1980 (12) TMI 44 - HC - Income Tax

Summary

Issues involved: Interpretation of powers of an Income Tax Officer (ITO) under section 144B regarding the number of proposed draft orders of assessment that can be confronted to an assessee, and the compliance with procedural requirements under the said section.

Interpretation of Section 144B:
The petitioner argues that section 144B restricts the power of the ITO to only one draft order of assessment and not more, emphasizing the language used in the section such as "in the first instance" and "a draft order." The petitioner contends that allowing multiple draft orders would lead to unjustified harassment and bypassing the period of limitation prescribed by section 153 of the Income Tax Act.

Revenue's Contention:
The revenue, on the other hand, argues that there are no limiting words in section 144B regarding the number of draft orders that can be served on the assessee. They assert that serving a draft order each time an assessment is revised is permissible and does not prejudice the assessee, as they are entitled to an opportunity to be heard each time.

Comparison with Section 144A:
A distinction is drawn between sections 144A and 144B, highlighting that under section 144A, the Inspecting Assistant Commissioner (IAC) can call for records suo motu, while under section 144B, the IAC's directions are mandatory only upon a reference made by the ITO when proposing a variation exceeding the limit fixed by the Board.

Procedural Violation and Quashing of Proceedings:
The judgment finds that the revenue's procedure in issuing a second draft assessment order without providing an opportunity of being heard to the assessee was illegal and in violation of the express provisions of section 144B. The second draft order, resulting from illegal directions by the IAC, is deemed bad in law, leading to the quashing of the entire proceedings post the IAC's directions.

Compliance with Section 153:
The judgment delves into the interaction between section 144B and section 153, particularly regarding the period of limitation for completing an assessment. It emphasizes that section 144B(1) does not authorize an ITO to issue more than one draft assessment order, and the statutory period not exceeding 180 days mentioned in Explanation 1(iv) of section 153 is mandatory and cannot be extended.

Conclusion:
The impugned order is set aside, allowing the department to restart the proceedings at the stage of the IAC under the proviso to subsection (4) of section 144B. The petition is allowed with costs, and the rule is made absolute.