2010 (11) TMI 794 - HC - Income Tax

Applicability of provisions of section 144B - Held that - As in the case of Saraya Sugar Mills (P.) Ltd. s case (1985 (3) TMI 83 - ITAT ALLAHABAD-A) it cannot be said that IAC exercised the powers or performed the functions of the ITO, merely for the reason that he was conferred the concurrent jurisdiction, neither any order was passed by the IAC assessing the income of the assessee nor is there anything to indicate that he exercised the powers or performed the functions of the ITO, it cannot be said that the case was covered by section 144B(7) of the Act. The question is answered in negative, in favour of the Department and against the assessee. Limitation for making assessment - Held that - In the present case, the period falling under both the heads was different. They were not overlapping with each other and as such the period when the case was referred under section 142(2A) till receipt of audit report as well as, when the draft order under section 144B was received by the Assessee (when it was served on the assessee) till the IAC issued direction, was to be exclude. It is accepted that in the event the period under both heads was to be excluded then the assessment order would not be barred by time. Against assessee.

Issues Involved:
1. Interpretation of section 144B of the Income-tax Act, 1961.
2. Applicability of the provisions of section 144B.
3. Determination of whether the assessment order was barred by time under section 153(1)(a)(iii) of the Act.

Issue 1: Interpretation of Section 144B - Applicability:
The High Court analyzed whether the provisions of section 144B of the Income-tax Act, 1961 were applicable in the case. Referring to a previous decision, it was established that the case did not fall under section 144B(7) as the Inspecting Assistant Commissioner (IAC) did not assess the income of the assessee nor performed the functions of the Income-tax Officer (ITO). The Court concluded that the case was not covered by section 144B, ruling in favor of the Department and against the assessee.

Issue 2: Applicability of Section 144B - Final Assessment Order:
The Court found that since the first question regarding the applicability of section 144B was answered in favor of the Department, the second question about whether the draft assessment order would become final was deemed unnecessary to answer. Consequently, the Court refrained from expressing an opinion on this question.

Issue 3: Assessment Order Barred by Time under Section 153(1)(a)(iii):
The Court delved into the interpretation of section 153(1)(a)(iii) of the Act concerning the time limit for assessments. It was noted that the assessment order in question was passed on 28-1-1983, after the two-year limitation period from the end of the assessment year 1979-80 had expired on 31-3-1982. However, the Court examined the exclusion of time under section 153 Explanation 1(ii) and (v) to determine if the assessment order fell within the time limit. By analyzing the specific language of the provision and the usage of the word 'or,' the Court concluded that if the periods under both heads were excluded, the assessment order would not be barred by time. Therefore, the third question was answered in the negative, favoring the Department and against the assessee.

Conclusions:
The High Court concluded that the provisions of section 144B were applicable in the case, the assessment order was not barred by time, and the second question became academic due to the first question's resolution. The Court provided detailed reasoning for each issue, ultimately ruling in favor of the Department and against the assessee on questions 1 and 3. The opinion was directed to be sent to the Tribunal for appropriate consequential orders.

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