2016 (5) TMI 805 - SC - Income Tax

Time barred assessment u/s 153 - Time-limit for completion of assessments and reassessments - HC excluded the period during which the draft assessment was forwarded to the IAC till the date of receiving the instructions from the IAC under Section 144B of the Act - Held that - From the reading of Section 153, the period (not exceeding 180 days) commencing from the date on which the ITO forwards the draft order under sub-Section (1) of Section 144B to the assessee and ending with the date on which the ITO receives the directions from the IAC under sub-Section (4) of Section 144B, is to be excluded while computing the period of limitation. Even though an order is made under section 125A(1) empowering the Inspecting Assistant Commissioner to perform the functions of an Income-tax Officer, yet if he has not exercised the power or performed the function of an Income-tax Officer, the provisions requiring approval or sanction of the Inspecting Assistant Commissioner will be applicable. Sub-section (4) nowhere provides that, if some directions by the Inspecting Assistant Commissioner are issued as provided under sub-section (2), then provisions requiring approval or sanction of the Inspecting Assistant Commissioner will not be applicable. In the instant case, we find that it is not the IAC who exercises the powers or performs the functions of the ITO, even when such a power was conferred upon him, concurrently with the ITO. The significant feature of Section 125A of the Act is that even when the IAC is given the same powers and functions which are to be performed by the ITO in relation to any area or classes or person or income or classes of income or cases or classes of cases, on the conferment of such powers, the ITO does not stand denuded of those powers. With conferment of such powers on the IAC gives him concurrent jurisdiction which means that both, ITO as well as the IAC, are empowered to exercise those functions including passing assessment order. It is still open to the ITO to assume the jurisdiction and pass the order in case the IAC does not exercise those powers in respect of the assessment year. Provisions of Section 144B would not apply only if the IAC exercises powers or performs the functions of an ITO. What is important is the actual exercise of powers and not merely conferment of the powers that are borne out from the bare reading of sub-Section (4) of Section 125B. Sub-Section (7), in no uncertain terms, mentions that Section 144B will not apply only in that case where the IAC exercises the powers or performs the functions of an ITO in pursuance of an order made under Section 125 or Section 125A. In the instant case, as already noted above, no such power was exercised or function of an ITO was performed by the IAC. We would like to point out here that the High Court of Gujarat while dismissing the appeal of the Revenue failed to take into account the earlier judgment of the Co-ordinate Bench of the High Court in CIT vs. Shree Digvijay Woollen Mills Ltd. 1993 (12) TMI 13 - GUJARAT High Court which has taken the view that we have expressed above. Appeal filed by the assesee against the judgment of the Allahabad High Court is dismissed affirming the view in the said case which is reported as Commissioner of Income tax vs. Saraya Sugar Mills P. Ltd. 2010 (11) TMI 685 - Allahabad High Court

Summary

Issues Involved:
1. Whether the assessment order dated 01.09.1984 was time-barred under Section 153 of the Income Tax Act, 1961.
2. Interpretation and application of Section 125A regarding concurrent jurisdiction of the Income Tax Officer (ITO) and Inspecting Assistant Commissioner (IAC).
3. Applicability of Section 144B when the IAC has concurrent jurisdiction with the ITO.

Detailed Analysis:

Issue 1: Time-Barred Assessment Order
The primary issue was whether the assessment order dated 01.09.1984 for the Assessment Year 1981-82 was time-barred under Section 153 of the Income Tax Act, 1961. According to Section 153, the time limit for completing the assessment is two years from the end of the Assessment Year. For the Assessment Year 1981-82, this period ended on 31.03.1984. However, the assessment order was passed on 01.09.1984. The Revenue argued that the period from 13.03.1984 to 31.08.1984, when the draft assessment order was with the IAC, should be excluded from the limitation period. The High Court of Gujarat dismissed the Revenue's appeal, affirming that the assessment order was time-barred. Conversely, the Allahabad High Court, in a similar case, upheld the Revenue's position, excluding the period during which the draft assessment was with the IAC.

Issue 2: Concurrent Jurisdiction under Section 125A
Section 125A allows the Commissioner to confer concurrent jurisdiction on the IAC along with the ITO. The respondent/assessee argued that once the IAC was conferred with the same powers as the ITO by the CIT's order dated 29.08.1983, there was no need to forward the draft assessment order to the IAC. The High Court of Gujarat agreed with this interpretation, stating that the IAC and ITO had concurrent jurisdiction, making the forwarding of the draft assessment order unnecessary.

Issue 3: Applicability of Section 144B
Section 144B requires the ITO to forward a draft assessment order to the IAC if it involves a variation exceeding the amount fixed by the Board. The respondent/assessee contended that with the IAC having concurrent jurisdiction, Section 144B should not apply. However, the Supreme Court held that Section 144B would not apply only if the IAC actually exercised the powers or performed the functions of an ITO. In this case, the IAC did not exercise such powers, and therefore, the provisions of Section 144B remained applicable.

Conclusion:
The Supreme Court concluded that the assessment order dated 01.09.1984 was not time-barred. It held that the period during which the draft assessment was with the IAC should be excluded from the limitation period. The Court clarified that merely conferring concurrent jurisdiction on the IAC does not negate the requirement of Section 144B unless the IAC actually exercises the powers of an ITO. The judgment of the High Court of Gujarat was set aside, and the appeal of the Revenue was allowed. The appeal by the assessee against the Allahabad High Court's judgment was dismissed, affirming the view that the assessment order was within the prescribed period of limitation. The Revenue was entitled to costs in both appeals.