A different Assessing Officer finished my assessment from where the last one left off, without offering me a rehearing. Does s.129 give me a right he was bound to offer?
The right under the proviso to s.129 is a right to demand — the successor officer may continue the proceeding from the stage at which his predecessor left it, and where no demand for reopening or rehearing is made he is not obliged to wait. The practical consequence runs the other way too: because the extension of limitation is tied to that demand, an officer who was never asked for a rehearing cannot claim the time he spent waiting.
Decided by the High Court (D. K. Sen CJ and S. Ali Ahmad J) on 1988-10-11, reported as [1989] 176 ITR 34 (Patna); (1989) 77 CTR (Pat) 125; reference under s.256(1). It bears on section 129, section 153, section 271(1)(c), section 140A(3), section 271(1)(a) of the Income Tax Act 1961, in Assessment & Scrutiny and Penalty matters.
This is the older half of the s.129 rule and it disposes of the argument practitioners most often want to make — that a change of officer by itself entitled them to be reheard, and that the assessment is bad because no rehearing was offered. It does not. What the case is genuinely worth is the mirror-image point, which is a limitation point: the exclusion of time in the Explanation to s.153 attaches to the assessee's demand, so an assessment completed late cannot be saved by a rehearing nobody asked for. The court also left open, without deciding, a narrower proposition — that a successor officer continuing a part-heard proceeding should at the least issue a further notice saying he intends to continue it; in this case he did not. That observation is the hook for the fairness argument where the successor makes an addition on material the predecessor never put to you.
Binding within that High Court's jurisdiction. Persuasive elsewhere.
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The assessee, a registered partnership firm of contractors, filed its return for AY 1968-69 on 1 August 1968 declaring taxable income of Rs 1,05,525, and a revised return on 9 February 1972 declaring Rs 79,025 with audited statements. The Income-tax Officer rejected the 7 per cent net profit rate and estimated 10 per cent, completing the assessment ex parte on 21 March 1973 and initiating penalty proceedings under ss.271(1)(a), 271(1)(c) and 140A(3). The assessee appealed contending that the assessment was barred by limitation, the period expiring on 8 February 1973, one year from the revised return. The office of the Income-tax Officer had changed hands during the proceeding. The Tribunal cancelled the assessment as time-barred, and the question referred was whether it had rightly done so.
The question was answered in the affirmative and in favour of the assessee; the assessment order was correctly cancelled as time-barred. Under s.129 an assessee has a right to demand that the successor officer reopen the previous proceeding or any part of it, or rehear him, before a final order of assessment is passed. No such demand having been made, the successor officer was entitled to continue the proceeding from the stage at which his predecessor left it, and he could not claim that time spent waiting on the chance that a demand might be made should be excluded in computing limitation.
The court framed the first point as whether the proviso to s.129 entitled the Income-tax Officer to the benefit of the exclusion of time taken in giving the assessee an opportunity of being heard consistently with natural justice. It accepted that s.129 confers on the assessee a right to demand reopening or rehearing before the final order, but found that in this case there had been no such demand. The successor officer was accordingly entitled under the sub-section to continue the proceeding from the stage at which it had been left. The court noted that at the highest it could be contended that the successor should have issued a further notice stating that he intended to continue the proceeding, which he had not done, but held that he could not on his own wait indefinitely on the chance of a demand and then claim the waiting period as an exclusion. The Revenue's reliance on CIT v. Smt. Chitra Mukherjee was rejected as inapplicable, that case having concerned penalty and not assessment proceedings, and the Act having specially provided for extension of time in the case of a rehearing by the succeeding officer. On the extended limitation claimed under s.153(1)(b), the Tribunal had found no prima facie case of concealment and no specific finding by the Income-tax Officer before the assessment became time-barred on 8 February 1973; penalty proceedings initiated on 21 March 1973 in a routine manner were later dropped; and as the factual findings were not challenged by an appropriate question they had become final, so the extended period was not available.
In our view, the successor Income-tax Officer cannot wait on his own, indefinitely, on the chance that the assessee might demand a reopening of the proceedings or any part thereof or a rehearing and claim that the period of his waiting should be excluded in computing the period of limitation.
