barred on the ground that limitation has to be computed from the end of the previous year as according to the Tribunal, financial year referred to in Section 35 of the old Act is the previous year. Even though we do not approve the Tribunal's order that limitation has to be reckoned from the end of the previous year and not from the end of the assessment year, we are inclined to uphold the order of the Tribunal on the grounds of limitation, though for different reasons. The new Act came into force on 1-4-1991, and as on that date no assessment or proceeding was pending against the respondent-assessee in respect of the relevant assessment year i.e. 1986/87. Section 99(3) of the new Act however entitles the department to complete any proceeding pending on the commencement of the new Act regarding the assessment, levy, collection and recovery of tax chargeable under the old Act including that of escaped agricultural income. Since the consequence of repeal are fully provided in Section 99, the said section is extracted hereunder (see, (1991) 192 ITR 13):

(2.) It is obvious from the proviso to Sub-section (1) of the above section that any right, title, obligation or liability already acquired, accrued or incurred under the old Act will remain unaffected even after repeal. Similarly any action taken including any notice, order, rule, or certificate issued under the old Act shall be deemed to have been done or taken in the exercise of the powers conferred under the new Act. Sub-section (2) retains the authority of departmental officers to continue the proceedings pending under the old Act as if those are proceedings under the new Act. Sub-section (3) of the new Act retains the provisions of the repealed Act for the purpose of assessment, collection and recovery of tax including that of escaped agricultural income. In other words, not only a pending assessment can be completed under the provisions of the old Act, but even completed assessment can be reopened for the purpose of the assessment of escaped agricultural income by resort to the provisions of the repealed Act. In fact, the officer gets power in this case under Sub-section (3) to make an income escaping assessment under the old Act. Section 35 of the old Act provides for only five years time from the end of the assessment year to complete an income escaping assessment. Therefore, an escaped assessment for the year 1986-87 in the petitioner's case could be completed up to 31-23-1992. Sub-section (3) of Section 99 does not extend the period of limitation available under Section 99 and Section 41(1) of the new Act in respect of the assessments for any assessment year prior to the commencement of the new Act. In fact Section 41(1) provides for the assessment of income assessable under the new Act and not income pertaining to any period prior to the commencement of the new Act which could be assessed only under Section 99(3) of the new Act and by virtue of its operation, the limitation under the old Act applies. Since the escaped assessment in the petitioner's case was not completed before 31-3-1992, in terms of Section 35 of the old Act, the assessment is time-barred and consequently illegal and unenforceable. Even though the Special Government Pleader contended that by virtue of the proviso to Section 99(1) of the 1991 Act the provisions of the said Act apply for the assessment completed under the old Act, we do not find any such provision in the said proviso which as already stated, only validates what is done under the old Act. We, therefore, uphold the order of the Tribunal holding that the petitioner's assessment for 1986-87 is time barred, but for different reasons stated above.