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income-tax Officer Vs. L.K. Manathamby - Court Judgment

LegalCrystal Citation
CourtIncome Tax Appellate Tribunal ITAT Madras
Decided On
Judge
Reported in(1984)7ITD310(Mad.)
Appellantincome-tax Officer
RespondentL.K. Manathamby
Excerpt:
.....the additions. he, therefore, set aside the assessments for all the four years and directed that fresh assessments should be made by the ito after making due enquiries. thereafter the ito made a draft assessment by invoking section 144b and served it on the assessee on 30-3-1982. the assessee objected to similar additions being made as in the original assessments and by a memorandum dated 25-9-1982 the iac overruled the objections and directed the ito to make the additions as proposed. the assessee has specifically taken an objection that in a proceeding pursuant to the directions of the commissioner (appeals) section 144b could not be invoked, but the iac rejected that objection also in the view that the fresh assessments being made under section 143(3) of the act, the procedure to be.....
Judgment:
1. These appeals by the revenue are directed against the common order of the Commissioner (Appeals) holding that assessments made in pursuance of an appellate order were barred by limitation because Section 144B of the Income-tax Act, 1961 ('the Act') could not be invoked in such cases.

2. The assessee is an individual deriving income from properties and money-lending business. For the assessment years 1971-72 to 1974-75, assessments were originally made in 1974, 1976 and 1977. The ITO had added back certain cash credits and also income from certain properties treating the assessee as a benamidar in respect of such properties. The assessee appealed and the appeals were disposed of by two orders of the same date 18-2-1980, each in respect of the two assessment years. The Commissioner (Appeals) was of the opinion that further enquiries were required in respect of both the additions. He, therefore, set aside the assessments for all the four years and directed that fresh assessments should be made by the ITO after making due enquiries. Thereafter the ITO made a draft assessment by invoking Section 144B and served it on the assessee on 30-3-1982. The assessee objected to similar additions being made as in the original assessments and by a memorandum dated 25-9-1982 the IAC overruled the objections and directed the ITO to make the additions as proposed. The assessee has specifically taken an objection that in a proceeding pursuant to the directions of the Commissioner (Appeals) Section 144B could not be invoked, but the IAC rejected that objection also in the view that the fresh assessments being made under Section 143(3) of the Act, the procedure to be followed was under Section 144B. The assessments were thereafter made by the ITO on 25-9-1982 in accordance with the directions given by the IAC.3. The assessee appealed to the Commissioner (Appeals) and apart from contesting the merits of the additions, also took the ground that the assessments were barred by limitation because the time taken to follow the procedure laid down under Section 144B could not be excluded since that procedure itself was not applicable in a case where assessments were being made under the directions of the appellate authority. The Commissioner (Appeals) accepted this contention as he was of the opinion that though the fresh assessments were virtually made under Section 143(3), they cannot be regarded as orders under that section for all purposes, e.g., for the purpose of computing the limitation.

4. In these appeals the contention of the revenue is that under Explanation 1 to Section 153 of the Act, time taken for following the procedure under Section 144B must be excluded and, therefore, the assessments made were in time. On the other hand, the contention of the assessee was that Section 144B could not be invoked and, therefore, the time taken for such an unnecessary and illegal procedure could not be excluded in computing the period of limitation. It was argued that the basis of Section 144B itself was that a superior authority should apply his mind and this was unnecessary where a direction has already been given by an appellate authority superior to the IAC and, therefore, even on the basis of legislative intention, Parliament could not have contemplated that Section 144B was applicable in a case of assessment made in compliance with the directions given under Section 251 of the Act.

