1994 (3) TMI 11 - HC - Income Tax

Summary

Issues Involved:
1. Whether section 144B applies to assessments and reassessments made under section 147.
2. Validity and jurisdiction of the Income-tax Appellate Tribunal's decision to cancel the assessments for the assessment years 1973-74 and 1974-75.

Issue 1: Applicability of Section 144B to Assessments and Reassessments under Section 147

Contentions:
- Revenue's Argument: The statutory provisions that apply to a notice under section 139(2) should also apply to a notice under section 148, including section 144B.
- Assessee's Argument: Section 147 is independent of section 143, and thus, section 144B does not apply to reassessments under section 147.

Relevant Provisions:
- Section 148: Provides for the issuance of notice where income has escaped assessment and states that the provisions of the Act shall apply as if the notice were issued under section 139(2).
- Section 144B: Introduced following the Wanchoo Committee's recommendations to provide safeguards to assessees by requiring a draft assessment order and allowing objections before finalizing the assessment.

Analysis:
- The court examined the language of section 148, which mandates that the provisions of the Act apply to reassessments under section 147, implying that section 144B should also be applicable.
- The phrase "so far as may be" in section 148 suggests that the procedural safeguards of section 144B should be followed unless there is an inconsistency.
- The court referred to the Supreme Court's interpretation in Dr. Partap Singh v. Director of Enforcement, which construed "so far as may be" to mean that related provisions should generally be followed to the extent possible.
- The court disagreed with the Punjab and Haryana High Court's view in CIT v. Usha Aggarwal and the Madras High Court's view in CIT v. Simson and Mc Conechy Ltd., which excluded section 144B from reassessment proceedings under section 147.
- The Kerala High Court's view in Kerala Kaumudi (P.) Ltd. v. CIT was endorsed, which held that assessment proceedings under section 147 start afresh and continue until a final order is rendered.

Conclusion:
- The court concluded that section 144B applies to reassessments under section 147, and the procedural safeguards provided therein must be followed.

Issue 2: Validity and Jurisdiction of the Income-tax Appellate Tribunal's Decision

Background:
- The original assessments for the assessment years 1973-74 and 1974-75 were reopened based on information from a Judicial Commission of Inquiry.
- The Income-tax Officer made a draft assessment under section 144B, which was referred to the Inspecting Assistant Commissioner, leading to the completion of the assessment on August 10, 1979.
- The assessee contended that the use of section 144B for reassessment under section 147 was incorrect, rendering the assessment order time-barred.

Tribunal's Decision:
- The Income-tax Appellate Tribunal accepted the assessee's contention and canceled the assessments as invalid and without jurisdiction.

Court's Decision:
- The court reframed the question to focus on the applicability of section 144B to reassessments under section 147.
- The court held that the Tribunal's decision was unsustainable in law as section 144B does apply to reassessments under section 147.
- Consequently, the assessment in question was within the time limit, and the Tribunal's decision to cancel the assessments was incorrect.

Conclusion:
- The court answered the reframed question in the negative, in favor of the Revenue and against the assessee, upholding the validity of the assessments.

Summary
The court held that section 144B applies to reassessments under section 147, and the Income-tax Appellate Tribunal's decision to cancel the assessments for the years 1973-74 and 1974-75 was incorrect. The assessments were within the time limit, and the procedural safeguards of section 144B must be followed in reassessment proceedings.