9911796707
TMI Blog1993 (12) TMI 13X X X X Extracts X X X X X X X X Extracts X X X X ..... -tax Officer, Central Circle, Jamnagar, who had jurisdiction over the assessee, had served notices under sections 142(1) and 143(2) of the Act on the assessee on June 2, 1983, calling for certain information. On March 17, 1984, a draft assessment order under section 144B read with section 143(3) of the Act was forwarded by the Income-tax Officer to the assessee. After hearing the parties and considering the objections raised by the assessee, on September 18, 1984, the Inspecting Assistant Commissioner issued directions to the Income-tax Officer to pass an assessment order. On September 19, 1984, the Income-tax Officer passed the assessment order on the basis of the directions issued by the Inspecting Assistant Commissioner. He assessed the income of the assessee at Rs. 1,38,85,270. Against that order, the assessee preferred an appeal before the Commissioner of Income-tax (Appeals) raising various contentions with regard to the allowability of certain deductions under sections 36 and 37 of the Act. After considering the contentions raised by the assessee, by his detailed order dated August 6, 1984, the Commissioner of Income-tax (Appeals), Rajkot, allowed the appeal partly and dir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment order made under section 143(3)/144B of the Act, by holding that it was time-barred. Against that order, the Revenue preferred a reference application before the Tribunal and the Tribunal has referred the aforesaid question for our opinion. At the time of hearing of this reference, Mr. Thakore, learned counsel appearing for the Revenue, submitted that : (i) for the assessment year 1981-82, the assessee had filed return of income on July 27, 1981, and the Income-tax Officer passed the assessment order on September 19, 1984, which is within time because in the present case, the provisions of section 144B of the Act are applicable. For this purpose, he placed reliance on section 153 read with Explanation 1(iv) thereto ; (ii) the Inspecting Assistant Commissioner has not exercised the powers nor performed the functions of an Income-tax Officer of making an assessment order under section 143 of the Act. Mere issuance of direction or instruction or guidance would not mean that the Inspecting Assistant Commissioner has exercised the powers or performed the functions of an income-tax Officer. The phrase "exercise of the powers and performance of the functions of an Income-tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ercised the concurrent jurisdiction conferred on him under section 125A of the Act because the Inspecting Assistant Commissioner had issued directions for excluding or including particular amounts in the computation of total income while approving the draft assessment order and, accordingly, approved the draft assessment order ; (iii) under section 125A(4) or 144B(7), it is not necessary or incumbent on the Inspecting Assistant Commissioner to perform managerial functions of an Income-tax Officer, but the Inspecting Assistant Commissioner can distribute the functions to be discharged between himself and the Income-tax Officer and the Income-tax Officer shall exercise such powers as the Inspecting Assistant Commissioner may direct. Once that is done, the provisions of sections 125A(4) and 144B(7) would be applicable ; (iv) "concurrent jurisdiction" by the Inspecting Assistant Commissioner and the Income-tax Officer over an assessee would mean that both will function "jointly" and finalise the assessment of a particular assessee ; and (v) that such an assessment order has to be held to be time-barred and the Tribunal is required to annul the assessment proceedings and had no ju ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch confer jurisdiction on the income-tax authorities. Sections 120, 121, 121A and 122 provide for jurisdiction of Directors of Inspection, Commissioners, Commissioners (Appeals) and Appellate Commissioners, respectively. In the present case, we are not concerned with the said sections. The material provisions for our purposes are sections 123, 124, 125 and 125A. They are as under : " 123. Jurisdiction of Inspecting Assistant Commissioner.--(1)The Inspecting Assistant Commissioners shall perform their functions in respect of such areas or of such persons or classes of persons or of such incomes or classes of income or of such cases or classes of cases as the Commissioner may direct. (2) Where any directions issued under sub-section (1) have assigned to two or more Inspecting Assistant Commissioners, the same area or the same persons or classes of persons or the same incomes or classes of income or the same cases or classes of cases, they shall have concurrent jurisdiction and shall perform such functions in relation to the said area or persons or classes of persons or incomes or classes of income or cases or classes of cases as the Commissioner may, by general or special order i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ), where an assessee calls in question the jurisdiction of an Income-tax Officer, then the Income-tax Officer shall, if not satisfied with the correctness of the claim, refer the matter for determination under sub-section (4) before assessment is made. (7) Notwithstanding anything contained in this section, or in section 130A, every Income-tax Officer shall have all the powers conferred by or under this Act on an Income-tax Officer in respect of any income accruing or arising or received within the area for which he is appointed. 