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TMI Blog1997 (7) TMI 95X X X X Extracts X X X X X X X X Extracts X X X X ..... 79 for the assessment year 1975-76 (accounting year ending on March 31, 1975). The Assessing Officer examined the books of account of the assessee's proprietary business, Bombay Wool Agency, Ludhiana, and proposed disallowances aggregating to Rs. 71,725 under section 144B of the Act. These disallowances consisted of the disallowance of interest paid on the borrowings at Rs. 57,500, disallowance of travelling expenses Rs. 2,000, disallowance of motor car expenses Rs. 11,309 and disallowances of shop expenses and charity Rs. 916. In addition, the Assessing Officer redetermined income from house property at Rs. 6,833 and the share income from the firm at Rs. 1,81,884. The assessee had declared share of profit from the firm, Everest Woollen Mills, Ludhiana, at Rs. 21,479 but the Assessing Officer, on the basis of the draft assessment order, prepared by the Assessing Officer in the case of the firm under section 144B of the Act, estimated the assessee's share income from the firm at Rs. 1,81,884. Since the variation in the income returned and the income proposed to be assessed exceeded Rs. 1,00,000, the power under section 144B of the Act was invoked by the Assessing Officer and a draft ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 144B of the Act would not be attracted in the case of the assessee. The Commissioner of Income-tax also did not accept the assessee's second plea that the Assessing Officer, by resorting to section 144B, illegally enlarged the time limit for completion of the assessment. The assessee's plea was that an assessment could be validly completed before the expiry of two years from the end of the assessment year in which the income was first assessable, as provided in sub-clause (iii) of clause (a) of sub-section (1) of section 153 of the Act. In other words, the assessment could be completed up to March 31, 1978, whereas it was made on September 16, 1978. The Commissioner of Income-tax, after rejecting the challenge to the validity of the addition, however, directed the Assessing Officer to assess the assessee's share income which had been finally and actually determined by that time in the case of the firm. Certain reliefs were granted in respect of the other disallowances which are not required to be discussed because those are not in controversy here. The assessee went in second appeal before the Tribunal against the Commissioner's order upholding the assessment framed by the Ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s are received within the period or the extended period aforesaid or the assessee intimates to the Income-tax Officer the acceptance of the variation the Income-tax Officer shall complete the assessment on the basis of the draft order. (4) If any objections are received, the Income-tax Officer shall forward the draft order together with the objections to the Inspecting Assistant Commissioner and the Inspecting Assistant Commissioner shall, after considering the draft order and the objections and after going through (wherever necessary) the records relating to the draft order, issue, in respect of the matters covered by the objections, such directions as he thinks fit for the guidance of the Income-tax Officer to enable him to complete the assessment : Provided that no directions which are prejudicial to the assessee shall be issued under this sub-section before an opportunity is given to the assessee to be heard. (5) Every direction, issued by the Inspecting Assistant Commissioner under sub-section (4) shall be binding on the Income-tax Officer. (6) For the purposes of sub-section (1), the Board may, having regard to the proper and efficient management of the work of assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the proposed overall variation in the returned total income did not exceed Rs. 1,00,000. The obligation as to the making of a draft assessment order and reference to the Inspecting Assistant Commissioner under section 144B arose if the assessment was made under section 143(3) in a case where the variation exceeded Rs. 1,00,000 and not where an ex parte best judgment assessment was made under section 144 of the Act. The provisions, contained in section 144B, also did not apply to an assessment or reassessment made under section 147 read with section 148. The intention behind the provisions of section 144B seemed to be to reduce the ever increasing number of appeals. It was designed to provide a forum, before the actual assessment and being burdened with an ascertained liability, for the assessee to know the merits of the proposed assessment, the materials arrayed against him, and to meet them, in the manner of a mini appeal, by pointing or producing such evidence or materials, or making submissions as the assessee might think fit. The proceedings, from the point of view of the assessee, stood on a slightly better footing than an appeal. Here the assessee might introduce additio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble. In the case of the present assessee, the assessment year was 1975-76 and thus the assessment could be completed within two years from the end of the assessment year 1975-76. The assessment has been framed on September 16, 1978, whereas it should have been completed on or before March 31, 1978. However, in a case where section 144B