1. This is an appeal filed by Doolchand Bawarilal of Secunderabad against the order of the AAC, for the assessment year 1960-61.
2. The assessee is a registered firm and the accounting year is for the period starting from 11-5-1958 to 18-5-1959. The assessment was originally made on 30-3-1965 under Section 23(4) of the Indian Income-tax Act, 1922 ('the 1922 Act'). But the assessment was reopened thereafter and completed on 6-5-1975 after making various additions on account of low gross profit, cash credit and the value of unaccounted pledged stock. In first appeal, the assessee contended that the assessment was time barred. It was further contended that the edditions were unjustified. The first appellate authority upheld the jurisdiction as well as the additions. The assessee is in second appeal.
3. The learned counsel for the assessee repeated the plea that the reassessment was barred by limitation. It is not disputed that during the relevant time there was no statutory time limit for completion of assessments reopened under Section 146 of the Income-tax Act, 1961 ('the Act'). It is, however, stated that a circular, viz., Circular No.10P (V-68), dated 15-10-1968-see Taxmann's Direct Taxes Circulars, Vol.
1, 1980 edn., p. 558- stipulated the time limit for this year as well.
Authorities were cited for the proposition that circulars of the Board were binding. Reference was also made to Section 119 of the Act. It was further pointed out that time limit has been statutorily introduced from the assessment year 1971-72. Even otherwise, it was claimed that assessment was completed after delay of eight years without the assessee being responsible for the same. These were the arguments presented for urging that the assessment is time barred. As for gross profit addition and cash credit addition, both were opposed on merits.
As for the variation in stock between books and the bank statements to the extent reconciliation failed, it was claimed that it was done to avail a larger loan facility.
4. The learned departmental representative, on the other hand, took us over the facts. As for jurisdiction, he referred to the order sheet to show that the matter was under continuous investigation and enquiry.
Parties were examined and letters of enquiry were addressed. The assessee had put up a claim that the stocks were that of one Hanumantha Rao at one stage. This was denied and the assessee had to retract from the above claim. He pointed out to the entries in the order sheet to suggest that the case was being continuously investigated and that the delay was not due to any negligence. On the other hand, he pleaded that even otherwise the assessment is not time barred. The Board's circular only desired that the ITOs should not keep the reopened assessments pending unduly long. That does not make the assessments made beyond the desirable time limit invalid. As for the statement that variation in bank and book stock was because it is open loan, he pointed out that it was not an open loan as per records. The variation is too large. It was a case of a key loan, according to him. He submitted that the addition on account of discrepancy in stock was well justified. So were the additions for low gross profit and cash credit.
5. We have carefully considered the records as well as the arguments.
Order under Section 27 of the 1922 Act reopening the assessment was passed on 14-2-1967. The order sheet shows that the case was heard more than once. There was also Tribunal's order which was received on 7-7-1971. Neither of the parties was able to enlighten us as to what the order relates. It was thereafter that the case was more seriously and continuously taken up from 4-4-1972. Summons were issued to the creditor and even to the managing partner. These are uncomplied with.
One Shri K.J. Raju, Advocate, appeared from time to time. There were requests more than once for adjournments on the ground that books were not available. It was understandable because it was stated that the firm was dissolved on 19-5-1959. The assessee had, therefore, been requesting for time and this had been allowed till the case was finally heard on 5-5-1975 and the order passed on 6-5-1975. We are, therefore, not in a position to find any negligence on the part of the authorities on the facts and in the circumstances of the case. The time taken was partly utilised due to the assessee's requests for time. The assessee's claim that it is time barred is based upon Circular No. 10P (V-68) of 1968 (supra) which reads as under : 1. Suggestions have been made to the Board that a time limit should be laid down for the completion of assessments by the Income-tax Officer in cases where ex parte assessments made under Section 144 are reopened by the Income-tax Officer under Section 146 of the Act or which have been set aside by the appellate authorities.
2. It has been decided by the Board that the assessments which have either been reopened under Section 146 or which have been set aside in appeal, should normally be completed within a period of 2 years.
The period of 2 years will be reckoned from the date on which the Income-tax Officer passes the order accepting the application of the assessee under Section 146 to reopen the assessment or from the date of receipt of the appellate order setting aside the assessment. (p.
558) In our opinion, the direction of the Board is only to say that the assessments are not unreasonably delayed. Time limit was in respect of normal assessments It also does not follow that the assessments passed beyond such time-limit as administratively laid down, make the assessments illegal. Though we have no doubt that Board's circulars are binding on the ITOs on concessional interpretation of statute, we are not in a position to say that an assessment under such circumstances as in the assessee's case, would become illegal. Besides, as pointed out, the time limit is to apply to normal circumstances. This was a dissolved firm's case where the assessee itself was not in a position to furnish all materials as and when required. Investigations were made on various matters. The assessee relied upon a sales tax decision of the Kerala High Court in the case of P.K. Sankaran v. STO  54 STC 312 with reference to the Kerala General Sales Tax Rules, 1963 ('the Rules') wherein it was decided that set aside assessment remade after 13 years was held to be illegal. This decision was rendered in the context of Rule 32(21) of the rules which had prescribed a much short time for preservation of books. Asking the assessee to explain certain matters long after such period was considered unreasonable. The circumstances or that case in which the delay occurred was such that the delay was characterised as not bonafide. We are not prepared to hold that the facts in this case are in any way comparable. An ex parte assessment was made for non-compliance. It was reopened at the assessee's instance. Even partners did not respond to all the notices and summons had to be issued to ensure their presence more than once.
The assessee asked for time for production of books. There are so many other factors which could show that a similar allegation for lack of bona fides cannot be lightly made in the facts and circumstances of the assessee's case. Though the ITO might have well been justified in having passed the order with or without assistance from the taxpayer, the mere fact that he accommodated the assessee and tried to get materials could work to the advantage of the taxpayer. All enquiries, we should presume, are ultimately to help a reasonable assessment.
Under the circumstances, we find no merit whatsoever on the contention relating to the question of jurisdiction.
6 to 8. [These paras are not reproduced here as they involve minor issues.]