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TMI Blog1985 (4) TMI 102X X X X Extracts X X X X X X X X Extracts X X X X ..... s operations by its letter dated 29-11-1977 and so the company closed its business operations with effect from 15-2-1978. At its extraordinary general meeting held on 29-3-1978 the assessee-company resolved for members' voluntary winding up and two liquidators were appointed accordingly. It is stated that a notice under section 178 of the Income-tax Act, 1961 ('the Act') was given to the ITO who, however, did not respond. In the course of beneficial winding up of the affairs of the company, the liquidators took the decision to sell the assets of the company. On 26-7-1978, the assets, viz., railway track, slippers, rolling stock and plant and machinery, lying in its premises between Arrah and Sasaram, were sold for a total consideration of Rs. 95 lakhs. The assessee opted to adopt the fair market value of these assets as on 1-1-1964 as the cost of acquisition for the purpose of computation of capital gains under section 55 of the Act. Such market value was determined at Rs. 39,46,000 as per certificate of valuation given by Talbot Co. 3. The assessee submitted on 17-10-1979 a return showing business loss of Rs. 3,12,235. In course of the hearing before the ITO, the various conte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d to the legality of the assessment the Board's instruction that has been obtained in the Shahdara (Delhi)--Saharanpur Light Rly. Co. Ltd.'s case will be of much assistance to us. Section 292B will take care for that proposition. With regard to the claim of liquidation expenses I beg to submit that in view of the Supreme Court decision in the case of CIT v. Lahore Electric Supply Co. Ltd. [1966] 60 ITR 1, no establishment expenses are allowable as there is no business. In the context, as narrated above, I solicit your instruction." In the course of hearing under section 144A before the IAC, the assessee gave a long explanation about the facts of the case and the stand taken by it (vide pages 12 to 37 in the assessee's paper book)' The IAC by his letter dated 15-3-1982 gave the following instructions under section 144A : "Please refer to your letter dated 25-11-1982 on the above subject. After perusing the assessment record, your report and discussing the matter with the assessee's representative, Shri D.K. Guha, I direct you as under : (a) Please follow the Law Ministry's opinion given in the case of the Shahdara (Delhi)--Saharanpur Light Rly. Co. Ltd. with regard to the po ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rescribed in law." After receiving the above instructions, the ITO made the assessment under section 143(3)/144B of the Act on 18-9-1982. 4. The assessee appealed to the Commissioner (Appeals) and contended that the assessment made on 18-9-1982 was without jurisdiction. The contention raised was that the IAC having once given directions under section 144A did not have any further jurisdiction to give directions under section 144B. Consequently, the extended time limit available under Explanation 1(iv) to section 153 of the Act was not available in this case. Inasmuch as the assessment was made beyond the regular period of limitation, i.e., 31-3-1982, it was urged that the assessment made on 18-9-1982 was barred by limitation. it is to be noted that if section 144B was validly invoked in this case then the time taken for obtaining the instructions under section 144B adequately explained the delay in making the assessment beyond 31-3-1982 and so the assessment made on 18-9-1982 becomes one made within the prescribed time. Thus, the question posed before the Commissioner (Appeals) was whether the reference under section 144B was valid in which case the assessment would also be val ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . For the sake of convenience, we start with ground No. 2 which reads as below : "For that the learned Commissioner should have held that the assessment had become time barred on 31-3-1982 and in view thereof the order of assessment made by the ITO on 18-9-1982 is bad in law and without jurisdiction." Shri D.K. Guha urged before us that the language of section 144A was quite clear and that instructions given under section 144A were given to the ITO to enable him to complete the assessment and such directions are binding on the ITO. Hence, he urged that instructions given under section 144A on 15-3-1982 should have led the ITO to complete the assessment instead of making a further reference under section 144B on the same matter and thereby crossing the date-line set by section 153. He, then, referred to the language of section 144B and emphasised the word 'purposes' used in it. Section 144B says that whenever the ITO proposes to make a variation exceeding Rs. 1 lakh, he should make a reference under section 144B. The point of Shri D.K. Guha was that the ITO was already bound by the directions under section 144A to make the assessment in a particular way and so he is no longer fr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... espect of those specific items were referred under both the sections by a consolidated order. The assessee argued that the whole assessment became time barred because the extended time limit was available only in a case of reference under section 144B and not in a case of reference under section 144A. The Tribunal agreed with the assessee to the extent that the directions under section 144A, with regard to the specific items of addition mentioned therein, had become time barred and the other items of additions covered by the instructions under section 144B were not barred by limitation ; and as the two classes of items were severable, only the first part became barred by limitation and not the second part. The argument of Shri D.K. Guha before us was that the case of the assessee is covered by the ratio of the said decision and so it must be held that the assessment made by the ITO, in the present case, is barred by limitation and so bad in law. 6. Shri S.K. Jha, the learned representative for the department, replied that the assessment made by the ITO and upheld by the Commissioner (Appeals) was quite valid in law. He stated that sections 144B and 144A operated in different plan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rly distinguishable from the facts of this case. Firstly, the order under section 144B has not been combined with the order under section 144A. In fact, the order under section 144B was given separately and after the lapse of considerable time. Secondly, the directions under section 144A given in this case do not relate to any specific item of addition. They are general. If the IAC had given directions regarding any particular item of addition under section 144A then perhaps the ratio of the decision in the case of N. Krishnan would have been applicable. But this is not so in the instant case. The IAC merely gave guidelines on which the assessment had to be made in his directions under section 144A. The ITO followed those directions as best as he could. Following those directions the ITO arrived at an income with a variation of more than Rs. 1 lakh. In such circumstances, he clearly came within the purview of section 144B which directs him to make a reference to the IAC under section 144B, notwithstanding anything contained in section 144A. Accordingly, he made a reference proposing specific additions. We do not see anything improper or irregular in the procedure followed by the IT ..... X X X X Extracts X X X X X X X X Extracts X X X X
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