1999 (2) TMI 4 - SC - Income Tax

Reassessment - Limitation - held that additional period of 180 days given by Explanation 1(iv) to section 153 of the Income-tax Act, 1961, is available when the assessment or reassessment is made under section 147

Summary

Issues Involved:
1. Applicability of Section 144B to assessments/reassessments under Section 147.
2. Extended period of limitation under Explanation 1(iv) of Section 153 for assessments/reassessments under Section 147.
3. Procedural requirements and safeguards for assessees under Sections 144B and 147.

Detailed Analysis:

1. Applicability of Section 144B to Assessments/Reassessments under Section 147:
The core issue was whether the provisions of Section 144B, which involve forwarding a draft order to the assessee and obtaining directions from the Inspecting Assistant Commissioner, apply to assessments and reassessments made under Section 147. The Tribunal had initially held that Section 144B applied only to assessments under Section 143(3) and not to those under Section 147. However, the High Court of Delhi disagreed, holding that Section 144B's procedural safeguards also applied to assessments and reassessments under Section 147. This view was supported by similar judgments from other High Courts, such as Madras, Punjab and Haryana, and Calcutta, although contrary views were held by the Kerala and Bombay High Courts.

2. Extended Period of Limitation Under Explanation 1(iv) of Section 153 for Assessments/Reassessments Under Section 147:
The second issue was whether the 180-day extension provided under Explanation 1(iv) to Section 153 for completing assessments was applicable to assessments and reassessments under Section 147. The Supreme Court upheld the High Court's view that the extended period of limitation was indeed available for such assessments. The Court reasoned that Section 144B, being a procedural safeguard, should apply to all assessments, including those under Section 147, thereby justifying the extended period.

3. Procedural Requirements and Safeguards for Assessees Under Sections 144B and 147:
The Court analyzed the procedural requirements under Sections 144B and 147. Section 144B mandates that if an Income-tax Officer proposes a variation in the income returned by the assessee that is prejudicial and exceeds a certain amount, a draft order must be forwarded to the assessee. If the assessee objects, the draft order and objections must be sent to the Inspecting Assistant Commissioner, who issues binding directions after considering the objections. This procedure is intended to safeguard the interests of the assessee. The Court emphasized that these procedural safeguards must be followed even for assessments and reassessments under Section 147, as indicated by the language in Section 148, which states that the provisions of the Act apply as if the notice were a notice issued under Section 139(2).

The Court also addressed arguments against this interpretation. It rejected the contention that Section 144B should not apply to Section 147 assessments due to the specific language of Section 144B referring to assessments under Section 143(3). The Court clarified that the phrase "so far as may be" in Section 148 implies that the procedural steps outlined in subsequent sections, including Section 144B, must be followed for assessments under Section 147. The Court also dismissed concerns about the incongruity of requiring higher authority sanction for issuing notices under Section 148 but only Inspecting Assistant Commissioner oversight for the actual assessment, noting that different considerations apply at different stages of the assessment process.

Conclusion:
The Supreme Court concluded that Section 144B applies to assessments and reassessments under Section 147. Consequently, the extended period of limitation provided by Explanation 1(iv) to Section 153 is available for such assessments and reassessments. The appeals were dismissed with costs, affirming the High Court's judgment that procedural safeguards under Section 144B must be observed in assessments under Section 147, thus providing additional time for the completion of these assessments.