Supreme Court of India
TRUSTEES OF H.E.H. THE NIZAM'S SUPPLEMENTAL FAMILY TRUSTversusCOMMISSIONER OF INCOME TAX
- Citation
- 2000 INSC 77
- Decided
- 16 February 2000
- Disposal
- Appeal(s) allowed
- Bench
- D P WADHWA
Holding
A reassessment under Section 148 is invalid when the earlier return filed with a refund claim remains pending, as a mere internal note does not constitute a final order terminating assessment proceedings.
Summary
The trustees of H.E.H. The Nizam's Supplemental Family Trust filed a return for AY 1962‑63 in 1964 together with a Section 237 refund claim for tax deducted at source. The Income‑Tax Officer neither granted the refund nor communicated any final decision, but later recorded a note on 10‑Nov‑1965 stating that credit for tax deducted at source would not be allowed. In 1970 the officer issued a Section 148 notice for reassessment, which the trustees contested, arguing that the earlier return and refund application were still pending and that the note did not constitute a final order. The appellate authorities held the reassessment invalid, but the High Court reversed, treating the note as a disposal of the earlier return. The Supreme Court held that a return filed with a refund claim is a valid return, that assessment proceedings remain pending until a final order is communicated, and that the 1965 note was merely an internal endorsement, not a final order. Consequently, the reassessment under Section 148 was invalid and the appeal was allowed.
Issues considered
- The return filed with a Section 237 refund claim is a valid return under Section 139.
- Whether the note recorded on 10‑Nov‑1965 by the Income‑Tax Officer constitutes a final order terminating assessment proceedings.
- Whether a reassessment under Section 148 can be initiated while assessment proceedings on the earlier return are pending.
- Whether lack of communication of the note affects its validity as a final order.
Legislation cited
- Income Tax Act, 1961s. 139, s. 143(3), s. 147, s. 148, s. 237, s. 246(k), s. 249
- Income Tax Rules, 1962s. 41
Subjects
income taxreassessmentsection 148section 237refund claimassessment yeartax deduction at sourcefinal ordercommunication of orderassessment proceedings
Judgment
TRUSTEES OF H.E.H. THE NIZA.\1'S SUPPLEMENTAL A
FAMILY TRUST
v.
COMMISSIONER OF INCOME TAX
FEBRUARY 16, 2000
B
(D.P. WADHWA A.11.ID SYED SHAH MOHA.\.IMED QUADRI, JJ.)
Income Tax Act, 1961 :
Sections 143(3), 147 and 148--Reassessment-Valid return for AY C
1962-63 filed in 1964 was pending along with an application for refund of tax
deducted at source-Note recorded by ITO in the file that question of giving
credit for tax deducted at source could be considered at a later stage-Order
not communicated to assessee-Notice to file fresh return for AY 1962-
63-fi'resh return filed -Order of reassessment challenged-Appellate Assis-
tant Commissioner held reassessment valid as no final orders had been D
passed on previous retum--{/pheld by Income Tax Appellate Tribunal and
question of law refe"cd to High Court-High Court held the note to be an
order of disposal and also held the reasseJJment valid-On appeal Held, no
reassessment proceedings can be initiated if asseJ'Sment proceeding pending
on basis of return already filed-Note WOJ merely an internal endorsement on E
the file, no finality to the claim of refund was given-Notice for reassessment
was invalid-Sections 139, 237, 246(/)(k) and 249--lncome Tax Rules,
I 962:--R.ule 41.
Sections 237 and 139--Refund of tax deducted at source-Filing of
return in prescribed f onn a long with application for refund is not an empty F
f onnality-&amination of retum as regards co"ectness of the amount
claimed as refund constitutes assessment.
The appellant trustees filed income tax return for Assessment Year
1962-63 in 1964 along with an application under Section 237 of the Income
Tax Act, 1961 for refund of tax deducted at source. The appellant trustees G
did not get any favourable response on the refund application. TI1ey
received a notice under Section 148 of the Act requiring them to file return
for Assessment Year 1962-63, which was filed on 3.7.1970. The trustees
raised an objection before the Income Tax Officer after receiving tbe
assessment order, that the return filed in 1964 along with the refund H
863
864 SUPREME COlJRT REPORTS (2000] 1 S.C.R.
A application was still pending and, therefore, the proceeding initiated under
Section 147 of the Act were im'alid. The Income Tax Officer replied that
the previous return had been disposed of by a note recorded in the file on
10.11.65 to the effect that the question of giving credit for the tax deducted
at source could be considered in tlie hands of the beneficiaries but at a
B later stage. This note was not communicated to the appellants earlier.