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Handle my notice → Ask a CA on WhatsAppThe right under the proviso to s.129 is a right to demand — the successor officer may continue the proceeding from the stage at which his predecessor left it, and where no demand for reopening or rehearing is made he is not obliged to wait. The practical consequence runs the other way too: because the extension of limitation is tied to that demand, an officer who was never asked for a rehearing cannot claim the time he spent waiting. This was decided by the High Court (D. K. Sen CJ and S. Ali Ahmad J) and bears on section 129, section 153, section 271(1)(c), section 140A(3), section 271(1)(a) of the Income Tax Act 1961. It is reported as [1989] 176 ITR 34 (Patna); (1989) 77 CTR (Pat) 125; reference under s.256(1). This is the older half of the s.129 rule and it disposes of the argument practitioners most often want to make — that a change of officer by itself entitled them to be reheard, and that the assessment is bad because no rehearing was offered. It does not. What the case is genuinely worth is the mirror-image point, which is a limitation point: the exclusion of time in the Explanation to s.153 attaches to the assessee's demand, so an assessment completed late cannot be saved by a rehearing nobody asked for. The court also left open, without deciding, a narrower proposition — that a successor officer continuing a part-heard proceeding should at the least issue a further notice saying he intends to continue it; in this case he did not. That observation is the hook for the fairness argument where the successor makes an addition on material the predecessor never put to you. If it applies to you, the first step is this: If the officer changes mid-assessment and you want the proceeding reopened or a rehearing, write and demand it, dated, under the proviso to s.129 — do not expect it to be offered and do not treat the absence of an offer as a ground of appeal on its own.
The assessee, a registered partnership firm of contractors, filed its return for AY 1968-69 on 1 August 1968 declaring taxable income of Rs 1,05,525, and a revised return on 9 February 1972 declaring Rs 79,025 with audited statements. The Income-tax Officer rejected the 7 per cent net profit rate and estimated 10 per cent, completing the assessment ex parte on 21 March 1973 and initiating penalty proceedings under ss.271(1)(a), 271(1)(c) and 140A(3). The assessee appealed contending that the assessment was barred by limitation, the period expiring on 8 February 1973, one year from the revised return. The office of the Income-tax Officer had changed hands during the proceeding. The Tribunal cancelled the assessment as time-barred, and the question referred was whether it had rightly done so. The matter was decided on 1988-10-11 by the High Court (D. K. Sen CJ and S. Ali Ahmad J). On those facts the High Court held as follows. The question was answered in the affirmative and in favour of the assessee; the assessment order was correctly cancelled as time-barred. Under s.129 an assessee has a right to demand that the successor officer reopen the previous proceeding or any part of it, or rehear him, before a final order of assessment is passed. No such demand having been made, the successor officer was entitled to continue the proceeding from the stage at which his predecessor left it, and he could not claim that time spent waiting on the chance that a demand might be made should be excluded in computing limitation.
The court framed the first point as whether the proviso to s.129 entitled the Income-tax Officer to the benefit of the exclusion of time taken in giving the assessee an opportunity of being heard consistently with natural justice. It accepted that s.129 confers on the assessee a right to demand reopening or rehearing before the final order, but found that in this case there had been no such demand. The successor officer was accordingly entitled under the sub-section to continue the proceeding from the stage at which it had been left. The court noted that at the highest it could be contended that the successor should have issued a further notice stating that he intended to continue the proceeding, which he had not done, but held that he could not on his own wait indefinitely on the chance of a demand and then claim the waiting period as an exclusion. The Revenue's reliance on CIT v. Smt. Chitra Mukherjee was rejected as inapplicable, that case having concerned penalty and not assessment proceedings, and the Act having specially provided for extension of time in the case of a rehearing by the succeeding officer. On the extended limitation claimed under s.153(1)(b), the Tribunal had found no prima facie case of concealment and no specific finding by the Income-tax Officer before the assessment became time-barred on 8 February 1973; penalty proceedings initiated on 21 March 1973 in a routine manner were later dropped; and as the factual findings were not challenged by an appropriate question they had become final, so the extended period was not available. In the words reproduced by the source cited on this page: "In our view, the successor Income-tax Officer cannot wait on his own, indefinitely, on the chance that the assessee might demand a reopening of the proceedings or any part thereof or a rehearing and claim that the period of his waiting should be excluded in computing the period of limitation." The decision followed or applied CIT v. Smt. Chitra Mukherjee — distinguished as concerning penalty and not assessment proceedings.
