1988 (1) TMI 62 - AT - Income Tax

Summary

Issues Involved:
1. Validity of assessment framed under section 143(3)/144B.
2. Applicability of section 129 in the context of section 144B.
3. Binding nature of directions issued by the Inspecting Assistant Commissioner (IAC) under section 144B(4).

Issue-wise Detailed Analysis:

1. Validity of Assessment Framed Under Section 143(3)/144B:

The revenue challenged the CIT (Appeals) decision that the assessment framed under section 143(3)/144B was vitiated. The CIT (Appeals) had set aside the assessment order on the grounds that the assessee was denied the statutory right under section 129, which necessitates reopening of the proceedings when there is a change in the Income-tax Officer (ITO). The CIT (Appeals) relied on the cases of CIT v. Balkrishna Malhotra and CWT v. Umrao Lal to support this view. However, the appellate tribunal found that these cases did not directly relate to the point at issue, as they pertained to penalty and reassessment, respectively.

2. Applicability of Section 129 in the Context of Section 144B:

The crux of the matter was whether section 129, which provides for the reopening of proceedings when there is a change in the ITO, could be applied after the draft assessment order had been forwarded to the IAC under section 144B. The tribunal noted that section 129 allows the assessee to demand reopening of proceedings that are still pending. However, once the draft assessment order is forwarded to the IAC, the ITO becomes functus officio, meaning the proceedings are no longer pending before the ITO. The tribunal emphasized that section 144B opens with the words "notwithstanding anything contained in this Act," indicating that its provisions override other sections, including section 129.

3. Binding Nature of Directions Issued by the IAC Under Section 144B(4):

The tribunal highlighted that under section 144B(5), every direction issued by the IAC is binding on the ITO. This means that the ITO must comply with the IAC's directions and cannot act contrary to them. The tribunal referred to the case of K. Venkata Ramana and Budha Appa Rao v. CIT, where the Andhra Pradesh High Court held that section 129 does not apply in situations governed by section 144B, especially when the change in the ITO occurs while the matter is pending before the IAC. The tribunal concluded that the CIT (Appeals) erred in setting aside the assessment order based on section 129, as the provisions of section 144B take precedence.

Conclusion:

The tribunal found that the CIT (Appeals) was wrong in setting aside the assessment order and restored the matter to the CIT (Appeals) for rehearing and disposal in accordance with the law. The appeal by the revenue was treated as allowed for statistical purposes, and the cross-objections filed by the assessee were dismissed. The tribunal's decision emphasized the binding nature of the IAC's directions under section 144B and the inapplicability of section 129 once the draft assessment order is forwarded to the IAC.