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TMI Blog1984 (10) TMI 86X X X X Extracts X X X X X X X X Extracts X X X X ..... aking, the ITO completed the assessment of the assessee under section 143(3), read with section 144B, of the Act by his order, dated 31-8-1981. The assessee is a company. The ITO, who completed the assessment, was the ITO, ' B ' Ward. The background of the case is that the ITO, ' J ' Ward, had the original jurisdiction as per order of the CBDT, dated 4-7-1980. The ITO, J Ward, took up the assessment and when he found that the provision of section 144B was attracted, he processed the matter and the points of making the assessment order, and, accordingly, by his letter, dated 26-3-1981, forwarded the draft assessment order to the assessee under section 144B(1), as the variation of the income proposed to be made by him exceeded Rs. 1 lakh. From the order of the ITO, it is seen that the forwarding letter was served on the assessee on 28-3-1981. The assessee, as provided under section 144B(2), sent its objections to the different points made in the assessment order, a copy of which has been placed at page 3 of the paper book. The ITO, J Ward, forwarded the draft assessment order along with the assessees objections thereto to the IAC, Special Range III. Meanwhile, on 1-6-1981, the Commis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eforth. 5. The assessee raised another objection stating that at the time of the transfer of jurisdiction for the year under consideration, the assessee had raised certain objections to the draft assessment order sent by the ITO, J Ward. It was pointed out that as the assessment was still pending at the time of transfer of the jurisdiction to the ITO, B Ward, the assessee in terms of section 129 demanded that it should be reheard before any further proceeding was taken to finalize the assessment. The ITO, B Ward, intimated the assessee that his predecessor in office has forwarded the draft assessment order along with the assessee's objections to the concerned IAC, and as a result thereof, the proceedings under section 144B were pending before the IAC, Special Range III. The ITO, B Ward, intimated the assessee further that no proceeding was pending before him at that stage relating to the assessment year 1978-79. The assessee at this stage also reiterated its demand that it should be reheard and the previous proceedings be reopened, as provided by the provision to section 129, contending that if the IAC, Special Range III, gives direction for completion of the assessment to the I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ving the assessee an opportunity under section 129 as the IAC was not the authority who could pass the assessment order. It was argued that it was difficult to agree with the view of the IAC that he could give direction under section 144B before the ITO, B Ward, could give the assessee an opportunity of being heard, and it was also submitted that if the proceedings before the ITO, B Ward, were barred by limitation, then the assessee considered that any hearing by the IAC, Range III, would not have any legal effect either as binding on the ITO or as saving the limitation period after 31-3-1981 while the assessment year 1978-79 was still pending. 7. The IAC, in his order dated 31-8-1981, took up the various points and the other contentions raised by the assessee as discussed briefly above. Amongst other things, he noted that he held concurrent jurisdiction by virtue of section 125A(1) as passed by the Commissioner, but he pointed out that the scope of new section 125A has been explained by the Board's Circular No. 179, dated 30-9-1977-Taxmann's Direct Taxes Circulars, vol. 2, 1980 edn., p. 766. He pointed out that holding any concurrent jurisdiction under section 125A(1) would not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re the Commissioner (Appeals), who noted the facts and the background of the case. The contention of the assessee before him was that when the jurisdiction was transferred from one ITO to another, section 129 gives the assessee a right of being heard, and that right did not get disintegrated in section 144B proceeding. It was urged that the ITO denied this opportunity and the assessment, therefore, was void. The Commissioner (Appeals) examined the different aspects of the matter and the stand taken by the IAC, etc. He was of the view that as soon as the draft order was prepared by the ITO, who sent the same to the IAC along with the assessee's objections, the ITO became functus officio except for the limited purpose of incorporating the direction of the IAC in the final order. He was of the view that once the draft order was prepared by the ITO, he has no power to grant hearing to the assessee. He pointed out that the ITO has the power to hear the assessee only before framing the draft order and not thereafter, and therefore, the role of the ITO for giving hearing stood concluded, and the question of applicability of proviso to section 129, would not arise. The