It was decided by the High Court on 1988-10-11 and is reported as [1989] 176 ITR 34 (Patna); (1989) 77 CTR (Pat) 125; reference under s.256(1). Binding within that High Court's jurisdiction. Persuasive elsewhere. A High Court decision binds the assessing officer, the Commissioner (Appeals) and the Income Tax Appellate Tribunal within that state, and is persuasive elsewhere. If your assessment is in a different jurisdiction, check whether your own High Court has taken the same view before relying on it. On section 129, section 153, section 271(1)(c), section 140A(3), section 271(1)(a), the practical question is whether the facts of your own notice match the facts of this case closely enough for the same rule to apply.
It helps the taxpayer. The question was answered in the affirmative and in favour of the assessee; the assessment order was correctly cancelled as time-barred. Under s.129 an assessee has a right to demand that the successor officer reopen the previous proceeding or any part of it, or rehear him, before a final order of assessment is passed. No such demand having been made, the successor officer was entitled to continue the proceeding from the stage at which his predecessor left it, and he could not claim that time spent waiting on the chance that a demand might be made should be excluded in computing limitation. It arises in Assessment & Scrutiny and Penalty matters, on section 129, section 153, section 271(1)(c), section 140A(3), section 271(1)(a) of the Income Tax Act 1961, and was decided by D. K. Sen CJ and S. Ali Ahmad J. Before relying on it, read the source linked on this page and check whether it has since been distinguished, overruled or overtaken by an amendment to the Income Tax Act. In practice the steps that follow from it are these. Weigh the demand against limitation before you make it: the time taken is excluded in computing the period for completing the assessment, so a demand in a nearly time-barred year hands the department the time it needs. Where the assessment was completed after the ordinary limitation date, ask the department to identify the exclusion it relies on and check the record for any demand by you under s.129 — no demand, no exclusion. If the successor officer made an addition on material the predecessor had never put to you, plead it as a breach of natural justice on the merits and rely on this court's observation that at the highest the successor should have issued a further notice stating that he intended to continue the proceeding. Read this with Novateur Electrical (ITAT Mumbai, 31 December 2024) if the change was a transfer of jurisdiction rather than a change of incumbent — s.129 does not apply at all to a s.127 transfer.
Validity check could not be completed. Later treatment was NOT checked. No search was run for decisions following or dissenting from the Patna High Court on the proviso to s.129. The proposition is consistent with the reading of Explanation 1 to s.153 applied by the ITAT Mumbai in Novateur Electrical on 31 December 2024, which was read for this batch, but that order does not cite this judgment. No source could be cited for that finding. Checking whether an authority still stands matters as much as knowing what it held: a decision may be overruled on one point and survive on another, or the provision it interprets may have been amended since. Read the source and the editor's note on this page before relying on it in a reply to an Assessing Officer or in an appeal.
The section numbering is of the era: the exclusion of time for a s.129 rehearing sat in the Explanation to s.153 as it then stood, and the assessment years are 1968-69 with a revised return of 9 February 1972, so the arithmetic in the report is not the arithmetic a reader will apply today. Only the s.129 passage and the concluding findings were obtained verbatim; the remainder of the judgment (including the concealment findings under s.271(1)(c) and the s.153(1)(b) extended-limitation point, both decided against the Revenue) was read in a rendered form that was not word-for-word, so nothing from those parts is quoted here. One retrieval of the s.129 passage was refused by the summarising layer before a differently worded request returned it. This library shows the verification state of every entry openly. This entry has not yet been read in full by a chartered accountant. The summary reflects the sources listed on this page. Read the source before you rely on it in a reply to an Assessing Officer or in an appeal before the Commissioner (Appeals) or the Income Tax Appellate Tribunal.
The question was answered in the affirmative and in favour of the assessee; the assessment order was correctly cancelled as time-barred. Under s.129 an assessee has a right to demand that the successor officer reopen the previous proceeding or any part of it, or rehear him, before a final order of assessment is passed. No such demand having been made, the successor officer was entitled to continue the proceeding from the stage at which his predecessor left it, and he could not claim that time spent waiting on the chance that a demand might be made should be excluded in computing limitation.
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