5. On a consideration of the rival submissions, we are of the opinion that the order of the Commissioner (Appeals) has to be reversed. The assessments having been originally made by orders dated 18-2-1980, they had been set aside with a direction to the ITO to make fresh assessments after due enquiries and in accordance with law. Under Section 153(2A), an order of fresh assessment in pursuance of an order under Section 250 of the Act may be made before the expiry of two years from the end of the financial year in which the order under Section 250 was received by the Commissioner. It is not in dispute that the order under Section 250 dated 18-2-1980 was received before the end of the financial year ended 31-3-1980. It follows that the last date for making the fresh assessments was 31-3-1982. The assessments in these cases were made only on 25-9-1982 and they are prima facie barred by limitation. But the plea of the revenue is that the period commencing from the date on which the ITO forwarded the draft order under Section 144B and ending with the date on which the ITO received the direction of the IAC should be excluded in computing the period of limitation. In this case the relevant period is from 20-3-1982 when the draft order was forwarded to the assessee and 25-9-1982 when the direction of the IAC was received by the ITO. If this period is excluded, then the assessments are in time. Therefore, the question is whether Exportation I to Clause (iv) is applicable to this case.

6. It is pointed out by the revenue that the Explanation starts with the words 'in computing the period of limitation for the purposes of this section' covering all the preceding Sub-sections and would, therefore, apply to Sub-section (2A) also. This contention could not be seriously controverted by the assessee because the other clauses in the Explanation refer to time taken for reopening any assessment and giving a fresh opportunity to the assessee as required by Section 129 of the Act, time taken by any stay of the proceedings by any Court, time taken for auditing the accounts on the direction of the ITQ which equally apply to a case of fresh assessment made in pursuance of directions under Section 250 referred to in Sub-section (2A) as they would to an original assessment referred to in Sub-section (1) or a reassessment referred to in Sub-section (2). But the case of the asses-see is that Section 144B itself would not be attracted to a fresh assessment being made under the direction given by an order under Section 250. According to the assessee, the ITO derives the power to make fresh assessment only in pursuance of the direction of the appellate authority and though the procedure that has to be followed may be in terms of Section 143(3) since the power itself is derived from a superior authority, there is no justification or requirement of the law to get further directions from the IAC under Section 144B. We are unable to accept this contention because under Section 144B in an assessment to be made under Section 143(3), the ITO has to follow the procedure set down therein if he proposes to make a variation in the income exceeding the amount prescribed. Therefore, the provisions of Section 144B would be automatically attracted where the fresh assessment is one made under Section 143(3). The assessee is not able to avoid the application of Section 144B to a fresh assessment made in pursuance of the direction under Section 250 because such a fresh assessment cannot be made without recourse to Section 143(3). The occasion for making the fresh assessment may be the direction given by the appellate authority. But once the original assessment is set aside, the ITO can function only under Section 143(3) and must naturally follow the procedure rescribed therein. On behalf of the assessee it was argued that there was an anomalous situation where an ITO acting under the direction of the Commissioner (Appeals) given under Section 250 again refers to the IAC, who is junior to the Commissioner (Appeals), for getting directions and he is bound by his direction rather than the direction of the superior authority quite contrary to the object of Section 144B which was to associate a superior authority in the making of assessment to avoid harassment to the assessee. It may be that while framing the provisions of the Act this situation has not been envisaged. But we must also remember that when the assessment was set aside by the Commissioner (Appeals) with a direction to make a reassessment, no specific direction has been given about the addition or for deleting any particular item but only a general direction was given to make fresh enquiries and make fresh assessment in accordance with law. It has been held by the Madras High Court in the case of CIT v. Seth Manicklal Forma [1975] 99 ITR 470 that once the order of assessment is set aside and the matter comes up for fresh assessment before the ITO, his powers will have to be decided with reference to the provisions of Section 143(3) and not with reference to any observations by the appellate authority in his order. Therefore, such a fresh assessment has to be made within the framework of the Act and considering the non obstante clause of Section 144B, the procedure prescribed in that section has to prevail. We are, therefore, of the considered opinion that the ITO was required to follow the procedure under Section 144B and, therefore, the time taken for following that procedure had to be excluded in computing the limitation prescribed for making such an assessment. In this view the assessment made by the ITO could not be held to be barred by limitation. We must, therefore, reverse the orders of the Commissioner (Appeals) and restore the appeals to his file for fresh disposal on merits in accordance with law. The appeals are treated as allowed.


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