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Duncan Bros. and Co. Ltd. Vs. Income-tax Officer - Court Judgment

LegalCrystal Citation
CourtIncome Tax Appellate Tribunal ITAT Kolkata
Decided On
Judge
Reported in(1985)12ITD144(Kol.)
AppellantDuncan Bros. and Co. Ltd.
Respondentincome-tax Officer
Excerpt:
1. the first two appeals are by one assessee, and the other two appeals are by two different assessees in which a common point is involved and the facts are similar. of course in the case of the first assessee, namely, duncan brothers & co. ltd., additional points are also pressed for consideration. the learned counsels of both the sides have addressed us in one set. accordingly, we consolidate the appeals for disposal by this common order.2. we shall take up the case of duncan brothers. the appeal by the assessee is that the commissioner (appeals) should have cancelled the assessment as barred by limitation for the assessment year 1978-79. it is also the appeal of the assessee that the assessment was otherwise bad in law and void, as no necessary opportunity demanded by the assessee.....
Judgment:
1. The first two appeals are by one assessee, and the other two appeals are by two different assessees in which a common point is involved and the facts are similar. Of course in the case of the first assessee, namely, Duncan Brothers & Co. Ltd., additional points are also pressed for consideration. The learned counsels of both the sides have addressed us in one set. Accordingly, we consolidate the appeals for disposal by this common order.

2. We shall take up the case of Duncan Brothers. The appeal by the assessee is that the Commissioner (Appeals) should have cancelled the assessment as barred by limitation for the assessment year 1978-79. It is also the appeal of the assessee that the assessment was otherwise bad in law and void, as no necessary opportunity demanded by the assessee under Section 129 of the Income-tax Act, 1961 ('the Act'), was given before the completion of the assessment.

3. Briefly speaking, the ITO completed the assessment of the assessee under Section 143(3), read with Section 144B, of the Act by his order, dated 31-8-1981. The asssssee is a company. The ITO, who completed the assessment, was the ITO, 'B' Ward. The background of the case is that the ITO, 'J' Ward, had the original jurisdiction as per order of the CBDT, dated 4-7-1980. The ITO, J Ward, took up the assessment and when he found that the provision of Section 144B was attracted, he processed the matter and the points of making the assessment order, and, accordingly, by his letter, dated 26-3-1981, forwarded the draft assessment order to the assessee under Section 144B(1), as the variation of the income proposed to be made by him exceeded Rs. 1 lakh.

From the order of the ITO, it is seen that the forwarding letter was served on the assessee on 28-3-1981. The assessee, as provided under Section 144B(2), sent its objections to the different points made in the assessment order, a copy of which has been placed at page 3 of the paper book. The ITO, J Ward, forwarded the draft assessment order along with the assessees objections thereto to the IAC, Special Range III.Meanwhile, on 1-6-1981, the Commissioner, on grounds of administrative convenience, transferred the jurisdiction of the case of Duncan Bros. & Co. Ltd. from ITO, J Ward, to the IAC, Special Range III. The IAC by his letter, dated 7-7-1981, fixed the case for hearing on 27-7-1981 requesting the assessee to appear before him together with necessary evidence, on which the assessee relied on contentions raised in the asses-see's objections dated 1-4-1981. The assessee responded, but it was stated that the assessee was not aware that the jurisdiction was changed from the ITO, J Ward, as such. The assessee noted that for the purpose of Section 144B, the IAC, Range VII, was vested with the jurisdiction on the draft, etc., sent by the ITO, J Ward. The assessee asked the IAC to clarify the position in order to ascertain the authority having proper jurisdiction over the assessee. The assessee was supplied with a copy of the order of the Commissioner, dated 1-6-1981, by which the jurisdiction was transferred to the IAC, Special Range III. Thereafter, the assessee raised another objection that if the case has been transferred to the IAC, Special Range III, it would mean that the said IAC would be exercising concurrent jurisdiction under Section 125A of the Act, over the case of the assessee, and in that situation the assessee drew the attention of the IAC to the provision of Section 144B(7). According to the assessee, in view of this section, the provision of Section 144B would not apply to the case where concurrent jurisdiction is in existence. Accordingly, the assessee expressed the doubt whether the IAC, Special Range III, would be acting in accordance with law. The assessee also wrote to the Commissioner stating the different aspects of the matter, while pointing to the jurisdiction of the concerned IAC to process the draft assessment order along with the assessee's objection thereto.

