1998 (4) TMI 102 - HC - Income Tax

Issues Involved:
1. Application of the principle laid down in 128 ITR 292.
2. Interpretation of section 144A, section 144B, and Explanation 1(iv) to section 153 of the Income-tax Act, 1961, regarding whether the assessment is time-barred.
3. Consideration of remitting the case for fresh consideration based on various precedents and section 292B of the Income-tax Act, 1961.
4. Claim of the benefit of extension of time as contemplated by Explanation to section 153 of the Income-tax Act, if no direction is given under section 144B.

Issue-wise Detailed Analysis:

1. Application of the Principle Laid Down in 128 ITR 292:
The Tribunal applied the principle from the Delhi High Court decision in Sudhir Sareen v. ITO [1981] 128 ITR 445, which held that the Income-tax Officer (ITO) cannot issue a second draft order. The Tribunal concluded that the assessment was time-barred as the ITO had no jurisdiction to issue the second draft order dated March 24, 1983. However, the High Court disagreed, noting that the ITO could issue a second draft order following directions under section 144A, which was necessary for finalizing the assessment. The court emphasized that such action is in the interest of the assessee and aligns with sections 144A and 144B.

2. Interpretation of Section 144A, Section 144B, and Explanation 1(iv) to Section 153:
The court examined whether the assessment was time-barred by considering the relevant dates and the provisions of sections 144A and 144B. The ITO initially issued a draft order on November 16, 1982, and later, a second draft order on March 24, 1983, following directions under section 144A. The court held that the period between March 24, 1983, and August 16, 1983, should be excluded under Explanation 1(iv) to section 153, making the final assessment order dated August 24, 1983, within the permissible period. The court noted that the ITO's actions were justified and necessary for a thorough assessment.

3. Consideration of Remitting the Case for Fresh Consideration:
The Tribunal had not remitted the case for fresh consideration, relying on precedents and section 292B of the Income-tax Act. The High Court found that the Tribunal's reliance on the Delhi High Court decision was misplaced, as the facts differed significantly. The court referenced decisions from the Calcutta High Court, which supported the view that the ITO could issue a second draft order following directions under section 144A, thus negating the need for remitting the case.

4. Claim of Extension of Time Under Explanation to Section 153:
The court addressed whether the Revenue could claim an extension of time under Explanation 1(iv) to section 153 if no direction was given under section 144B. The High Court ruled that the ITO's second draft order dated March 24, 1983, was valid and that the period between this date and August 16, 1983, should be excluded from the limitation period. Consequently, the final assessment order dated August 24, 1983, was within the statutory period, and the Revenue's claim for an extension of time was upheld.

Conclusion:
The High Court answered the questions as follows:
- Question 1(a): In the negative, against the assessee and in favor of the Revenue.
- Question 1(b): In the affirmative, in favor of the Revenue and against the assessee.
- Question 2: In the negative, against the assessee and in favor of the Revenue.
- Questions 3 and 4: Declined to answer as unnecessary in light of the answers to questions 1 and 2.

The judgment concluded that the final assessment order was within the limitation period and directed the Income-tax Appellate Tribunal, Cochin Bench, to pass consequential orders.

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