1981 (1) TMI 167 - AT - Income Tax

Summary

Issues:
- Whether the ITO was justified in ignoring the assessee's claim for further deduction under section 35B after submitting draft assessment order to the IAC under section 144B(1).
- Whether the Commissioner (Appeals) was competent to entertain the assessee's appeal on the ground of the additional claim made by the assessee before the ITO.

Analysis:
1. The appeal was filed by the revenue against the order of the Commissioner (Appeals) on the grounds related to the assessment proceedings under section 144B of the Income-tax Act, 1961. The dispute arose when the assessee made a fresh claim for enhanced exports development expenditure under section 35B after the ITO submitted a draft assessment order to the IAC. The IAC declined to entertain this claim, leading to the completion of the assessment without considering the claim.

2. The Commissioner (Appeals) examined whether the IAC could consider matters under section 144B not arising from the draft assessment order submitted by the ITO. The Commissioner (Appeals) held that the assessee's claim under section 35B was valid as it was made before the ITO, and directed the ITO to examine the claim in accordance with the law.

3. The revenue contended that once the ITO submitted the draft assessment order to the IAC under section 144B, he became functus officio and was subordinate to the IAC. The revenue argued that the Commissioner (Appeals) had no authority to entertain the appeal on this ground, citing a Supreme Court ruling.

4. The assessee argued that the claim was made before the assessment was finalized, and the provisions of section 144B did not take away the rights of the assessee to make claims before the ITO. The assessee maintained that the Commissioner (Appeals) was competent to consider the appeal, as the claim was within the scope of the assessment order.

5. The Tribunal analyzed the provisions of section 143(3) and section 144B, emphasizing that the latter was an additional safeguard against arbitrary assessments. The Tribunal concluded that the assessee had the right to raise issues before the ITO even after the draft assessment order was submitted to the IAC. The Tribunal upheld the Commissioner (Appeals)'s decision to entertain the appeal and directed the ITO to consider the claim on its merits.

6. Ultimately, the Tribunal dismissed the appeal, affirming the Commissioner (Appeals)'s direction to examine the assessee's claim under section 35B. The Tribunal found no merit in the revenue's objection based on the Supreme Court ruling cited, stating that the ruling did not apply to the present case.