125. Powers of Commissioner respecting specified areas, cases, persons, etc. -- (1) The Commissioner may, by general or special order in writing, direct that-- (a) the powers conferred on the Income-tax Officer, by or under this Act shall, in respect of any specified case or class of cases or of any specified person or class of persons, be exercised by the Inspecting Assistant Commissioner. . . . ; (2) For the purposes of any case or person or proceeding under this Act in respect of which or whom an order under sub-section (1) applies,-- (a) where such order is made under clause (a) of the said sub-section (1), references in this Act or in any ru ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he functions of an Income-tax Officer in relation to any area, or persons or classes of persons, or incomes or classes of income, or cases or classes of cases, references in this Act or in any rule made thereunder to the Income-tax Officer shall be construed as references to the Inspecting Assistant Commissioner and any provision of this Act requiring approval or sanction of the Inspecting Assistant Commissioner shall not apply." From the aforesaid sections, it is apparent : (i) Under section 123 of the Act, the Inspecting Assistant Commissioners have jurisdiction in respect of such areas or of such persons or classes of persons or of such incomes or classes of income or of such cases or classes of cases as per the direction of the Commissioner. Where there are two or more Inspecting Assistant Commissioners, they are having concurrent jurisdiction and are required to exercise their powers and perform their functions as per the order in writing made by the Commissioner specifying for the distribution and allocation of the work to be performed. (ii) Similarly, under section 124(1), the Income-tax Officers are also required to perform their functions as per the direction of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issioner may, by general or special order in writing, direct that all or any of the powers or functions conferred on, or assigned to, the Income-tax Officer or Income-tax Officers by or under this Act in respect of any area, or persons or classes of persons, or incomes or classes of income, or cases or classes of cases, shall be exercised or performed concurrently by the Inspecting Assistant Commissioner. Sub-section (2) of section 125A also empowers the Inspecting Assistant Commissioner to issue direction to the Income-tax Officer and the Income-tax Officer is required to exercise his powers and perform his functions under the Act as per the said direction. Sub-section (3) thereto clarifies that the Income-tax Officer is also required to observe and follow such instructions as may be issued to him for his guidance by the Inspecting Assistant Commissioner within whose jurisdiction he performs his functions in relation to any particular proceedings or the initiation of any proceeding under the Act. The proviso clarifies that no instructions which are prejudicial to the assessee shall be issued before an opportunity is given to the assessee to be heard. For the purposes of this ref ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any Income-tax Officer to another Income-tax Officer or to Income-tax Officer having concurrent jurisdiction with the Inspecting Assistant Commissioner. It is made clear in this section that the Commissioner is empowered to transfer a case from the Income-tax Officer having concurrent jurisdiction with the Inspecting Assistant Commissioner to any other Income-tax Officer having no concurrent jurisdiction with the Inspecting Assistant Commissioner. Similarly, the Board is also entitled to transfer a case from the Income-tax Officer having concurrent jurisdiction with the Inspecting Assistant Commissioner to any other Income-tax Officer having no concurrent jurisdiction with the Inspecting Assistant Commissioner. Further, when the case is transferred from any Income-tax Officer to two or more Income-tax Officers having concurrent jurisdiction with the Inspecting Assistant Commissioner, the officers including the Inspecting Assistant Commissioner to whom the case is so transferred shall have concurrent jurisdiction over such case and they are required to perform their functions in accordance with the general or special orders in writing made by the superior authority. The Income-tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... missioner in this behalf ; (c) in a case, where two or more Income-tax Officers have concurrent jurisdiction over such assessee in relation to any function, be the Income-tax Officers empowered to perform such function by the Board or, as the case