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TMI Blog1981 (1) TMI 167X X X X Extracts X X X X X X X X Extracts X X X X ..... ment was served by the ITO on the assessee also. At that stage on 26-2-1977 the assessee addressed a letter to the ITO objecting to certain additions proposed to be made by the ITO in the draft assessment order. While concluding this letter of objection, the assessee put in a fresh claim before the ITO for enhanced exports development expenditure under section 35B of the Act in the following terms: "XIV. Export development expenditure --- In the earlier year the AAC has allowed rebate on certain additional expenditure though incurred in India. We, accordingly, claim the rebate on the expenditure incurred on staff engaged directly on export of Rs. 35,760, shipment and sampling expenses Rs. 71,427, export credit guarantee premium of Rs. 24,1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce with law. 6. The revenue is in appeal against the order of the Commissioner (Appeals) on this issue. It is submitted on behalf of the revenue that at the assessment stage before the ITO, the assessee had not made any such claim in respect of these four items. Therefore, there was no variation between the income as returned by the assessee and the income proposed to be determined by the ITO. Once the ITO submitted a draft assessment order to the IAC, he became functus officio and he was entirely subordinate to the IAC under section 144B(5). Therefore, the assessee's plea before the ITO in its letter dated 26-2-1977 claiming additional relief under section 35B was of no consequence and has to be ignored. Further it is submitted by the lea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... im, when the assessee made the claim before the ITO. The facts were already on record. Formerly the assessee had not made this claim. The assessee by its letter dated 26-2-1977 brought to the notice of the ITO that it was entitled to certain additional deductions under section 35B which should be allowed while framing the assessment. Therefore, the Commissioner (Appeals) was competent to entertain the assessee's appeal on this ground and the Commissioner (Appeals)' order did not suffer from any infirmity on the basis of the dictum laid down by the learned Judges of the Supreme Court in the case of Gurjargravures (P.) Ltd. 8. We have carefully considered the facts and circumstances of the case in respect of this issue and the submissions on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee it was entitled on the basis of the facts already on record. The question to be considered is whether the ITO was justified in ignoring the assessee's claim. According to the learned departmental representative in a case to which the provisions of section 144B applied, once the ITO forwarded a draft assessment order to the IAC under section 144B(1), he became functus officio. He had nothing further to do except to carry out the orders of the IAC issued by the IAC under section 144B(4). Further, under section 144B(5) every direction issued by the IAC under sub-section (4) was binding on the ITO. 10. To our mind, the dispute between the parties in the present appeal cannot be disposed of so easily. First we have to consider the norm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the assessee and the amount of such variation exceeded the amount fixed by the CBDT under section 144B(6), the ITO was under an obligation, in the first instance, to forward a draft of the proposed order to the assessee. Thereafter, after following the further formalities laid down in section 144B, he was to finalise the assessment. By placing the two provisions alongside, namely, section 143(3) and section 144B(1) it is abundantly clear that the provisions of section 144B came into operation only where there was a variation between the income as returned by the assessee and the income as proposed to be assessed by the ITO and where such variation exceeded the amount fixed by the CBDT only in respect of items of income or loss where the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the mere fact that the assessee included its claim for additional allowance under section 35B in its letter placing on record its objections to the additions proposed in the draft assessment order did not detract the basic nature of the assessee's claim, it was a claim made before the ITO before he made an assessment under section 143(3). The claim should have been dealt with by the ITO in the normal course. Since he failed to deal with this claim either allowing or rejecting it, it was an outstanding issue between the assessee and the ITO. The assessee had every right to appeal to the Commissioner (Appeals) in respect of this claim for additional allowance. We, therefore, see no reason to interfere with the order of the Commissioner (Appe ..... X X X X Extracts X X X X X X X X Extracts X X X X
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