COMMISSIONER OF INCOME TAX Vs. SHAHZADI BEGUM

JUDGEMENT

(1.) ON the application of the Revenue, filed under section 256(2) of the Income-tax Act, 1961 (for short "the Act"), this court issued a direction to the Income-tax Appellate Tribunal to state the case and refer the following questions of law for opinion, by its order in I.T.C. No. 233 of 1985 passed on September 2, 1986. The questions read as follows :

(2.) THE assessee is an individual. In the assessment year 1976-77, the assessee filed her return. However, the Income-tax Officer considered it a fit case to proceed under section 144B of the Act. He prepared a draft assessment order and signed it on March 27, 1979. That order appears to have been served on the representative of the assessee on March 29, 1979. THE objections of the assessee were filed on April 12, 1979. THE draft assessment order and the objections of the assessee were sent to the Inspecting Assistant Commissioner of Income-tax (IAC) for approval. THE Inspecting Assistant Commissioner granted his approval on September 22, 1979. THEreupon, the order of the assessment was passed by the Income-tax Officer on September 26, 1979. That order of the Income-tax Officer was questioned before the Commissioner of Income-tax (Appeals), inter alia, on the ground that it was barred by limitation. On September 4, 1981, the Commissioner dismissed the appeal. THE assessee then carried the matter in second appeal before the Income-tax Appellate Tribunal. THE Tribunal held that the assessment was barred by limitation and accordingly allowed the appeal of the assessee on November 30, 1982. Thus, the above said questions are said to arise from that order of the Tribunal.

(3.) SECTION 144B was inserted by the Taxation Laws (Amendment) Act, 1975, with effect from April 1, 1976. It was on the statute book for 13 years and was omitted by the Direct Tax Laws (Amendment) Act, 1987, with effect from April 1, 1989; it is no more on the statute book now. A plain reading of section 144B shows that where, in an assessment to be made under sub-section (3) of section 143, the Assessing Officer proposes to make any variation either in the income or loss returned which is prejudicial to the assessee and the amount of such variation exceeds the amount fixed by the Central Board of Direct Taxes, the Assessing Officer has to forward a draft of the proposed order of assessment to the assessee. This power could have been exercised before October 1, 1984, and that provision is not controlled by sub-section (3) of section 143 of the Act. On receipt of the draft order, the assessee has to forward his objections, if any, to the Assessing Officer within seven days of the receipt of the order or within the extended time which should not exceed fifteen days. In the absence of filing of objections by the assessee, the Assessing Officer has the power to complete the assessment on the basis of the draft order; but, where objections are received, the Assessing Officer is obliged to forward the draft order together with the objections to the Deputy Commissioner who, after examining the draft order and the objections in the light of the record relating to the said order, has to issue directions in respect of the objections for the guidance of the Assessing Officer to enable him to complete the assessment. The limitation for the exercise, contemplated under section 144B, is to be found in section 153(1)(a) read with clause (iv) of Explanation 1 thereto. We shall read this provision here :