The Supreme Court has recently decided [vide order dated 2nd May 2016] that an assessment order passed in the case of Saurashtra Cements on 1st September 1984 was a valid one and not time-barred, as held by lower appellate forums. The assessment order related to Fiscal year 1980-81. The Gujarat High Court and Ahmedabad Tax Tribunal had earlier ruled in favour of the Taxpayer and decided that the assessment was time-barred (consequently invalid).

The decision related to a technical point on how the limitation period for assessments had to be determined under an old assessment (‘audit’) procedure where the Income-tax officer was required to forward the draft assessment order to a superior officer – designated at the Inspecting Assistant Commissioner – for his review.

The Taxpayer contended that the time taken by Inspecting Assistant Commissioner could not be excluded to determine the limitation period for assessment since the Inspecting Assistant Commissioner was having a ‘concurrent jurisdiction’ over its case. Consequently, the assessment order passed was time-barred,  it was contended. The argument did not find favor with the Supreme Court and the assessment order was held to be passed within the statutory time-lines and valid in law.

Our Comment

While the decision is of little practical relevance today as the assessment (‘audit’) procedures applicable now are very different and the practice of forwarding draft assessment orders to Inspecting Assistant Commissioner has been long gone. The decision nevertheless highlights that there would always be unforeseen risks when a Taxpayer decides to litigate a matter purely on technical grounds. The lesson for Taxpayers: If you bank on Technical nuances to save you Taxes – you may later find yourself breaking the bank to pay your taxes.