9911796707
TMI Blog1998 (4) TMI 102X X X X Extracts X X X X X X X X Extracts X X X X ..... lled ? 3. Whether, on the facts and in the circumstances of the case and also considering the decisions in 108 ITR 119 (sic) and 114 ITR 231 (sic), AIR 1978 SC 1244 (sic) and Guduthur Bros. v. ITO [1960] 40 ITR 298 (SC) and the provision in section 292B of the Income-tax Act, 1961, should not the Tribunal have remitted the case for fresh consideration ? 4. Whether, on the facts and in the circumstances of the case, if no direction is given under section 144B, cannot the benefit of extension of time as contemplated by Explanation to section 153 of the Income-tax Act, be claimed by the Revenue ?" The relevant facts are as follows : The assessee-company is engaged in export of fish products. For the assessment year 1980-81, it filed return disclosing a loss of Rs. 13,90,590. The assessment was completed on a total income of Rs. 5,53,580. Since the variation between the income returned and the income assessed was more than Rs. 1 lakh, a draft assessment order under section 144B was passed on November 16, 1982. The assessee was called upon to file its objection, if any, within seven days of receipt of the draft order. The assessee who received the draft order on November 27, 198 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nity to the assessee to file its objections. After hearing the assessee's representative and examining the books of account and other evidences produced, the Inspecting Assistant Commissioner under order dated August 16, 1983, a copy of which is produced in the paper book as annexure-E, issued directions to enable the Income-tax Officer to frame the final assessment in the light of the directions. Thereafter, the Income-tax Officer passed the final assessment order dated August 24, 1983, a copy of which is produced as annexure-A. The above order is passed by the Income-tax Officer under section 143(3) read with sections 144A and 144B. The assessee filed appeal before the Commissioner of Income-tax (Appeals) contending that the assessment was time barred. The Department had taken the stand that even though in the normal course, assessment for the year 1980-81 could have got time barred on March 31, 1983, since, in this case, the Income-tax Officer got time extended by 145 days by virtue of the provision contained under clause (iv) of Explanation 1 of section 153. The appellate authority took the view that the order under appeal was not properly made. It was observed that apart fr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g Assistant Commissioner onwards were held liable to be quashed. It was then observed that there is no provision for the Income-tax Officer to send the second draft order. If the Inspecting Assistant Commissioner had given an opportunity to the assessee against his proposal to enhance the amount and if the Inspecting Assistant Commissioner was not persuaded with the objection raised by the assessee, he could give necessary direction to the Income-tax Officer and the Income-tax Officer has to pass a final order. There is no question of the Income-tax Officer issuing a second draft order, as such an action would be contrary to the provisions of sub-section (5) of section 144B. It was on this basis the learned judge of the Delhi High Court took the view that the second draft order issued by the Income-tax Officer was unsustainable in law. It was further observed that going by the language of section 143 also it is clear that the Income-tax Officer is entitled to issue only one draft order. Learned standing counsel for the Revenue would submit that the above decision has no application to the facts of this case, since in that case there was no parallel proceeding initiated by the In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Income-tax Act reads as follows : "144A. Power of Inspecting Assistant Commissioner to issue directions in certain cases.-(1) An Inspecting Assistant Commissioner may, on his own motion or on a reference being made to him by the Income-tax Officer or on the application of an assessee, call for and examine the record of any proceeding in which an assessment is pending and, if he considers that, having regard to the nature of the case or the -amount involved or for any other reason, it is necessary or expedient so to do, he may issue such directions as he thinks fit for the guidance of the Income-tax Officer to enable him to complete the assessment and such directions shall be binding on the Income-tax Officer : Provided that no directions which are prejudicial to the assessee shall be issued before an opportunity is given to the assessee to be heard. Explanation.