4. Meanwhile, the Commissioner by his order dated 24-7-1981 notified that the case of the assessee in question has been shown to have been transferred to the IAC, Special Range III, by mistake. Accordingly, the correct jurisdiction will be that of the ITO, B Ward, who intimated the assessee by his letter dated 27-7-1981, that the jurisdiction has been transferred to the ITO, B Ward, by the Commissioner, and, therefore, the assessee was requested to contact or correspond with the ITO, B Ward, over the assessments henceforth.

5. The assessee raised another objection stating that at the time of the transfer of jurisdiction for the year under consideration, the assessee had raised certain objections to the draft assessment order sent by the ITO, J Ward. It was pointed out that as the assessment was still pending at the time of transfer of the jurisdiction to the ITO, B Ward, the assessee in terms of Section 129 demanded that it should be reheard before any further proceeding was taken to finalize the assessment. The ITO, B Ward, intimated the assessee that his predecessor in office has forwarded the draft assessment order along with the assessee's objections to the concerned IAC, and as a result thereof, the proceedings under Section 144B were pending before the IAC, Special Range III. The ITO, B Ward, intimated the assessee further that no proceeding was pending before him at that stage relating to the assessment year 1978-79. The assessee at this stage also reiterated its demand that it should be reheard and the previous proceedings be reopened, as provided by the provision to Section 129, contending that if the IAC, Special Range III, gives direction for completion of the assessment to the ITO, B Ward, on the basis of the draft order sent by the ITO, J Ward, justice would be denied to the assessee in terms of Section 129, and, therefore, the assessment order would not be in accordance with law. The IAC, Special Range III, fixed the case for hearing. It was stressed on behalf of the assessee that in view of the change in jurisdiction while assessment was pending, the assessee demanded to be reheard under Section 129 before taking further steps to finalize the assessment. It was argued that in the circumstances, the assessee considered that there can be no hearing on a draft order sent by the ITO to the assessee as that draft order was not sent by the ITO over whom the IAC has jurisdiction, and, therefore, the assessee has the right to be reheard by the ITO, B Ward, before any such draft order, with the assessee's objection, can be forwarded to the IAC on the basis of which alone the IAC can give hearing to the assessee.

According to the assessee, the hearing fixed by the IAC, Special Range III, would not be in accordance with the requirements of law as provided under Section 129.

6. The IAC, Special Range III, considered the submissions and the points made out by the assessee relating to the jurisdiction. He was of the view that he can hear the pending proceedings under Section 144B in the present case at that stage as the jurisdiction over the case was transferred to him. He also was of the opinion that the ITO has no power to continue the assessment proceeding for the assessment year 1978-79 after 31-3-1981, which has already been concluded by him and the draft assessment order was sent to the IAC under Section 144B. He, therefore, requested the assessee once again to represent the case under Section 144B. He also pointed out that as he has succeeded the pending Section 144B proceedings left by the predecessor IAC, Range VII, he can give the opportunity to the assessee for being heard under Section 129. The case was accordingly fixed. The assessee this time also raised an objection, stating that it had demanded that the previous proceedings be reopened and the assessee be reheard under Section 129. It was urged that any direction under Section 144B can come only after the ITO reheard the assessee and then referred to the IAC for framing directions. It was, therefore, pleaded that the assessee was unable to understand as to how the IAC was giving the assessee an opportunity under Section 129 as the IAC was not the authority who could pass the assessment order. It was argued that it was difficult to agree with the view of the IAC that he could give direction under Section 144B before the ITO, B Ward, could give the assessee an opportunity of being heard, and it was also submitted that if the proceedings before the ITO, B Ward, were barred by limitation, then the assessee considered that any hearing by the IAC, Range III, would not have any legal effect either as binding on the ITO or as saving the limitation period after 31-3-1981 while the assessment year 1978-79 was still pending.