Commissioner (Appeal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Sixth ITO [1983] 3 ITD 633 (Bom.) (SB). According to the assessee's learned counsel, section 144B does not take away the assessee's substantive right available under section 129. Further reference is made to another decision of the Tribunal as reported in ITO v. Supan International (P.) Ltd. [1984] 9 ITD 256 (Delhi). In course of his argument, the assessee's learned counsel refers to the different papers placed in the paper book in order to stress the claim of the assessee that the assessment was bad in law since no opportunity was allowed under section 129 by the ITO, and even otherwise the assessment was barred by limitation. The assessee has also given a zerox copy of Craics' on Statute Law, which is reproduced below : " Where alternative constructions are equally open, that alternative is to be chosen which will be consistent with the smooth working of the system which the statute purports to regulate. ' If the choice is between two interpretations, the narrower of which would fail to achieve the manifest purpose of the legislation, we should avoid a construction which would reduce the legislation to futility and should rather accept the bolder construction based on the vi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... SC 185. 11. According to the learned departmental representative, the IAC can deal only with the point noted in the draft assessment and that too only on the points objected to by the assessee in its written objection. It is pointed out that the IAC in this context is not acting as an appellate authority, nor the IAC can reframe such draft assessment. It is urged that in respect of the points proposed in the assessment order on which no objection was raised by the assessee, such point is final for all concerned and, in fact, the IAC cannot enhance and in that sense, such point in the draft assessment order has reached a stage of finality. The difference of the provision of sections 144A and 144B is highlighted by the learned representative. It is also argued that once the draft assessment order is prepared and if no objection was received from the assessee, there is no scope for any variation or change. According to him, the rights of the assessee under section 129 ended with the sending of the draft assessment order by the ITO, J Ward, under section 144B. In course of arguments, the learned departmental representative referred to the case laws as reported in Sirpur Paper Mill L ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee by his letter dated 6-8-1981 that the draft assessment order was forwarded by his predecessor in office on 28-3-1981, and the matter was pending before the IAC, Range III, who held jurisdiction over the case under section 144B, and that in the circumstances, no proceeding was pending before the ITO, B Ward, at that stage relating to the assessment year 1978-79. The IAC as well as the Commissioner (Appeals), as discussed briefly by us above, have given the same opinion that the ITO, after sending of the draft assessment order along with the objections of the assessee to the IAC Concerned, has no other power to rehear the assessee in view of the provisions of section 144B. The provisions of section 144B are quite clear and unambiguous. The ITO, in case he was of the opinion that there would be a variation of the assessed income vis-a-vis the returned income exceeding more than Rs. 1 lakh, has to conform to the requirements of section 144B. He has to prepare a draft and send it to the assessee, and on receipt of the assessee's objection, if any, the ITO would have simply to forward those papers to the IAC concerned, who would have the jurisdiction to rehear the assessee on t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce, material facts, etc., afterwards. In fact, at the last para of its aforesaid objection, at page 10 of the paper book, the assessee noted that it hoped that the ITO, J Ward, would examine each and every item objected to by the assessee and would finally frame the assessment which is in accordance with law. The IAC also has given a finding that the assessee did not tender any evidence in support of his letter of objection dated 1-4-1981. Actually, he has given a finding that when the matter was before him, Mr. B. Venkataratnam, who was present on behalf of the assessee in course of proceedings under section 144B, refused to tender any evidence, etc., in view of the assessee's claim of hearing under section 129 before the ITO. In this connection, we may refer to the decision in the case of Sadhan Kumar Roy v. CIT [1977] 107 ITR 954, in which, on the facts of that case, it was held by the Hon'ble Calcutta High Court that there was no non-compliance with the provision of section 5(7C) of the Indian Income-tax Act, 1922 (' the 1922 Act '), as the assessee was not asking for any personal bearing by the Commissioner for the purpose of section 33B of the 1922 Act. It was observed that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hear the assessee in view of section 144B(7). But when the case was transferred to the ITO, B Ward, and another concerned IAC gave the hearing, the assessee raised the plea that hearing was to be given by the ITO, B Ward, only and that IAC can examine afresh the ITO, B Ward, who is under his jurisdiction. Again, as pointed out earlier, the assessee was asking for some thing which, in our opinion, could not be done as the assessment proceedings were otherwise barred already by 31-3-1981. 