may be, the Income-tax Officers to whom function has been assigned by an order of the Commissioner or by an order or a direction of the Inspecting Assistant Commissioner under sub-section (2) of section 124 or, as the case may be, under sub-section (2) of section 125A." As per clause (a) of section 130A, with regard to an assessee where only one Income-tax Officer has jurisdiction over such assessee, he is empowered to perform all the functions under the Act. As per clause (b) where two or more Income-tax Officers have concurrent jurisdiction, they are required to perform such functions as per the direction of the Board or the Income-tax Officer to whom such function has been assigned by an order of the Commissioner or of the Inspecting Assistant Commissioner authorised by the Commissioner in this behalf. Clause (c) clarifies the situation that, where an Income-tax Officer is exercising concurrent jurisdiction, he is required to exerc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ejudicial to the assessee and the amount of such variation exceeds the amount fixed by the Board under sub-section (6), the Income-tax Officer shall, in the first instance, forward a draft of the proposed order of assessment (hereafter in this section referred to as the draft order) to the assessee. (2) On receipt of the draft order, the assessee may forward his objections, if any, to such variation to the Income-tax Officer within seven days of the receipt by him of the draft order or within such further period not exceeding fifteen days as the Income-tax Officer may allow on an application made to him in this behalf. (3) If no objections 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e any variation in the income or loss returned and the amount of such variation exceeds the amount fixed by the Board, he is required to prepare a draft assessment order and to forward it to the assessee. On receipt of the draft assessment order, the assessee is entitled to forward his objections. If objections are received, the Income-tax Officer is required to forward the draft assessment order together with objections to the Inspecting Assistant Commissioner. The Inspecting Assistant Commissioner is required to consider the draft assessment order and the objections and is entitled to issue such directions as he thinks fit for the guidance of the Income-tax Officer to enable him to complete the assessment. It also provides for giving an opportunity of hearing to the assessee if such directions are prejudicial to him. The directions issued by the Inspecting Assistant Commissioner are binding on the Income-tax Officer. Sub-section (7) provides that nothing provided in section 144B shall apply to a case where an Inspecting Assistant Commissioner exercises the powers and performs the functions of an Income-tax Officer. The requirement of sub-section (7) is that the procedure which is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the draft order are received from the assessee, a period of thirty days, or (iva) the period (not exceeding sixty days) commencing from the date on which the Income-tax Officer received the declaration under sub-section (1) of section 158A and ending with the date on which the order under sub-section (3) of that section is made by him, or . . . . shall be excluded . . . . .." Admittedly, in the present case, the Income-tax Officer has followed the procedure prescribed under section 144B. The draft assessment order was prepared by him on March 17, 1984. It was forwarded to the assessee. The assessee had submitted its objections. Thereafter, the Inspecting Assistant Commissioner had given an opportunity of hearing to the assessee and learned advocates, Messrs. K. C. Patel and G. K. Sureka had made their submissions before the Inspecting Assistant Commissioner. After taking into consideration the submissions made by the learned advocates for the assessee, the Inspecting Assistant Commissioner had issued necessary directions under section 144B of the Act to the Income-tax Officer. On the basis of the said directions, the Income-tax Officer had passed an assessment order on Septem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the computation of the total income and of approving the draft assessment order. In our view, it would be difficult for us to accept the contention raised by learned counsel, Mr. Kaji, for the assessee. Sub-section (7) of section 144B specifically provides that the provisions of section 144B shall not be applicable to a case where an Inspecting Assistant Commissioner exercises the powers or performs the functions of an Income-tax Officer. The phrase "Inspecting Assistant Commissioner exercises the powers or performs the functions of an Income-tax Officer" would mean that the Inspecting Assistant Commissioner performs the functions as provided under section 130A, and also exercises his powers which are enumerated in sections 131 to 136 and thereafter makes an assessment order as provided under section 143. Apart from other powers and functions, the jurisdiction or function of the Income-tax Officer is of assessing a particular assessee, that is