7. The IAC, in his order dated 31-8-1981, took up the various points and the other contentions raised by the assessee as discussed briefly above. Amongst other things, he noted that he held concurrent jurisdiction by virtue of Section 125A(1) as passed by the Commissioner, but he pointed out that the scope of new Section 125A has been explained by the Board's Circular No. 179, dated 30-9-1977--Taxmann's Direct Taxes Circulars, vol. 2, 1980 edn., p. 766.

He pointed out that holding any concurrent jurisdiction under Section 125A(1) would not empower the IAC, Special Range, automatically to make assessment by himself, as argued by the assessee, unless the IAC makes an order to that effect. In respect of the distribution of powers and functions between himself and the ITO, he observed that if there was no order of the IAC having concurrent jurisdiction under Section 125A(2), saying that he would exercise the powers and perform the functions of the ITO in respect of any case or if there was no such order passed by the Commissioner under Section 125(1), the provision of Section 144B(7) would have no application, as argued by the assessee. Accordingly, the IAC, Range III, concluded that he has jurisdiction to issue directions to the ITO, B Ward, for completion of the assessment under Section 144B(4). He also pointed out that the assessee has been informed that after 31-3-1981, the ITO has no power to rehear any assessment proceeding which has already been concluded by his predecessor, who made the draft assessment and forwarded such order to the IAC for direction under Section 144B. He pointed out that the assessee was allowed to be reheard under Section 129 by the IAC, Range III. He was of the view that the words 'income-tax authority' do not restrict it to the ITO only, and the IAC was also one of the income-tax authorities mentioned in the Act, who took up the proceedings under Section 144B left by the IAC, Range VII. The IAC, Range III, was of the clear opinion that he had every power to rehear the assessee under Section 129, which the assessee did not want to avail of and simply filed letters of objection. The IAC went through the draft assessment order and also took into account the objections filed by the assessee dated 1-4-1981. He noted that Mr. B. Venkataratnam, who was present on behalf of the assessee in course of the proceedings under Section 144B, refused to tender any evidence in support of the assessee's objection in view of the assessee's claim for rehearing under Section 129 before the ITO. The IAC, Range III, in the circumstances, had no other alternative but to approve the draft assessment order prepared in the case. He directed the ITO, B Ward, to finalise the assessment accordingly. The ITO, B Ward, completed the assessment order on 31-8-1981 in terms of the provision of Section 144B(5).

8. The assessee along with other grounds of appeal took up the jurisdiction matter before the Commissioner (Appeals), who noted the facts and the background of the case. The contention of the assessee before him was that when the jurisdiction was transferred from one ITO to another, Section 129 gives the assessee a right of being heard, and that right did not get disintegrated in Section 144B proceeding. It was urged that the ITO denied this opportunity and the assessment, therefore, was void. The Commissioner (Appeals) examined the different aspects of the matter and the stand taken by the IAC, etc. He was of the view that as soon as the draft order was prepared by the ITO, who sent the same to the IAC along with the assessee's objections, the ITO became functus officio except for the limited purpose of incorporating the direction of the IAC in the final order. He was of the view that once the draft order was prepared by the ITO, he has no power to grant hearing to the assessee. He pointed out that the ITO has the power to hear the assessee only before framing the draft order and not thereafter, and therefore, the role of the ITO for giving hearing stood concluded, and the question of applicability of proviso to Section 129, would not arise. The Commissioner (Appeals) examined the aspect from another angle also. He found that the IAC concerned gave adequate opportunity to the assessee to give evidence in support of the objections, which the assessee did not wish to avail of. He observed that the IAC stepped in the shoes of the ITO, and as the opportunity was given, proviso to Section 129 stood complied with and this point of objection of the assessee was rejected. Hence, this appeal before us.

