Law:

Section:

Section 34(3) of the Indian Income-tax Act, 1922 [corresponding to section 153(3) of the Income-tax Act, 1961] - Reassessment - Time limit for completion of - Assessee, in relevant assessment year, had made an application for refund of tax deducted at source - ITO passed an assessment order without giving an opportunity of hearing to assessee - On appeal, AAC directed ITO to follow procedure laid down in the Act for assessment - Fresh assessment order was passed after expiry of time limit -Whether Tribunal was justified in holding that saving provision in second proviso to section 34(3) was not applicable and assessment order was time barred - Held, yes Facts The assessee, a charitable trust, had received a certain amount as commission/brokerage in the year relevant to the assessment year 1955-56 after deduction of tax at source. The assessee filed an application before the ITO under section 48 of the 1922 Act for refund of the said tax deducted at source on the ground that it was a charitable trust not liable to tax. The ITO, however, included the said amount in the income of the assessee and levied tax and adjusted the amount of tax deducted at source. He also raised a further demand of a certain amount which was directed to be adjusted against the refund due to the assessee in the following year. The assessee contended before the AAC that the ITO had no jurisdiction to pass an assessment order on an application for refund and it was neither given an opportunity of hearing nor a notice was served as required under the Act. The AAC set aside the impugned order of the ITO and directed him to make a fresh assessment according to law. The ITO passed a fresh assessment order on 10-12-1970 after expiry of the time limit prescribed under section 34. The AAC on appeal held the order to be time barred and not saved by the provisions of the proviso to section 34(3). On appeal the Tribunal upheld the AAC's order. On reference : Held In the instant case, the AAC held that the ITO had not followed the procedure laid down in the Act for making an assessment. The ITO did not issue any notice nor afforded an opportunity of hearing to the assessee. He had been directed to…

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