18. Section 116 of the Act defines and enumerates the income-tax authorities which include the ITO, IAC, etc. Section 129 provides that whenever an income-tax authority ceases to exercise jurisdiction and is succeeded by another who has and exercises jurisdiction, the income-tax authority so succeeding may continue the proceeding from the stage at which the proceeding was left by his predecessor. There is a proviso that the assessee may demand that before proceeding is continued, the previous proceeding or any part thereof may be reopened or that before any order of assessment is passed against him, he may be heard. When the ITO, J Ward, ' forwarded ' the draft assessment order along with the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... period so extended is for 180 days, which commences from the day the ITO ' forwards ' the draft order and ends with the period when the ITO ' receives ' instructions from the IAC. It is not the case of the assessee before us that the ITO, J Ward, has not forwarded the draft assessment order, etc., as pointed out above within the period prescribed by law. The ITO, B Ward, who ultimately completed the assessment, passed the final order of assessment on the same day of receipt of the IAC's instruction. This too was within time. How the assessee could raise a plea before us that the assessment was time barred and the Commissioner (Appeals) was not justified in upholding such assessment order in the present case. In this connection, we may refer to the decision of the Hon'ble Madhya Pradesh High Court in the case of Gulabchand Manakchand v. CIT [1984] 148 ITR 404, in which it was held that the date to be counted for limitation was the date on which the instruction of the IAC was received and not the date on which the IAC issued direction. As repeatedly mentioned earlier, the assessee in the present case wanted the ITO, B Ward, to rehear the assessee under section 129. This could not hav ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 53 ITR 57, it was held by the Hon'ble Mysore High Court that opportunity of being heard was given by the succeeding officer, who has the authority to impose the penalty after considering the written representations of the assessee who did not desire to adduce evidence or present oral arguments. 22. In fact, the Hon'ble Calcutta High Court in the case of Kanailal Gatani v. CIT [1963] 48 ITR 262 has enunciated certain guidelines in a similar situation. It was held amongst other things that where no witnesses had to be called and no arguments had been advanced, but the matter depended on written objections, the succeeding officer was in the same position as the officer who originally was in the conduct of the case, and as long as the successor applies his mind to the materials before him, an order made by him cannot be held to be invalid. The facts of that case were that the draft order for imposition of the penalty under section 28(3) was prepared by one officer, who was transferred in the meanwhile. The succeeding officer looked into the draft order and after he had concurred therein, sent the same with a forwarding memo to the IAC concerned. It was held on the facts of that case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f Bengal Assam Investors Ltd. [1983] 142 ITR 156. The learned departmental representative has drawn the distinction and the basic difference between the provisions of section 144B and of section 144A. In the present case before us, apparently, every conceivable objection was raised by the assessee at different times harping on the same tune that opportunity should be given by the ' income-tax authority ' to the assessee under section 129. But when the effective and substantive opportunity was given by the IAC, Range III, the assessee's counsel refused to tender any evidence, etc, relating to the assessee's objections to the draft assessment order, as noted in the order of the IAC itself. From the papers before us, it is seen that the assessee has not chosen to rely on any additional evidence or material, as apparently it was satisfied with the written objections filed earlier. 25. In view of what we have discussed and dealt with in the preceding paragraphs, we are of the opinion that there was no non-compliance with the provisions of section 129 by the income-tax authority nor in respect of the provisions under section 144B. In this view of the matter, we agree with the findin ..... X X X X Extracts X X X X X X X X Extracts X X X X
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