9. It is submitted by the assessee's learned counsel that the authorities below erred in ignoring the clear provision of Section 129, and, in fact, the Commissioner (Appeals), on the facts of the case, should have cancelled the assessment as barred by limitation, and even otherwise the assessment was void, as no opportunity, as demanded by the assessee under Section 129, was given before the completion of the assessment. It is reiterated before us that the assessee demanded under Section 129 that the previous proceedings should be reopened and the assessee should be reheard by the ITO before making the assessment.

According to the assessee's learned counsel, the right of the assessee under Section 129 is a substantive right which cannot be tampered with.

It is specifically stressed before us that this demand was made repeatedly before the ITO, and if the same was denied, the assessment was void, referring to the decision of the Calcutta High Court in the case of Calcutta Tanneries (1944) Ltd. v. CIT [1960] 40 ITR 178.

Further reference is also made to the decision of the Punjab and Haryana High Court in the case as reported in Ram Saran Das Kapur v.CIT [1970] 77 ITR 298. The assessee's learned counsel also relies on the decision as reported in Manabendra Nath Roy v. CIT [1977] 107 ITR 959 (Cal.). It is also stressed that Section 144B proceedings are procedural, relying on the decision of the Madhya Pradesh High Court as reported in Banarsidas Bhanot & Sons v. CIT [1981] 129 ITR 488.

According to the assessee's learned counsel, opportunity should be given by the ITO who had to complete the assessment and not the IAC as it was done in the present case. It is urged, therefore, that the opportunity given by the IAC in the present case was not proper and valid. Further reference is made to the decision of the Tribunal in the case of ITO v. G.N. Agarwal [1982] 1 ITD 77 (Nag.) and to another case as reported in Rex Cinema Co-owners v. Sixth ITO [1983] 3 ITD 633 (Bom.) (SB). According to the assessee's learned counsel, Section 144B does not take away the assessee's substantive right available under Section 129. Further reference is made to another decision of the Tribunal as reported in ITO v. Supan International (P.) Ltd. [1984] 9 ITD 256 (Delhi). In course of his argument, the assessee's learned counsel refers to the different papers placed in the paper book in order to stress the claim of the assessee that the assessment was bad in law since no opportunity was allowed under Section 129 by the ITO, and even otherwise the assessment was barred by limitation. The assessee has also given a zerox copy of Craics' on Statute Law, which is reproduced below: Where alternative constructions are equally open, that alternative is to be chosen which will be consistent with the smooth working of the system which the statute purports to regulate. 'If the choice is between two interpretations, the narrower of which would fail to achieve the manifest purpose of the legislation, we should avoid a construction which would reduce the legislation to futility and should rather accept the bolder construction based on the view that Parliament would legislate only for the purpose of bringing about an effective result. If the language is capable of more than one interpretation, one ought to discard the more natural meaning if it leads to an unreasonable result and adopt the interpretation which leads to a reasonably practical result'." [1924] AC 185, 192, [1942] AC 402, 414, [1940] AC 1014.

In short, it is urged that on the facts of the case, the Commissioner (Appeals) erred in not cancelling the assessment order for the assessment year 1978-79. The prayer of the assessee is that the assessment may be cancelled, 10. On the other hand, the learned departmental representative supports the order of the Commissioner (Appeals) while highlighting the points noted above and dealt with by the authorities below. It is urged that opportunity was given by the IAC also while dealing simultaneously with the objections raised by the assessee under Section 144B. According to him, effective opportunity was correctly offered by the IAC concerned although the assessee has chosen not to avail of that opportunity. It is stated that the ITO, J Ward, forwarded the draft assessment order to the assessee on 28-3-1981, and the assessment was to be barred by limitation after 31-3-1981. The assessment was completed on 31-8-1981 and, as such, there was no question of the same being time barred as claimed by the assessee in view of the provision of Section 153(3) of the Act. It is urged that the word 'draft' means substantive order, which is amenable to corrections, modification, etc. In this connection, he referred to the case law as reported in State of Madras v. Gannon Dunkerley & Co. Madras Ltd. AIR 1958 SC 560, R.M.D.Chamarbangwalla v. Union of India AIR 1957 SC 628 and, Kathi Raning Rawat v. State of Saurashtra AIR 1952 SC 123 with emphasis at page 132.

