1988 (10) TMI 67 - AT - Income Tax

Summary

Issues:
1. Condonation of delay in filing cross-objection.
2. Validity of second draft assessment order and instructions issued by IAC.
3. Interpretation of provisions under sec. 129 of the IT Act.
4. Applicability of Delhi High Court judgment in Sudhir Sareen's case.
5. Competence of IAC to issue instructions u/s. 144A while proceedings u/s. 144B are pending.

Analysis:
1. The delay of 29 days in filing the cross-objection by the revenue was condoned by the Appellate Tribunal ITAT COCHIN due to valid reasons provided for the delay, allowing the cross-objection to be considered in the appeal.

2. The case involved a situation where the Income-tax Officer (ITO) prepared a second draft assessment order after the successor-ITO found modifications necessary in the initial draft order. The Appellate Tribunal held that the provisions of the IT Act do not prohibit the ITO from revising a draft order if the assessment is pending and not concluded, as long as the revised draft is prepared after hearing the assessee and within the limitation period.

3. Section 129 of the IT Act allows the succeeding ITO to continue proceedings from the stage left by the predecessor, and the Appellate Tribunal clarified that the second draft submitted by the ITO was a rectification of the original draft, permissible under the law as long as the earlier draft had not taken a final shape.

4. The Appellate Tribunal distinguished the Delhi High Court judgment in Sudhir Sareen's case, stating that the decision does not apply to the current case as the second draft order in this case was not a result of illegal directions but a valid revision by the ITO. The Tribunal also referenced a decision by the Bombay Bench 'E' in Heritage Estates (P.) Ltd. v. ITO to support the ITO's authority to revise a draft order.

5. The Appellate Tribunal upheld the validity of instructions issued by the IAC under sec. 144A and sec. 144B based on the second draft order, citing approval by the Kerala High Court in a similar case. The Tribunal concluded that the procedure followed by the ITO and the IAC was correct, overturning the decision of the CIT (Appeals) to set aside the assessment based on the second draft order.

In conclusion, the Appellate Tribunal rejected the assessee's appeal and allowed the cross-objection by the revenue, restoring the case for further consideration on other grounds raised before the CIT (Appeals).