to say, to make an order of assessment or reassessment. Unless that jurisdiction or function of the Income-tax Officer of making an assessment order by following the prescribed procedure is exercised by the Inspecting Assistant Commissio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er is dispensed with. The second condition is also required to be satisfied, i.e., the Inspecting Assistant Commissioner has exercised the powers and performed the functions of the Income-tax Officer. The Legislature has not provided that, once an order under sub-section (1) of section 125A is issued conferring concurrent jurisdiction and the Inspecting Assistant Commissioner has given directions as provided under sub-section (2), the provision of the Act requiring approval or sanction of the Inspecting Assistant Commissioner will not be applicable and the references in the Act or in any rules to the Income-tax Officer should be considered as reference to the Inspecting Assistant Commissioner. The material requirement is that he should have exercised the functions of the Income-tax Officer. In the present case, there is nothing on record to suggest that the Inspecting Assistant Commissioner has consciously or otherwise exercised the powers and performed the functions of the Income-tax Officer. As stated earlier, he has exercised his powers of issuing directions. The Inspecting Assistant Commissioner has jurisdiction to issue directions either under sections 119(3), 125A(2), 144A or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 144B." From the aforesaid clauses (b), (d) and (f), it is apparent that the Legislature has contemplated two categories of orders -- (1) where the orders are passed by the Inspecting Assistant Commissioner and (2) where the orders are made by the Income-tax Officer on the basis of issuance of directions of the Inspecting Assistant Commissioner under section 144A or 144B. This also would indicate that the phrase "Inspecting Assistant Commissioner has exercised the powers or performed the functions of the Income-tax Officer" would mean exercising of all the powers of the Incometax Officer including making of a final assessment order. In our view, clause (b) provides that, if an assessment order is made by the Inspecting Assistant Commissioner in exercise of the powers or functions conferred on or assigned to him under section 125 or section 125A, the appeal would lie before the Commissioner (Appeals). As stated earlier, once powers under section 125 are conferred on an Inspecting Assistant Commissioner, the Inspecting Assistant Commissioner is required to exercise the powers and perform the functions of an Income-tax Officer and is required to pass a final assessment order. The sam ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... concurrent jurisdiction, when one authority has taken cognizance of the matter, then the other authority would not take cognizance of the said subject-matter. Apart from the general principles, under section 125A, there is a specific provision to that effect. Sub-section (2) empowers the Inspecting Assistant Commissioner to issue necessary directions to the Income-tax Officer which would include a direction not to proceed with the matter of which the Inspecting Assistant Commissioner has taken cognizance. If the contention of learned counsel for the assessee is accepted, it may result in absurdity and, in some cases, the assessee will be put to double jeopardy. Further, it would be against the scheme of sections 123, 124, 125A, 127 and 130A. All these sections contemplate concur rent jurisdiction of the Inspecting Assistant Commissioners, Income-tax Officers, or Income-tax Officer and Inspecting Assistant Commissioner. In all these sections, it is provided that these authorities are required to exercise their jurisdiction in accordance with general or special orders in writing by the Commissioner or by the Inspecting Assistant Commissioner authorised by the Commissioner of Income- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing Assistant Commissioner for guidance and directions in respect of the matters covered by the objections so as to enable the Income-tax Officer to complete the assessment. The procedure is evolved for the benefit of the assessee in a case where the Income-tax Officer proposes to make any variation in the income or loss returned which is prejudicial to the assessee and the amount of such variation exceeds the amount fixed by the Board having regard to the proper and efficient management of the work of assessment. Admittedly, this procedure was followed in the present case. Further, at no point of time, the assessee, who was ably assisted by learned counsel, raised a contention that the aforesaid procedure was not required to be followed. No such contention was taken by it when the assessee preferred objections to the proposed draft assessment order nor such a contention was raised in the appeal before the Commissioner of Income-tax (Appeals). On the contrary, from the order of the Income-tax Officer, it is apparent that he has passed the assessment order under section 143(3) read with