1. This is an appeal filed by the assessee against the order of the AAC.
2. The assessee filed the return in the status of a firm. The ITO for default of statutory notices completed the assessment under section 144 of the Income-tax Act, 1961 (the Act), in the status of an unregistered firm. In this ex parte assessment, the assessees business income was estimated at Rs. 10,500 and besides Rs. 19,152, was added as income from undisclosed sources for unexplained cash deposits. Here it will be necessary to point out that against the making of the assessment under section 144, there was an application under section 146 of the Act filed by the assessee on 20-4-1981 praying for the cancellation of the ex parte assessment and making of fresh assessment in accordance with law. No orders on this application under section 146 appear to have been passed by the ITO. The assessee, however, filed an appeal against the assessment order to the AAC. In this appeal, the AAC held, firstly, that the default of notices under section 143(2) of the Act was without reasonable cause and, therefore, the ex parte assessment under section 144 was justified. The AAC further held that the treatment of cash deposits amounting to Rs. 19,152 as the assessees income from undisclosed sources was justified. However, on the issue of the registration of the assessee-firm, the AAC found that an application in the prescribed Form No. 11 for registration was filed by the genuineness of the assessee firm and decide the issue of status in. which the assessment ought to be made, keeping in view the provision of sub-section (5) of section 185 of the Act. The assessee is aggrieved and has, therefore, come up in the present appeal before me.
3. The assessees learned counsel, Shri Mehta, submitted that it was not open to the AAC to adjudicate upon and decide what he could consider and decide only in appeal against the order of the ITO under section 146. Proceedings further, Shri Mehta submitted that the issue of whether the assessment under section 144 was properly made or not could only be considered in the proceedings under section 146 and against the order of the ITO under section 146, a separate appeal was provided by clause (b) of sub-section (1) of section 246 of the Act. Shri Mehta, therefore, vehemently argued before me that it was not open to the AAC in an appeal against an assessment order to consider and adjudicate upon what could have been the subject matter of appeal before him against the order of the ITO under section 146 only and not against the assessment order. Shri Mehta referred to the order of the AAC where there was a definite finding that an application under section 146, had been filed by the assesse on 20-4-1981 and brought to my notice that till now no order had been passed by the ITO on this application under section 146. He submitted that if in the order, under section 146, passed by the ITO on the assessees application, the assessment under consideration here was cancelled, the present appeal will become infructuous. He further submitted that even if the ITO rejected the assessees application under section 146, it will be open to the assessee to file an appeal against the order of the ITO under section 146 and if as a result of the appeal the assessment under consideration here was cancelled either by the AAC or by the Tribunal, the same result will follow, i.e., the present appeal will become infructuous. Summing up, Shri Mehta argued before me that the AAC ought not to have decided the appeal under consideration here without first finding out what had happened to the application under section 146, whether the assessee had filed any appeal against the order of the ITO under section 146 and if so, what had happened in the appeal before the AAC against the order of the ITO under section 146. Summing up, Shri Metra vehemently argued before me that the order of the AAC should be set aside and the matter should be sent back to him for a decision afresh.
4. On the other hand, the learned departmental representative, Shri Tuli, pointed out to me that with effect from 1-4-1976, sub-section (2) was inserted by the Taxation Laws (Amendment) Act, 1975, whereby there was a time limit of 90 days from the date of the receipt of the application under section 146 for an order under section 146 by the ITO. Proceeding further, Shri Tuli pointed out that since this period of limitation was over and no order was passed by the ITO on the assessees application under section 146, it should be presumed that the assessees application under section 146, was rejected. He, therefore, justified the order of the AAC under appeal before me.
5. I have carefully considered the rival submission. Under sub-section (1) of section 66 of the Indian Income-tax Act, 1922, the Tribunal was required to draw up a statement of the case within 90 days of the receipt of the application for reference to the Honble High Court and the issue arose before their Lordships of the Honble Calcutta High Court in the cases of Raja Benoy Kumar Sahas Roy v. CIT : 24ITR70(Cal) and CIT v. Duncan Bros. & Co. Ltd. : 28ITR427(Cal) , whether if no reference was made by the Tribunal within 90 days, the reference can be made subsequently by the Tribunal. Their Lordships laid won that the question of limitation arises only where there is a delay by the parties to the dispute before a Court and not where a Court or a public authority has not performed its duty resulting in delay and in such a case it could never be the intention of the Legislature that the object of the Legislature should be set at nought not by the breach in performance of public duty by the authority concerned. The Honble Calcutta High Court, therefore, laid down that where an application for reference is made within the time limited laid down under the law and a reference lies to the Honble High Court, the Tribunal is bound to make a reference even if it had failed to do so within the statutory time limit of 90 days and the time limit laid down is merely directory and no mandatory. It might perhaps be not out of place to mention here that even though in the case of Raja Benoy Kumar Sahas Roy (supra), the revenue went up in appeal before the Honble Supreme Court against the judgment of the Honble Calcutta High Courts, no appeal was preferred by the revenue on this issue. On the same parity of reasoning I hold that even if the ITO did not pass the order under section 146 on the assessees application, within the time limit of 90 days laid down under sub-section (2) thereof, the assessee has a right to have the matter adjudicated as this right vested in him by sub-section (1) of section 146 cannot be extinguished by the latches, carelessness or delay on the part of the public authority, i.e., the ITO, in the present case the ITO is, therefore, under a duty to pass an order on the assessees application under section 146, even if he has not done it within the stipulated period of limitation of 90 days. There is, therefore, no question of any inference one way or the other, if no orders were passed by the ITO on the assessees application under section 146. There is a lot of merit in the argument of the assessees learned counsel Shri Mehta that in an appeal against the assessment order, the AAC has merely to confine himself to the dispute regarding the amount of the total income assessed or the amount of the tax determined or the status under which the assessment is made an it is not open to him to consider and adjudicate upon whether the assessment was properly made under section 144 which could be considered only in an order under section 146 and against which a separate appeal is provided under clause (d) of sub-section (1) of section 246. Besides, before the AAC decides an appeal against an assessment order, he has to wait for the order of the ITO on the assessees application under section 146, if any, in which case the appeal against the order under section 146 has to be taken up simultaneously or earlier than the appeal against the assessment order. This has not been done in the present case. Considering all this and looking to the totality of the facts and circumstances. The order of the AAC is set aside and the appeal restored to his file for a decision afresh keeping in view the observations in this order.
6. The appeal is partly allowed.