The appellant trustees filed an appeal before the Appellate Assistant
Commissioner who was of the view that final order on the return filed in
1964 had not been passed, therefore reassessment was invalid. The Income
Tax Appellate Tribunal dismissed the appeal filed by the Revenue and
C referred the question of law arising from its order to the High Court for
opinion. The High Court was of the view that the note dated 10.11.1965
made by the Income Tax Officer was an order of disposal of the tax return
filed in 1964, therefore, there was no bar to the reassessment proceedings.
Hence this appeal by the trustees.
D Allowing the appeal, this Court
HELD : 1. Unless the return of income already filed is disposed of,
notice for reassessments under Section 148 of the Act cannot be issued.
No reassessment proceedings can be initiated so long as assessment
E proceedings pending on the basis of the return already filed are not
terminated. [870-D]
Kalyan Kumar Ray v. Commissioner of Income Tax, (1990) 191 ITR
634; Commissioner of Income Tax, Madras v. M.KKR. Muthukaruppan
Chettiar, (1970) 78 ITR 69, relied on.
F
M. Ct. Muthuraman v. Commissioner of Income Tax, Madras, (1963)
50 ITR 656; U.S. Sivalingam- Chettiar v. Commissioner of Income Tax,
Madras, (1966) 62 ITR 678; Commissioner of Agricultural Income Tax,
Kera/a v. KH. Parameswara Bhat, (1974) 97 ITR 190, approved.
G 2.1. Return of income filed in the prescribed form along with an
application for refund under Section 237 of the Act is a valid return. There
is no stopping the Income Tax Officer to complete the assessment on the
basis of the return so filed. He may limit the scope of examination of the
return to satisfy himself regarding the correctness of the amount claimed
H as refund. He will examine if the tax paid by the assessee exceeds the
1RUSIECS OF H.E.H. IBE NIZAM'S SUPPLE\fENTAL FAMILy rausr v. C.l.T. 865
amount of tax for which he is chargeable. If the income is found "nil", A
-, refund will be granted for any amount of tax paid. That will certainly be
assessment. (874-G-H]
2.2. Filing of return in the form prescribed under Section 139 of the Act
along with the application for refund is not an empty formality. It assumes
importance if such return had not been filed earlier. [875-A] B
3.1. The note recorded by the Income Tax Officer shows that no
finality was given to the refund since no refund is granted either in the
hands of the trust or in the hands of the beneficiaries. It is an
inconclusive note, where the Income Tax Officer left the matter at the
stage of consideration even with regard to refund in the hands of the
c
beneficiaries, and it was not communicated to the trustees. Nothing flows
from the note and even if it is an order, it would be appealab!e under
Section 249 of the Act. Since period of limitation starts from the date
of intimation of such an order, it is imperative that it should be
communicated to the assessee. (875-C-D] D
3.2. T:ie note is merely an internal endorsement on the file without
there being an indication if the refund application has been finally
rejected. The Income Tax Officer cannot be said to have closed the
proceedings finally. [875-E] E
4. During the pendency of the return filed under Section 139 of
the Act along with refund application under Section 237 of the Act action
could not have been taku. under Section !471148 of the Act. (875-F]
CIVIL APPELLATE JURISDK'TION : Civil Appeal No. 5395 of F
1993
From the Judgment and Order dated 7.10.83 of the Andhra Pradesh
High Court in R.C. No. 58 of 1978.