section 144B of the Act. This would be clear from the first and last pages of the order. Even t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been furnished or made or issued or taken in pursuance of any of the provisions of this Act shall be invalid or shall be deemed to be invalid merely by reason of any mistake, defect or omission in such return of income, assessment, notice, summons or other proceeding if such return of income, assessment, notice, summons or other proceeding is in substance and effect in conformity with or according to the intent and purpose of this Act. " Indisputably, the intent and purpose of the Act is to levy, assess and collect income-tax by following the prescribed procedure. Section 144B provides for additional procedure which is required to be followed in the cases contemplated therein. However, Mr. Kaji, learned counsel for the assessee, vehemently submitted that, in view of sub-section (7) of section 144B, when an order under section 125A was made by the Commissioner of Income-tax conferring concurrent jurisdiction on the Inspecting Assistant Commissioner and when the Inspecting Assistant Commissioner has exercised the powers under section 125A by issuing necessary directions under section 125A(2) of the Act, it is required to be held that he has exercised the powers and performed the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ficer with regard to the assessee's matter and the Income-tax Officer has sought guidance with regard to the specific issues such as allowability of selling commission and also claim of the assessee for deduction under section 35(1)(ii) of the Act. Thereafter, by letter dated November 24, 1983, the Inspecting Assistant Commissioner has given his opinion on the questions raised by the Income-tax Officer. Further, by letter dated December 5, 1983, the Income-tax Officer sought directions with regard to the contention of the assessee's representative for deduction of commission paid by the party after the end of the accounting year. He further relied upon the letter dated December 12, 1983, written by the Inspecting Assistant Commissioner to the Income-tax Officer. In our view, from the correspondence referred to hereinabove, the Income-tax Officer has sought guidance or direction from the Inspecting Assistant Commissioner with regard to the claims made by the assessee. At no point of time, the Inspecting Assistant Commissioner has decided the matter finally. In his letters, he has expressed his opinion and asked the Income-tax Officer to decide the matter in accordance with law. In t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ner and the Inspecting Assistant Commissioners. The aforesaid sections contemplate that, even though the officers are having concurrent jurisdiction, yet they have to exercise the powers and to perform the functions of the Income-tax Officers assigned to them on the basis of the directions issued by the Board, the Commissioner of Income-tax or the Inspecting Assistant Commissioner, as the case may be. If the contention of the assessee that they are required to work jointly is accepted, then the scheme would fail and the assessee will be put to double jeopardy and, in some cases, it will lead to absurd results because of conflicting orders or difference of opinion between the income-tax authorities. The scheme of the Act does not envisage that two authorities should act jointly and pass a common order in the case of the assessee. II. The phrase "Inspecting Assistant Commissioner exercises the powers or performs the functions of an Income-tax Officer" would mean that the Inspecting Assistant Commissioner performs the functions as provided under section 130A and also exercises his powers which are enumerated in sections 131 to 136 and thereafter makes an assessment order as provided ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... order, as stated by him, by invoking the jurisdiction under section 143(3) read with section 144B of the Income-tax Act. The Inspecting Assistant Commissioner stated that he has also invoked his jurisdiction under section 144B of the Income-tax Act. The assessee also considered all throughout that the Income-tax Officer had exercised his powers and performed his functions under section 143 of the Income-tax Act and the Inspecting Assistant Commissioner has also discharged his functions under section 144B of the Income-tax Act, till the appeal was decided by the Commissioner against the assessee. Only for the first time, the assessee raised the contention before the Tribunal that the Income-tax Officer ought not to have followed the procedure prescribed under section 144B and by a process of interpretation the Tribunal arrived at the conclusion that the Income-tax Officer was not required to follow the procedure prescribed under section 144B. Considering the aforesaid facts, in our view, this would not be a ground for not applying the provisions of Explanation 1(iv) to section 153 which provides for exclusion of time in computing the period of limitation. Now, we would deal with t ..... 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