was invoked, there was an extended period of limitation as provided in clause (iv) of Explanation 1 to section 153 of the Act. Clause (iv) of Explanation 1 reads as under : " Explanation 1. --- 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, or. . . shall be excluded." The assessee's challenge is confined to the use of the extended period of limit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eover, the assessee was not able to show that the assessment under section 143(3) read with section 144B of the Act on September 16, 1978, was so framed beyond the period of 180 days after the expiry of two years from the end of the assessment year. Shri S. K. Mukhi, learned counsel for the assessee, has also challenged the application of section 144B with the plea that the Assessing Officer had no jurisdiction to invoke that section when an elaborate scheme had been laid down in the Act for redetermining a partner's share income after the completion of the firm's assessment. Section 67 of the Act laid down the method of computing a partner's share in the income of the firm. In computing the total income of an assessee, who was a partner of a firm, his share is required to be computed after the net result of the computation of total income of the firm is available. Section 182 related to the assessment of income of registered firms. After assessing the total income of the firm, the income-tax payable by the firm itself is to be determined and the share of each partner in the income of the firm is to be included in his total income and assessed to tax accordingly. Section 247 of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 144B of the Act. There was no legal bar against proceeding under section 144B. If there were two courses open, any one could be adopted unless barred by a specific provision in this behalf. The provisions in section 144B were procedural in nature. Where, in making an assessment under section 143(3), the Assessing Officer proposed to make any variation in the income or loss returned by an amount exceeding Rs. 1,00,000, he could do so though he was bound to comply with the provisions of section 144B of the Act. Section 144B started with a non obstante clause which implied that even if there were other provisions on a subject, those would not create a bar to the application of section 144B. As already stated, there was no legal bar in section 144B, which could prohibit the use of that section in the matter of determining the share income of a partner on the basis of a proposed variation. It is true that, in the case of the firm, the total income had not been finally determined under section 143(3) of the Act. A draft order had been prepared in the case of the firm also. The Assessing Officer, in the case of the assessee as an individual, proceeded to look into the draft assessment o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The assessee's interests were not prejudiced inasmuch as he could claim refund of tax, collected from him, with interest. Section 144B enables the Assessing Officer to make an assessment order after giving effect to the directions received from the Inspecting Assistant Commissioner. Such an assessment order was an assessment made by the Assessing Officer in exercise of the jurisdiction and power under section 143(3) of the Act. An assessee was entitled to file an appeal against such an assessment order notwithstanding that he failed to file objections to the variation proposed by the Assessing Officer under section 144B of the Act. The mere fact that the assessee did not file any objections to the draft assessment order would not debar the assessee from preferring an appeal against the final, assessment order. If there was a non-compliance or an irregular compliance with the provisions of section 144B, it was a procedural irregularity. In the controversy in hand, no case has been made out about the non-compliance or irregular compliance with the provisions of section 144B. The only charge made against the assessment is that the share income of a partner could not be proposed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t High Court in CIT v. Shree Digvijay Woollen Mills Ltd. [1995] 212 ITR 310. There also, it was held that the assessment was not barred by limitation if it was completed within the period specified in Explanation 1(iv) to section 153. As has been observed earlier, the question of limitation raised by the assessee is relevant to the extent that the Assessing Officer availed of the extended period of limitation and completed the assessment within that extended period in the case of the assessee. It has not been shown by the assessee that the assessment completed on September 16, 1978, was beyond the period of limitation. The only charge, however, is that the Assessing Officer, with a mala fide intention, resorted to section 144B and thereby sought an extended period of limitation. This charge has, however, been not substantiated. Moreover, a larger period of four years was available under section 155(1) of the Act and, therefore, it is not correct to assume that the Assessing Officer resorted to section 144B simply for seeking an extended period of limitation. The two decisions on which reliance has been placed by Shri B. S. Gupta do not, however, appear to be relevant to the contr ..... X X X X Extracts X X X X X X X X Extracts X X X X
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