Joseph Vallapalli, (Harish N. Salve) (NP), Dr. V. Gouri Shankar, G
KN. Shukla, M.L. Verma, P. Murli Krishnan, AK Sharma, Mrs. AK
Verma, B.A Ranganathan, Ms. Smriti Madan, Anil Srivastava, Shall
Kumar Dwivedi, Shravan K. Sharma, P.K. Prasad, S. Sukumaran, S. Rajap-
pa, D.S. Mehra, S.V. Pathak, (Ms. A Subhashini) (NP), and Y. Ratnakar,
J.B. Dadachanji for the appearing parties. H
866 SUPREME COURT REPORTS [20CO] 1 S.C.R.
A The Judgment of the Court was delivered by
D.P. WADHWA, J. The question that calls for consideration is :
Whether, on the facts and in the circumstances of the case, the assessment
made by the Income-tax Officer for the Asstssment Year 1962-63 under
Section 143(3) read with Section 147 of the Income Tax Act; 1961 is valid
B in law?
The case concerns the H.E.R the Nizam's second Supplemental
Family Trust. l'he trustees of the trust filed income tax return for the
Assessment Year 1962-63 on behalf of the beneficiaries on April 2, 1964.
C Along with the return they filed an application under Section 237 of the
Income Tax Act, 1961 (for short the 'Act') for refund of tax of Rs. 2,050.52
deducted at source on interest on Government securities and dividends.
Section 237 of the Act provides for refund and it is as under :
"237. if any person satisfies the Assessing Officer that the amount
D of tax paid by him or on his behalf or treated as paid by him or
on his behalf for any assessment year exceeds the amount with
which he is properly chargeable under this Act for that year, he
shall be entitled to a refund of the excess."
Under Rule 41 of the Income Tax Rules, 1962 (for short the 'Rules') a
E claim for refund is to be mo.de in Form No. 30. This Rule is as under :
'41. (1) A claim for refund under Chapter XIX shall be made in
Form No. 30.
(2) The claim under sub-rule (1) shall be aceompanit:d by a return
F in the form prescribed under section 139 unless the claimant has
already made such a return to the Assessing Officer.
(3) Where any par~ of the total income of a person making a claim
for refund of tax consists of dividends or any other income from
which tax has been deducted under the provisions of sections 192
G
to 194, section 194A and section 195, the claim shall be accom-
panied by the certificates prescribed under section 203.
(4) The claim under sub-rule (1) may be presented by the claimant
in person or through a duly authorised agent or may be sent by
H post."
1RU>TEES OF H.E.H. IBE NI LAM'S SUPPLEMENTAL f AMIL Y1RUST v. C.I. T. [D.P. WADHWA. l.i 867
The claim for refund is to be accompanied by return of income in the form A
- prescribed under Section 139 of the Act unless the claimant has already
made such return to the Income-tax Officer.
Since there was no response from the Income-tax Officer the trustees
reminded him on June 17, 1964 for disposal of the refund application. The
B
Income-tax Officer gave a reply on July 22, 1964 stating that the refund
could not be granted to the trustees unless the references on the same
question for the preceding assessment years filed by the trustees were
disposed of by the High Court. A reminder was again sent by the trustees
on September 23, 1966 to the Income-tax Officer for grant of refund but
again no reply was given by the Income-tax Officer. Thereafter a notice c
under Section 148 of the Act was received by the trustees from the
Income-tax Officer requiring them to file return for the Assessment Year
1962-63. Return was filed on July 3, 1970 declaring an income of Rs.
6,26,200 as long term capital gain. It would appear that on the same day
the return was accepted on the income returned by the trustees. The D
trustees thereafter raised an objection by writing to the Income-tax Officer
on July 3, 1970, after they had received the assessment order, that the
return filed by them on April 2, 1964 along with refund application was
still pending and, therefore, the proceeding initiated under Section 147 of
the Act were invalid. They also claimed that the assessment made pursuant
to the notice under Section 148 was equally invalid. To this the Income-tax E
Officer sent his reply on July 18, 1970 stating that the return filed on April
2, 1964 was disposed of on November 10, 1965 by a note recorded by the
Income-tax Officer in his fik. This note was recorded on November 10,
1965 in the file pertaining to Assessment Year 1963· 64 and was tu the
following effect :-
F
"In view of the Supreme Court judgment in the case of H.E.H.