-For the purposes of this sub-section, no direction as to the lines on which an investigation connected with the assessment should be made, shall be deemed to be a direction. prejudicial to the assessee. (2) The provisions of this section shall be in addition to, and not in derogation of the provisions contained in s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urther that the amount fixed under this sub-section shall, in no case, be less than twenty-five thousand rupees. (7) Nothing in this section shall apply to a case where an Inspecting Assistant Commissioner exercises the powers or performs the functions of. an Income-tax Officer in pursuance of an order made under section 125 or section 125A." Clause (iv) of Explanation 1 to section 153 reads as follows "Explanation I.-In computing the period of limitation for the purposes of this section -... (iv) the period (not exceeding one hundred and eighty days) commencing from the date on which the Income-tax Officer forwards the draft order under sub-section (1) of section 144B to the assessee and ending with the date on which the Income-tax Officer receives the directions from the Inspecting Assistant Commissioner under sub-section (4) of that section, or, in a case where no objections to the draft order are received from the assessee, a period of thirty days." The Tribunal has come to the conclusion that the assessment order is barred by limitation on the basis that the Income-tax Officer has no jurisdiction to issue the draft assessment order dated March 24, 1983. The only dr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... being heard. But when the Income-tax Officer takes action under section 144B and forwards the draft assessment order to the Inspecting Assistant Commissioner, the power of the Inspecting Assistant Commissioner is limited to the proposed additions in the draft assessment order. He cannot travel beyond the draft assessment order as the assessment is not open before him as in the case of his exercising power under section 144A. We do not find any reason to hold that once directions are issued by the Inspecting Assistant Commissioner to the Income-tax Officer, in exercise of his power under section 144A in no case the Income-tax Officer can issue a draft assessment order under section 144B. It is true that the Income-tax Officer is bound by the directions given by the Inspecting Assistant Commissioner under section 144A, but if such directions are for further enquiry, it is open to the Income-tax Officer to issue a draft assessment order on the basis of the result of the enquiry and forward the same to the Inspecting Assistant Commissioner. If we examine the relevant documents in the present case itself, it will be clear that issue of such a draft assessment order under section 144B w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Income-tax Officer shall have to work on the lines of investigation directed. The outcome of the investigation and the conclusion drawn therefrom may give rise to a new situation for exercise of discretion by the Income-tax Officer. It, therefore, cannot be said that section 144A intends to take away from the Income-tax Officer all power of discretion and decision making. The assessment that he will have in his mind on the basis of the fresh materials relied upon by him will surely give rise to a situation where he proposes additions, in his own right. In such a contingency, the question of the Income-tax Officer proposing to make variations shall arise and it will certainly attract the provisions of section 144B. Therefore, the contention on behalf of the assessee that section 144A excludes the operation of section 144B is not tenable. We cannot agree with the contention that prior operation of the provisions of section 144A cancels the scope for the operation of section 144B. If the assessment made on the basis of directions under section 144A are of the order of Rs. 1 lakh or more, resort to section 144B can, by no means, be assailed as illegal. Rather such a course will be b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Assistant Commissioner. Under section 144B, the Income-tax Officer does not become functus officio by merely passing or forwarding the draft order. It is only after the final assessment order is passed that the Income-tax Officer loses jurisdiction over the assessment proceeding. Thus, the court took the view that there was no legal bar under section 144B for the Income-tax Officer to send a second draft assessment order and for the Inspecting Assistant Commissioner to issue a second set of directions. Their Lordships disagreed with the view taken by the Delhi High Court in Sudhir Sareen v. ITO [1981] 128 ITR 445. We find that the abovementioned two decisions of the Calcutta High Court would support the view taken by us that merely because the Income-tax Officer had initially sent a draft order under section 144B on November 16, 1982, that would not debar him from issuing a second draft assessment order pursuant to a direction issued by the Inspecting Assistant Commissioner in exercise of his power under section 144A(1). The decision of this court in O. P. No. 10852 of 1987 relied on by learned counsel for the assessee cannot be of any help to the assessee in this case. A readin ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
