BUDHINDRA NATH SARMA Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) THE reference under Section 256(1) of the Income-tax Act, 1961, raised at the instance of the assessee revolves round the time limit for completion of assessment and reassessment as enjoined in Section 153(1)(b) of the Income-tax Act, 1961, pertaining to the assessment year 1985-86 and the accounting year ending on March 51, 1985.

(2.) IN the course of assessment, the Assessing Officer asked the assessee to explain certain bank deposits, bank accounts, fixed deposits and investments in respect of properties that stood in his name and in the name of his wife and children. He was also required to produce the names of the creditors from whom he had taken loans. Summons were issued to the creditors some of whom were interrogated/examined by the Assessing Officer on March 8, 1988. The Assessing Officer noticed that the assessee had various bank deposits in his name which were not explained. The Assessing Officer mentioned some of those transactions. Under the normal course, the assessment was to be completed on or before March 31, 1988, in terms of Section 153(1)(a)(iii) of the Act of 1961. The Assessing Officer, however, held the opinion that the assessee was at fault for the concealment of his income thereby making him liable under Section 271(1)(c) of the Act of 1961. The Assessing Officer completed the assessment on March 31, 1989, after making additions of various amounts under the head "Other sources". The assessment was assailed in appeal on the ground that the assessment was barred by limitation and that there was no material of whatsoever manner in the possession of the Assessing Officer to hold that the case fell within the rigour of Section 271(1)(c) of the Act of 1961. The appellate authority accepted the contention of the assessee and held that the assessment was barred by limitation and that the provision of Section 153(1)(b) of the Act of 1961, was not applicable. On appeal by the Revenue, the Appellate Tribunal held that the assessment was not barred by limitation and that provisions of Section 153(1)(b) read with Section 271(1)(c) of the Act of 1961, were applicable to the case. The Appellate Tribunal distinguished the judgment of the Allahabad High Court in CIT v. Surajpal Singh, 1977 108 ITR 746 , which was relied upon by the Commissioner of INcome-tax (Appeals), on the facts. The Tribunal held that till March 28, 1988, no proper explanation was given/filed by the assessee in respect of the deposits. The Tribunal, after evaluating the materials in record, found that since no materials were produced before the Assessing Officer explaining the amounts/accounts as indicated by the Assessing Officer, extension of limitation under Section 153(1)(b) read with Section 271(1)(c) of the Act of 1961, was permissible and accordingly, directed the Assessing Officer to pass a fresh order after giving an opportunity to the parties. The assessee not being satisfied with the order of the Appellate Tribunal, made the reference application under Section 256(1) of the Act of 1961, to draw up a statement of the case and to refer the two questions indicated in the application to the High Court for its opinion. The Appellate Tribunal reframed the questions and accordingly made the following reference :

(3.) PARLIAMENT showed its concern for expeditious disposal of the assessment proceedings and for that purpose a time limit for completion of assessment and reassessment has been set out in Section 153 of the Act of 1961. In order to expedite the disposal of the assessment proceedings during the relevant time, amendment was made by the Finance Act of 1968, effecting a phased reduction in the time limit from four years to two years as indicated in Sub-clauses (i), (ii) and (iii) of Clause (a) to Sub-section (1) of Section 153 of the Act of 1961. However, in those cases wherein the asses-see has made concealment of particulars of his income or furnished inaccurate particulars of such income, as mentioned in Section 271(1)(c) of the Act of 1961, a longer time period is prescribed in view of the fact that such enquiry at the assessment stage would be likely to consume more time and accordingly, a longer time limit for completion of such assessment is prescribed. In aid of the aforesaid provisions, the Assessing Officer is armed with the jurisdiction to prolong the assessment on fulfilment of the conditions set out in Clause (b) to Sub-section (1) of Section 153 of the Act of 1961. The power is not arbitrary. The Assessing Officer can stretch the period of limitation on being satisfied, on the materials on record, about the necessity of invoking Section 271(1)(c) of the Act of 1961. It is no doubt true that the power conferred on the Assessing Officer is not arbitrary power. It has to be exercised only when condition (s) set out in Clause (b) of Sub-section (1) of Section 153 of the Act of 1961, is/are satisfied. But no such issue arises in the present matter.