Nizam, the question of giving credit for tax deducted at source can
be considered in the hands of the beneficiaries. Hence, no credit
for the tax deducted at source is to be allowed here. The question
of refunding the additional surcharge will have to be considered." G
Against the order of reassessment dated July 3, 1970 trustees filed
an appeal bt:fore the Appellate Assistant Commissioner questioning the
same. The Appellate Assistant Commissioner took the view that the In-
come-tax Officer had not passed the final orders on the return filed on H
868 SUPREME COURT REPORTS [2COO] l S.C.R.
A April 2, 1964 along with application seeking refund. He, therefore, held
that the reassessment made by the Income-tax Officer pursuant to the .-
notice under Section 148 of the Act was invalid and cancelled the same.
The Revenue then took the matter in appeal to the Income-tax Appellate
Tribunal. Following two questions were raised before the Tribunal :
B "(l) Whether the return filed by the assessee on April 2, 1964,
along with the refund application was one filed under Section
139(1) of the Income-tax Acri
(2) Even if it is assumed that the return filed by the assessee
c along with the refund application commences assessment proceed-
ings, whether the proceedings should be treated to have been
finalised by the Income-tax Officer at least by his note dated
November 10, 1965, if not earlier by his letter dated September 26,
1984, addressed to the assessee, and as the proceedings for the
refund were terminated by the Income-tax Officer by his note
D dated November 10, 1965, there is no bar for the reassessment
proceedings for the same year and, hence, the reassessment
proceedings in respect of the income of such year would be valid?"
There was difference of opinion between the Accountant Member
E and the Judicial Member comprising the Tribunal and the matter was
referred to the third member in the following manner :
''Whether, on the facts and in the circumstances of the case, the
order of assessment made by the Income-tax Officer for the As-
sessment Year 1962-63 under Section 147 of the Income-tax Act,
F 1961, is valid in law."
The Accountant Member was of the view that the return filed by the
assessee along with its refund claim did not set in motion any assessment
proceedings and consequentially there were no assessment proceedings
G which remained undisposed of by the Income-tax Officer at the time when
he initiated proceedings under Section 147 of the Act. Judicial Member
was of the view that on consideration of the entirety of the facts and
circumstances of the case the return filed by the assessee on April 2, 1964
was a valid return. On second question whether proceedings had been
terminated by the noting of the Income-tax Officer in the order sheet the
H Accountant Member held that proCtiedings, if any, that commenced with
1RU!ffEF.S OF H.E.H.1HE NIZAM'SSUPPIBMENTAL FAMILY1RUSI>. C.LT. [D.P. WADHWA. 1.J 869
the return, were terminated by the Income-tax Officer by his note dated A
November 10, 1965. On the second question the Judicial Member held that
on a plain reading of the endorsement made by the Income-tax Officer it
- was very clear that no disposal was given to the return filed and the said
endorsement related to the opinion expressed by the Income-tax Officer
about giving credit for tax deduction at source. Third member (Mr. D.
Rangaswamy, Vice President) after examining the whole matter said as B
under:
"Since I have already expressed my agreement with the views
expressed by the Judicial Member that the return accompanying
an application for refund is a return under Section 139 and all the
procedures, formalities and machineries applicable to proceedings
c
of a return under section 139 would apply and I have further agreed
with his view that there has been no termination of the proceedings,
I hold that both the Judicial Member and the Appellate Assistant
Commissioner were right in holding that the assessment made by
the Income-tax Officer, pursuant to notice under section 147 was D
invalid and has to be accordingly cancelled."
Thereafter, in conformity with the views of the majority of the members
the Tribunal dismisst::d the appeal of the revenue.
At the instance of the revenue under Section 256(1) of the Act the E
Tribunal referred the question of law arising from its order to the Andhra
Pradesh High Court as set out in the beginning of this judgment for the
opinion of the High Court. High Court was of the view that the ordt::r dated
November 10, L965 of the Income-Lax Officer on the note-sheet
(reproduced above) was an order of disposal of the tax return filed by the
trustees. lt held that the return filed by the trustees on April 2, 1964 along F
with refund application was one filed under Section 139 of the Act and was
valid return and as the refund application was disposed of by order dated
November 10, 1965 of the Income-tax Officer, there was no bar to the
reassessment proceeding for the same year and the reassessment proceed-
ings were, therdore, valid. G
Now it is the assessee, which felt aggrieved and has come to this
Court.
