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TMI Blog1989 (5) TMI 135X X X X Extracts X X X X X X X X Extracts X X X X ..... inst the ex parte order passed under section 144. The assessee has filed a petition under section 146 for reopening of the assessment on 20-2-1982 and to the best of our knowledge and belief the said petition has not been disposed of as yet. Inasmuch as the petition has not been disposed of as yet, we would like to submit that as per the decision of the Income-tax Appellate Tribunal, Madras Bench ' D ' in the case of Third ITO v. Mohammedbhai Hasanally [1984] 9 ITD 57, the petition filed by the assessee under section 146 is deemed to have been allowed. Under the circumstances we would request you to kindly set aside the ex parte order passed by the Income-tax Officer. Thanking you Yours faithfully. Sd/- ", the CIT(A) issued a letter dt. 18-2-1986 to the ITO, City Circle VII (6), Madras, which reads as under : " Please refer to the assessment made by your predecessor for A.Y. 1978-79 in the above mentioned case. The assessment has been made ex parte under the provisions of sec. 144. The assessee claims that he had filed a petition u/s 146 for re-opening of the assessment, on 20-2-1982. You are requested to let me know whether the assessee has actually filed any petitio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 82, and this not having been done, according to the decision of the Tribunal already referred to, the petition u/s 146 should be deemed to have been allowed on 20-5-1982. This being the position, the reassessment should have been completed within two years from the last day of the financial year, i.e., two years from 31-3-1983 and, therefore, the reassessment should have been completed by 31-3-1985. Since the order of the CIT(A) itself was passed only on 9-4-1986 the learned counsel submitted that the CIT(A) erred in directing the ITO to make a fresh assessment after affording the assessee a reasonable opportunity. Such a direction he submitted could not have been given since limitation had already set in and the ITO was, therefore, barred from making a fresh assessment. He, therefore, submitted that we should pass an order expressly stating that the application filed u/s 146 on 20-2-1982 should be deemed to have been allowed in the assessee's favour on 20-5-1982 and since a fresh assessment had not been made by 31-3-1985, we should give a finding that no further assessment could be made in view of the provisions of section 153(2A). 3. The first submission of the learned departme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... where a case falls under the provisions of section 153(2A), the same is taken outside the purview of section 153(3). His submission is that by a fiction the application u/s 146 is deemed to have been allowed and, therefore, the consequences of such a fiction have to be taken to its logical conclusion, following the observations of Lord Asquith in East End Dwellings Co. Ltd. v. Finsbury Borough Council [1952] AC 109. which were quoted with approval by the Supreme Court in CIT v. S. Teja Singh [1959] 35 ITR 408 and which are as under :---- " If you are bidden to treat an imaginary state of affairs as real, you must surely, unless prohibited from doing so also imagine as real the consequences and incidents which, if the purative state of affairs had in fact existed, must inevitably have flowed from or accompanied it. One of these in this case is emancipation from the 1939 level of affairs : it does not say that having done so, you must cause or permit your imagination to boggle when it comes to the inevitable corollaries of that state of affairs." According to the learned counsel for the assessee, the fact that there was no written order allowing the assessee's application u/s 14 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ithin the time prescribed, such an approval is deemed to be granted. If we do not assume such a result, the section itself would become meaningless and remain a pious wish on the part of the Parliament that the ITO should dispose of the application within the period prescribed. In order to make it effective, we have to make the necessary direction that where the ITO does not pass the orders within the period of limitation prescribed, the ex parte assessment made under section 144 stands cancelled. In this view of the matter also, we deem it fit to declare that the assessment made by the ITO has been cancelled and, therefore, we direct the ITO to make a fresh assessment in accordance with law after giving the assessee a reasonable opportunity of being heard." In that case, the assessment was made on 15-2-1977 and the application u/s 146 was filed on 9-9-1977 and the Tribunal passed its order on October 28, 1983. If the submission of the learned counsel for the assessee were to be accepted, the question of the Tribunal directing the ITO to make a fresh assessment in accordance with law could not arise, because the fresh assessment in that case should have been completed within two ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessment year 1971-72 and subsequent years. The statute expressly prescribes the time limit with reference to the period from the end of the financial year in which the order cancelling the assessment is passed by the ITO. The question that arises is whether it could be deemed, in view of an order u/s 146 not having been passed within a period of 90 days as contemplated u/s 146(2) which reads as under, that the application has been allowed in the manner stipulated under section 153(2A) : " 146(2) Every application made under sub-section (1) shall be disposed of within ninety days from the date of receipt thereof by the Income-tax Officer." It has to be construed that the deemed allowing of the application consequent to the non-passing of an order u/s 146 is equivalent to allowing the application by the specific act of passing an order u/s 146 if the assessee's contention is to be accepted. In our view, it is not possible to equate both. One contemplates a consequence which flows out of not taking an action by the ITO and the other contemplates the same consequence, but, it flows out of a positive action being taken by the ITO. In our view, the provisions of section 153(2A) ..... 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