TRUSTEES OF H.E.H. THE NIZAM'S SUPPLEMENTAL FAMILY TRUST versus COMMISSIONER OF INCOME TAX

Citation: [2000] 1 S.C.R. 863 · Decided: 16-02-2000 · Supreme Court of India · Bench: D.P. WADHWA · Disposal: Appeal(s) allowed

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Judgment (excerpt)

TRUSTEES OF H.E.H. THE NIZA.\1'S SUPPLEMENTAL 
FAMILY TRUST 
v. 
COMMISSIONER OF INCOME TAX 
FEBRUARY 16, 2000 
(D.P. WADHWA A.11.ID SYED SHAH MOHA.\.IMED QUADRI, JJ.) 
Income Tax Act, 1961 : 
A 
B 
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 ref e"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 re tum 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] 
F 
G 
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. 
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. 
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 S

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