COMMISSIONER OF INCOME TAX Vs. VIRWANI M M

JUDGEMENT

(1.) BY this reference under s. 256(1) of the IT Act. 1961, made at the instance of the assessee, the Tribunal has referred to this Court the following question of law for opinion :

(2.) THE assessee is an individual. THE assessment year involved in this reference is 1973-74. THE assessment of the assessee for this assessment year was completed by the ITO on 8th Sept., 1976, under s. 143(3) r/w s. 144B of the IT Act, 1961 ("the Act"). However, the CIT, on perusal of the record of the assessment proceedings of the assessee for the above assessment year, noticed that in computing the income of the assessee, the ITO had wrongly allowed deduction of a sum of Rs. 65,000. He, therefore, initiated proceedings under s. 263 of the IT Act, 1961, and after hearing the parties held that the order of the ITO, in so far as it related to the deduction of the said sum of Rs. 65,000, was erroneous and prejudicial to the interests of the Revenue. He, therefore, set aside the assessment and directed the ITO to redo the same in accordance with law.

(3.) UNDER s. 143 of the Act, the power of assessment is vested in the ITO. Sec. 144B requires the ITO in certain cases where any variation in the income or loss returned by the assessee exceeds the specified amount, to first forward a draft of the proposed order of the assessment to the assessee and if any objections are received thereon, to forward the same along with the objections to the IAC who may issue such directions as he may deem fit for guidance of the ITO to enable him to complete the assessment. The directions so issued are of course biding on the ITO under sub-s. (5) of s. 144B of the Act. This, however, does not make any difference. The fact remains that the assessment is an assessment made by the ITO under s. 143(3) of the Act. An order passed by the ITO under s. 143(3) of the Act, therefore, continues to be an order under that section though passed after following the mandatory procedure laid down in s. 144B. As observed by Mohta, J. in Nagpur Zilla Krushi Audyogik Sahakari Sangh Ltd. vs. Second ITO [(IT Ref. No. 300 of 1981, decided by the Nagpur Bench on 9th Sept., 1992)] : "Only because the procedure under s. 144B was followed, the order does not cease to be one under s. 143(3)". Sec. 144B, though inserted as an independent section, in truth and substance, is in the nature of proviso to s. 143(3) of the Act and should be read as such [CIT vs. V.S. Saraf (HUF) IT Ref. No. 315 of 1979, decided by the Nagpur Bench on 29th Sept., 1992)].