1. This departmental appeal is directed against the order of the Commissioner (Appeals) relating to the assessment year 1978-79. The ground of appeal is as under: On the facts and in the circumstances of the case, the learned Commissioner of Income-tax (Appeals) has erred in setting aside the assessment and directing the Income-tax Officer to take into account the revised return filed after issue of draft assessment order under Section 143(3) read with Section 144B of the Income-tax Act.
2. In order to appreciate the facts it would be necessary to give certain basic facts in this case. The assessee is a private limited company and its accounting year ended on 30-6-1977. The assessee had filed a return declaring loss of Rs. 3,94,618 on 30-8-1979. The ITO after examining the accounts proposed to make certain additions and made the draft assessment order which was sent to the IAC along with the objections of the assessee on 2-3-1981. The assessee filed a revised return on 3-3-1981 claiming further loss of Rs. 9,04,290 incurred in certain consignments sent to West Germany. While making the assessment on 2-9-1981, the ITO did not take into consideration this revised return and the IAC also did not entertain the objection of the company regarding the consideration of the revised return. The ITO completed the assessment on a net income of Rs. 1,86,780.
3. When the matter cams bsfore the Commissioner (Appeals) it was contended by the assessee that the revised return was bound to be considered by the ITO and he could not ignore it merely on the ground that the draft of the assessment order had been sent to the IAC under Section 144B of the Income-tax Act, 1961 ('the Act'). According to the assessee, the assessment was still pending for the purpose of filing a revised return. Certain decisions of the Tribunal were relied upon and it was contended that the revised return has to be taken into consideration by the ITO. The Commissioner (Appeals) accepted this plea of the assessee and held that non-consideration of the revised return filed on 3-3-1981 was not justified under law. He, therefore, set aside the assessment with a direction to consider the revised return and pass a fresh assessment order. The Commissioner (Appeals) did not go into the other grounds taken by the assessee.
4. The departmental representative submitted before us that after the ITO had made this assessment and forwarded it to the IAC on 2-3-1981, he cannot take cognizance of any revised return as it is not open to him to send another draft to the IAC under Section 144B. He relied on the decision of the Delhi High Court in Sudhir Sareen v. ITO  128 ITR 445, where it was held that under Section 144B the ITO could make only one draft order of assessment and he has no power to issue more than one draft order. In that case it was the plea of the revenue that the ITO could issue more than one draft assessment order under Section 144B but the same was not accepted by the High Court. The High Court has also considered the question of limitation with reference to Section 153 of the Act, where it is laid down that a period not exceeding 180 days is permitted to the revenue to complete an assessment in addition to the normal period when no action under Section 144B is taken by the department. The departmental representative, therefore, contended that it was not open to the ITO to take cognizance of the revised return. He also submitted that the assessment made by the ITO can become final if the assessee does not object to the additions proposed by him.
5. The departmental representative then relied on certain observations made by the Third Member in the case of Shagoon Emporium v. ITO  3 ITD 376 (Delhi). In this case the IAC had issued his instructions under Section 144A of the Act while considering the ITO's proposals for making addition under Section 144B. The Third Member had held that after forwarding the draft assessment order the ITO has no options whatsoever except to incorporate the directions of the IAC. It was further held that for purposes of issuing instructions under Section 144A, it cannot be said that the assessment is pending merely because the matter is lying with the IAC for the limited purpose of consideringthe objections of the assessee and for issuing directions to the ITO under Section 144B. The Third Member held that once a reference was made under Section 144B, the operation of Section 144A was excluded. The departmental representative submitted that if the ITO could not send the second draft under Section 144A, it follows that he cannot take into consideration the revised return filed after the order is sent to the IAC under Section 144B. He also posed the question as to what would happen where a revised return is filed after the normal period of limitation and submitted that in such a "case the extended period for passing assessment order would not be available.
6. The learned Counsel for the assessee, on the other hand, submitted that the provisions of Section 139 of the Act was clear. It provided for the filing of a revised return till the assessment was pending. He submitted that the passing of a draft order and sending it to the IAC cannot mean that the assessment had been completed and in case there is an objection by the assessee, that has to be taken into consideration and the assessment has to be made in accordance with the instructions issued by the IAC. He, however, submitted that till any such final order is passed, the assessment is pending and the right of the assessee to file a revised return cannot be taken away merely because the ITO has chosen to send the draft assessment order to the IAC. He relied on certain decisions of the Tribunal and submitted that the order of the Third Member in the case of Shagoon Emporium (supra) relied upon by the departmental representative was distinguishable as in that case there was no question of a revised return having been filed. The first case to which the reference was made was the order of the Madras Bench in the case of South India Shipping Corporation Ltd. v. ITO  8 Taxman 38 (Mad.-Trib.), where it was held that under Section 139(5) the assessee has got an unqualified right to file his revised return at any time before the assessment is made. The draft assessment order proposed under Section 144B can by no stretch of imagination be taken as amounting to making an assessment. The ITO can complete the assessment only after receiving the instructions and directions of the IAC. The Tribunal held that the ITO should act on the revised return which is furnished within the time specified under law.
The facts in that case were similar and the revised return had been filed before the assessment had been made.