It is not disputed that the return filed with the refund application
under Section 237 of the Act is a valid return and the Income-tax Officer H
870 SUPRE\1E COl RT REPORTS (2000) l S.C.R.
A can initiated proceedings for assessmtont on the basis of the return so filed.
The only question that falls for consideration for us is : if in the circumstan-
ces of tht: cast: it could be said that the note recorded by tht: Income-tax
Officer in his file on Nowmber 10, 1965 is an order which concluded the
asst:ssmcnt proceedings for the Ass~ssmcnt Year 1962-63 bdorc he in-
itiated proceedings under Section 147 of the Act. It is also not disputed
B that this note/order of November 10, 1965 terminating the assessment
proceedings of the Assessment Year 1962-63 was never communicated to
the trustees till July 16, 1970 and that too in a reply to the letter sent by
the trustees. According to the High Court the note, which is an order, did
terminate the assessment proceedings. High Court was of the view that the
C first part of the order gavt: reasons and the second part of the order clearly
spoke of the conclusion wht:n read : 'Hence no credit for tax deducted at
source is to be allowed here''.
It is settlt:d law that unless the return of income already filed is
disposed of notice for n:assessments under Section L48 cannot be issued,
D i.e. no reassessment proceedings can be initiated so long as assessment
proceedings pending on the basis of the return already filed are not
terminated. According to the Revenue:: it is immaterial whether the order
is communicated or not and that the only bar to the reassessment proceed-
ings is that proceedings on the return already filed should have been
terminated. In support of this contention reference was made is certain
E decisions of the High Courts and some observation made by this Court in
a case, which Wt:: note as under :-
In M.Ct. Muthuraman v. Commissioner of Income-tax, Madras, (1963)
50 ITR 656 the assessment proceedings which had commenced with the
returns filed by the assessc::c wt:re lawfully terminattd when they were
F closed with the entry "N.A." (not assessed). The orders terminating the
assessment proceedings were not communicatt:d to the assessee. The In-
come-tax Officer issued notices under Section 34 of the Income Tax Act,
1922 (corresponding to Section 147 of the Income Tax Act, 1961). The
Court held that the assessment proceedings were lawfully terminated and
G that ''the orders terminating the asseshlllent proceedings were not ap-
parently communicated to the assessee did not affect the legality of those
orders or their finality".
In V.S. Siva/ingam Chettiar v. Commissioner of Income Tax, Madras,
(1966) 62 ITR 578 again a similar question arose before the Madras High
H Court. It was contended that the conclusion of the Madras High Court in
rn.USTuES OF H.EH. rHE NIZAM'S SUPPLEMENTAL FAMILYlRUSh. C.LT. [D.P. WAD HWA, J.l 871
M.Ct Muthuraman's case that ;•the orders terminating the assessment A
proceedings were not apparently communicated to the asse5see did not
affect the !t:gality of those orders or their finality" was without reasons. But
the Court rejected this contention and held :
"But we are satisfied, if we may so with respect that is the correct B
view to take. Wherever orders are made under the Act, which
affect the assessee in some form or other, it has provided for
service of notice and the remedy there against. Section 29 requires
notice of demand to be served on an assessee; but the section
makes it a condition that a notice of demand will be required to
be served only when any tax, penalty or interest is due in conse- C
quenct: of any order passed under or in pursuance of the Act.
