2010 (11) TMI 685 - HC - Income Tax

Whether u/s 144B the draft assessment order was required to be sent to, the Inspecting Assistant Commissioner (IAC) having territorial jurisdiction (or administrative control) over the ITO; or the Inspecting Assistant Commissioner, who was also conferred powers and functions (jurisdiction) of the Income-tax Officer jurisdiction under section 125A. - Held that - The draft order, under section 144B was to be sent to the Inspecting Assistant Commissioner who was given concurrent jurisdiction along with the Income-tax Officer under section 125A of the Act and not to the Inspecting Assistant Commissioner who might be having territorial jurisdiction or administrative control. Merely because concurrent powers were conferred upon the Inspecting Assistant Commissioner or he had issued guidelines, did not lead to the conclusion or mean that he exercised the powers or performed the functions of an Income-tax Officer - The case of the assessee was not covered under section 144B(7) of the Act. - Decided in favor of revenue.

Issues Involved:
1. Reference of draft assessment order under section 144B of the Income-tax Act, 1961.
2. Concurrent jurisdiction under section 125A of the Income-tax Act, 1961.
3. Applicability of section 144B(7) of the Income-tax Act, 1961.
4. Validity and timing of the assessment order.
5. Applicability of section 292B of the Income-tax Act, 1961.

Detailed Analysis:

First Issue: Reference to Inspecting Assistant Commissioner Having Concurrent Jurisdiction
Relevant Sections:
- Sections 125 and 125A of the Income-tax Act, 1961.
- Section 144B of the Income-tax Act, 1961.

Judgment:
The court analyzed sections 125 and 125A, which empower the Commissioner to confer powers of an Income-tax Officer on an Inspecting Assistant Commissioner. Section 125A allows concurrent jurisdiction, meaning both the Income-tax Officer and the Inspecting Assistant Commissioner can assess an assessee. Section 144B mandates that if the Income-tax Officer proposes a significant variation in the income, a draft order must be sent to the assessee for objections and then to the Inspecting Assistant Commissioner for directions.

The court concluded that the draft order should be sent to the Inspecting Assistant Commissioner with concurrent jurisdiction (Inspecting Assistant Commissioner-Allahabad in this case) rather than the one with territorial jurisdiction (Inspecting Assistant Commissioner-Gorakhpur). This ensures that the officer supervising the assessment process finalizes it. Thus, the draft order was rightly sent to the Inspecting Assistant Commissioner-Allahabad.

Conclusion:
Question No. 1 was answered in the negative, in favor of the Department and against the assessee.

Second to Fourth Issues: Inspecting Assistant Commissioner-Allahabad Had Not Performed Functions of Income-tax Officer
Relevant Sections:
- Sections 125A and 144B of the Income-tax Act, 1961.

Judgment:
The court examined whether the Inspecting Assistant Commissioner-Allahabad had exercised the powers or performed the functions of the Income-tax Officer. It was argued that the time spent in forwarding the draft order should not be excluded under section 144B(7), as the Inspecting Assistant Commissioner had issued guidelines and stated he would assume jurisdiction.

However, the court found that merely issuing guidelines or having concurrent powers did not mean the Inspecting Assistant Commissioner had exercised the powers or performed the functions of an Income-tax Officer. The assessment order was ultimately passed by the Income-tax Officer-Gorakhpur, not the Inspecting Assistant Commissioner-Allahabad.

Conclusion:
Questions Nos. 2 to 4 were answered in the affirmative, in favor of the Department and against the assessee.

Fifth and Sixth Issues: Not Necessary to Answer
Judgment:
Given the answers to questions Nos. 1 to 4, the court deemed questions Nos. 5 and 6 academic and refrained from answering them.

Conclusions:
1. The draft order under section 144B was to be sent to the Inspecting Assistant Commissioner with concurrent jurisdiction (Inspecting Assistant Commissioner-Allahabad) and not the one with territorial jurisdiction (Inspecting Assistant Commissioner-Gorakhpur).
2. The draft order was rightly sent to the Inspecting Assistant Commissioner-Allahabad.
3. Concurrent powers or guidelines issued by the Inspecting Assistant Commissioner did not mean he exercised the powers or performed the functions of an Income-tax Officer.
4. The Inspecting Assistant Commissioner-Allahabad did not exercise the powers or perform the functions of the Income-tax Officer-Gorakhpur.
5. The case was not covered under section 144B(7) of the Act.
6. Questions Nos. 5 and 6 were academic and not answered.

Final Decision:
Question No. 1 was answered in the negative, and questions Nos. 2 to 4 were answered in the affirmative, all in favor of the Department and against the assessee. The opinion was to be sent to the Tribunal for passing the appropriate consequential order.

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