7. The other order on which he relied was an order of the Delhi Bench 'C' in the case of ITO v. Sain Steel Products [IT Appeal No. 1620 (Delhi) of 1982, dated 6-9-1983]. He drew attention especially to the separate but concurring order passed by the Accountant Member in that case and pointed out that all the aspects had been considered and it was held that where a revised return is filed, it must be taken into consideration by the ITO.8. We have carefully considered the contentions of the departmental representative as well as raised by the counsel for the assessee. The position under the normal law is clear. Under Section 139 a revised return can be filed by an assessee where he discovers any omission or any wrong statement therein at any time before the assessment is made.
Under Section 139(4) any person who has not furnished a return within the time allowed to him under Sub-section (1) or Sub-section (2) may before that assessment is made furnish a return before the end of the specified period, which for this assessment year would be two years from the end of the assessment year. In the present case this period would have ended on 31-3-1981 and thus there is no dispute that the assessee had a right to file a revised return up to that date. It is of course clear that the revised return has to be filed under the circumstances specified and they are where an assessee discovers any omission or any wrong statement in the first return.
9. The above normal position is sought to be complicated by the introduction of the provision under Section 144B which requires that before the final order is made and the ITO proposes to make additions of more than Rs. 1,00,000, he should forward the draft assessment order of the assessee and obtain his objections which can be then sent to the IAC for his directions. These directions are issued after hearing the assessee. These directions are binding on the ITO. The law further provides that where such a reference is made to the IAC, the normal period of limitation for making the assessment is extended by a maximum period of 180 days from the date of forwarding the draft order and the receipt of directions from the IAC. Where no such objections are received to the draft order, a period of 30 days is allowed beyond a normal limitation period.
10. From the above analysis of the legal position, it would appear that the order passed by the ITO is a draft order and though he cannot change it to the detriment of the assessee, he can certainly reduce it in the final assessment order according to the directions of the IAC.The law clearly contemplates the passing of an assessment order after the passing of the draft assessment order and till that time the assessment is pending. In these circumstances the assessee can certainly file a revised return if the conditions under Section 139(5) are fulfilled. It may also be mentioned that where such a revised return is filed, Section 153(1)(c) extends the period of limitation and the assessment can be made up to the period of one year from the date of the filing of the revised return. This extended limitation period even goes beyond the period of 180 days provided for the orders covered under Section 144B. In view of the legal position, the return filed by the assessee has to be taken into consideration by the ITO and has to be disposed of on merits. Its non-consideration is not justified merely on the ground that the ITO had already sent his draft order to the IAC.11. The case of the department in the present case mainly relies on the order of the Delhi High Court holding that only one draft assessment order can be sent by the ITO and on the observations of the Third Member in the case of Shagoon Emporium (supra) that as far as the ITO is concerned the assessment cannot be considered to be pending for the purpose of instructions under Section 144A and when the ITO forwards the draft order to the IAC for his instructions under Section 144B. We will now deal with these objections.
12. A close perusal of the decision of the Delhi High Court in Sudhir Sareen's case (supra) clearly shows that they were not considering the case of a revised return filed by the assessee. They were considering a simple case where the department claimed that the ITO could send more than one draft order for the approval of the IAC. The High Court held that the ITO could not do so. That was a case under the writ jurisdiction of the High Court, and the High Court gave the above directions. We have to consider the provisions of law harmoniously so as to make it workable. The order of the Third Member in the case of Shagoon Emporium (supra) was for deciding the specific issue of the powers of the IAC to issue instruction under Section 144A after a draft order has been submitted to him under Section 144B. In that case, no revised return had been filed and that had not come up for consideration before the Tribunal. It would, therefore, not be correct to extend the observations in that case to all the cases and for all the purposes.
13. The point whether an assessment had been made or is pending, one has to ask only one question 'whether an order under Section 143(3) or 144 of the Act has been passed ?'. A further question which can be asked is whether the assessee can file an appeal against the draft order passed by the ITO. The answer would be obviously in the negative.
The various provisions make it clear that the draft order is a stage before the completion of the assessment and it cannot be considered as the assessment order itself. It is also clear that though the IAC is an officer providing guidance to the ITO, he is not the officer for passing the assessment order. The assessment order has ultimately to be passed by the ITO and till then the assessment remains pending.
14. Once we come to this conclusion, it becomes clear that an assessee can file a revised return before the completion of such assessment. It is the duty of the ITO to take into consideration such a revised return before making a final order. It is for this purpose that the law has specially provided for one year's period after the filing of the revised return for the completion of assessment. The filing of such a revised return and its proper disposal is neither a formality nor a superfluous proceeding. It is a part of the integrated procedure for making the assessment. After such a revised return is filed, the ITO is bound to give a notice to the assessee under Section 143(2) unless he is inclined to accept such revised return under Section 143(1). Thus, all the procedure laid down for making an assessment has to be followed once a revised return is filed. It is also clear that once such proceedings start on the filing of a revised return, the ITO has to formulate the assessment order afresh and in case he again proposes to make additions of more than Rs. 1,00,000 he can send a draft to the IAC under Section 144B. In such circumstances, the first draft would stand superseded by the second one. We are saying so in order to make the provisions workable. We have already made it clear that the decision of the Delhi High Court in the case of Sudhir Sareen (supra) does not come in our way in holding as above.
15. We may mention that the same question was considered by the Delhi Bench 'C' of the Tribunal in Sain Steel Products' case (supra) to which a 0reference has been made above and we are in entire agreement with the observations made by the learned Accountant Member in his concurring order in that case.
16. In the result, we uphold the order of the Commissioner (Appeals) directing the ITO to take into consideration the revised return filed by the assessee on 3-3-1981.