Learnt:d counsel for the revenue argues that it is visualised by the
section that there should be an order made under the Act under
which tax, penalty or interest is due before a notice of demand is
served, and that this means that service of notice does not bear on D
the validity of an order. In other words, what he points out is that
there should be first a valid order, and then only a notice of
demand is required to be served, so that service of notice is not a
condition to the validity of the order itself. Though prim a f acie the
argument may appear to be tenable, the question may arise as to
whether proceedings under Section 34 could be initiated between E
the date of an order under the Act and service of notice of that
order. But an examination of some of the other provisions of the
Act like sections 24(3), 23(5) and (6), 27, proviso (2) to section
30(1) and the related provisions in section 30 lead us to the
conclusion that where orders are passed under or in pursuance of F
the Act, which are prejudicial to an assessee, notice of the order
is required to be served and, for the purposes of resorting to the
remedy, limitation is to count from the date of service of notice
of such order. In this case, from a purely fiscal point of view, it
can hardly be said that the orders made by the Income-tax Officer
on the returns by the assessee as an individual were in any way G
prejudicial to him. The orders did not fasten on the assessee any
liability to tax. Nor did they contain any finding which could by
any means be said to be against the assessee as an individual. All
that was held by the Income-tax Officer was that the income, which
the assessee claimed to be his as an individual, did not belong to H
872 SUPREME COVRT REPORTS (20C0j 1 S.C.R.
A him. That means that he was not held liable to pay any tax. In that
sense, as it seems to us, not prejudiced as he was by the order
passed by the Income-tax Officer, failure to serve notice thereof
did not deprive these orders of their validity. In our view on a strict
reading of the Act, it does not appear to contemplate service of
notice in such cases. Nevertheless, we feel that it is desirable from
B many points of view that the revenue serves notice on assessees of
such orders. It will not only tend to fairness to the assessee but
also avoid deserving complaints that an order of which the assessee
was not aware of forms the basis of proceedings under section 34."
C Relying on these two decisions of the Madras High Court in M.Ct.
Muthuraman and V.S. Sivalingam Chettiar's cases Kerala High Court in
Commissioner of Agricultural lncome-Tax, Kera/a v. KH. Parameswara
Bhat, (1974) 97 TTR 190 took somewhat a similar view. Kerala Agricultural
Income Tax Appellate Tribunal under the Agricultural Income Tax Act,
D 1950, however had taken the View that since the order of "nil" assessment
had not been communicated to the assessee, the notice under Section 35
was ab initio void. The ground for the decision was that as far as the
assessee was concerned, the assessment proceedings originally commenced
were still pending because the order of "nil" assessment had not been
communicated to the assessee. High Court said that the view taken by the
E Tribunal was erroneous. It said :
''The scheme of the Act indicatt:s that the making of an assessment
naturally by an order is difforcnt from tht: communication of the
absessment order to the assessee. There i' no ~pecific pruvisivn in
F tht: act enjoining that an assessmt:nt ordt:r must be communicated
to the asst:ssee. Nor is there any provision in the rckvant Rules
that assessment orders must be communicated. All that section 30
of the Act requires is that a notice of dt:mand in tht: prescribed
form specifying the sum payable shall be served on the assessee
G when a tax or penalty is due in consequence of an order passed
under the Act. But it is of course not only desirable but necessary
that an order or assessment should be communicated to the asses-
see. The Act itself envisages service of the assessment order.
Sub-section (3) of section 31 for instance provides that an appeal
H from the order of assessment shall be presented within a period
'[RU,TullSOF H.E.H. THE NIZAM'SSUPPLEMENIAL FAMILYTil.US'l '· C.l.T. [D.P. WADHWA. l.l 873
of thirty days from the date of service of the order. Apart from A
this, the assessee is entitled to know the reasoning for imposing
tax or penalty on him and he would be able to exercise his right
of appeal, if any, only if the order is communicated to him. But
the question is not whether it is either desirable or necessary that
an order of assessment should be communicated, but whether the B
lack of communication of the order would make the order void or
would have the result of keeping the assessment proceedings
pending. We conceive that once an order had been passed by the
officer, it is not open to him to modify or alter that order even if
the order had not been communicated to the assessee, without
adopting the procedure prescribed by section 35 or section 36".
c
In Kalyankumar Ray v. Commissioner of Income Tax, (1991) 191 ITR
634 this Court said that the "assessment" is one integrated process involving
not only the assessment of the total income but also the determination of
the tax. It said that when the Income Tax Officer first draws up an order D
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 E
section 143(3) will be complete. Section 143(3) mandates that the Income-
tax Officer 'shall, by an order in writing, make an assessment of the total
income or loss of the assessee, and determine the sum payable by him on
the basis of such assessment".
F
In Commissioner of Income Tax, Madras v. M.KKR. Muthukarnppan
Chettiar, (1970) 78 ITR 69 it was observed that it was manifest that notice
under Section 34 of the Income-Tax Act, 1922 for reassessment could not
be issued unless the returns which had already been filed were disposed
of. In that case the Income-tax Officer by his order closed the assessment
as 'no assessment" and added that since there was no separate income, the G
pending proceedings would be closed as N.A. and for Income-tax year
1953-54 the file would be removed and clubbed with the family file F.
1005-A. This Court said that the order of the Income-tax Officer should
be interpreted in the light of the circumstances in which that order was
passed and so interpreted "it appears to us that the lncome·tax Officer did H
874 SUPREME COURT REPORTS (2000] l S.C.R.
A not intend to conclude the proceedings before him''.
An order under Section 237 of the Act is appealable as provided in
clause (k) of sub-st:ction ( 1) of Section 246 of the Act. Section 249
prescribt:s limitation for filing appeal. Sub-section (1) of Section 249 is
relevant and it is as under :
B
"249. (1) Every appeal under this Chapter shall be in the pn:scribed
form and shall be verified in the pr .;scribed manner.
(2) The appeal shall be presented within thirty days of the following
date, that is to say -
c
(a) where the appeal relates to any. tax deducted under sub-
section (1) of section 195, the date of payment of the tax, or
(b) where the appeal relates to any assessment or penalty, the
datt: of service of the notice of demand relating to the
D assessment or penalty :
Providt.:d that, where an application has bt:en made under
section 146 for reopt:ning an assessment, the period from the
date on which thc application is made to the date on which
E tht.: order passed on the application is served on the assessee
shall be excluded, or
(c) in any other case, the date on which intimation of the order
sought to be appealed against is served.''
F There is difference in clauses (b) and (c) of sub-section (2) of
Section 249 of the Act.
Return of income filed in the form pre,cribcd along with an applica-
tion for refund under Section 237 of the Act is a ;alid return. There is no
G stopping the Income Tax Offic0r to complete the assessment on the basis
of return so filed. It may be that the Income Tax Officer may limit the
scope of examination of the return to satisfy himself regarding the correct-
ness of the amount claimed as refund. For that purpose, he will examine
if the tax paid by the assessce exceeds the amount to tax for which he is
chargeable. If it is found that the Income was ''nil", he will din:ct refund be
H granted to the asscssee for any amount of tax paid. That will certainly be
1RUSTEESOf -l.E.H. lHE NIZAM'S SUPPLEM!lN'lALt'AMILYTRUST '· C.l.T. :o.P. WADHWA, J.J 875
assessment. Filling of return in the form prescribt:d under Section 39 of the A
Act along with the application for refund is not an empty formality. It
assumes importance if such return had not been filed earlier. We have
reproduced the note/order dated Nowmber 10, I 965 on the file pertaining
to assessment year 1963-64. ln the file for assessment year 1963-64 there is
another note which is as under :
B
''Please see my note in 1963-64 file. Refund to be considered in
the hands of the beneficiaries."
The mere glance at this note would show that it could not be said
that the Income Tax Officer gave finality to the refund since no refund is
granted either in the hands of the trust or in the hands of the beneficiaries.
c
It is an inconclusive note where tht: Income Tax Officer left the matter at
the stagt: of consideration even with n:gard to refund in the hands of the
beneficiaries. This note was also not communicated to the trustees. When
we examine the nott: dated November 10, 1965 on the tilt: of 1963-64
nothing flows from that as well. In any case if it is an order, it would be D
appcalable under Section 249 of the Act. Since period of limitation starts
from the date of intimation of such an order, it is imperative that such an
order be communicated to the assesst:e. Had the Incomt:-tax Offiet:r
passed any final order, it would have been communicated to the assesset:
within a reasonable period. In any case, what we fmd is that the note datt:d
E
November 10, 1965 is merely an internal endorsement on the file without
there being an indication if the refund application has been finally rejected.
By merely recording that in his opinion, no credit for tax deducted at
source is to be allowed the Income-Tax Officer cannot be said to have
closed the proceedings fmally. Decisions referred to by the revenue are of
no help in the present case. We arc, thus, of the opinion that during the F
pendcncy of the return filed under Section 139 of the Act along with refund
application under Section 237 of the Act action could not have been taken
under Section 147/148 of the Act. Our answer to the question, therefore,
is in the negative, i.e., against the Revenue.
The appeal is accordingly allowed with cost.
G
A.Q. Appeal allowed.
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