It is emphasised that the policy behind the introduction of Section 144B was to give the assessee an opportunity at the first instance to raise any objection to any proposed addition which would bring about variation of such income of more than Rs. 1 lakh. The learned departmental representative strenuously argued at length, stating that adequate opportunity was given to the assessee by the authorities concerned at every stage. He referred to the decision in the case as reported in 1976 QB 503, and also to another case law as reported in AIR 1977 SC 185.

11. According to the learned departmental representative, the IAC can deal only with the point noted in the draft assessment and that too only on the points objected to by the assessee in its written objection. It is pointed out that the IAC in this context is not acting as an appellate authority, nor the IAC can reframe such draft assessment. It is urged that in respect of the points proposed in the assessment order on which no objection was raised by the assessee, such point is final for all concerned and, in fact, the IAC cannot enhance and in that sense, such point in the draft assessment order has reached a stage of finality. The difference of the provision of Sections 144A and 144B is highlighted by the learned representative. It is also argued that once the draft assessment order is prepared and if no objection was received from the assessee, there is no scope for any variation or change. According to him, the rights of the assessee under Section 129 ended with the sending of the draft assessment order by the ITO, J Ward, under Section 144B. In course of arguments, the learned departmental representative referred to the case laws as reported in Sirpur Paper Mill Ltd. v. CWT [1970] 77 ITR 6 (SC), J.K. Synthetics Ltd. v. CBDT [1972] 83 ITR 335 (SC) and ITO v. Eastern Scales (P.) Ltd. [1978] 115 ITR 323 (Cal.). It is submitted that in order to avoid invalidating orders due to instructions being given from different quarters, the provision of Section 144B was enacted. According to him, effective opportunity under Section 129 was given to the assessee and natural justice was given and offered to the assessee by the IAC, and there was no violation of the assessee's right at all in this respect, referring to another case law as reported in Dhakeswari Cotton Mills Ltd. v. CIT [1954] 26 ITR 775 (SC).

12. According to the learned departmental representative, the ITO, B Ward, to whom jurisdiction was transferred, cannot in the present context modify the draft order, nor he can decide any issue differently, and in fact he is just to carry out the instructions of the IAC. It is reiterated that after sending of the draft, the rights of the assessee under Section 129 are no longer available to the assessee. He refers to the case laws as reported in SJ. Aggarwal v.Karji Narayanbhai AIRHim Nath Mishra v. Principle Rajendra Medical College, AIR 1973 SC 1260. He also refers to another decision as reported in V. Raju v. CIT [1984] 147 ITR 212 (Mad.). It is further argued that there was no occasion in the present case to strike down the assessment order. According to him, the rights of the assessee under Section 129 are procedural with certain limitations. It is contended that even if there is any mistake, the appellate authority can rectify such mistake or error, as decided by the Hon'ble Supreme Court in the case as reported in Kapurchand Shrimal v. CIT [1981] 131 ITR 451. On the whole, it is urged that there is no merit in the appeal by the assessee on this point and the same may be dismissed.

13. We have perused the orders of the authorities below for our consideration along with the rival contentions made by both the sides.

We have also gone through the paper book placed on behalf of the assessee before us. The facts, as stated briefly above, are not disputed. The assessee claimed that opportunity was not given, as demanded by it under Section 129, to be reheard, and that the previous proceedings should be reopened by the ITO before completing the assessment. The ITO B Ward, at the first instance, intimated the assessee by his letter dated 6-8-1981 that the draft assessment order was forwarded by his predecessor in office on 28-3-1981, and the matter was pending before the IAC, Range III, who held jurisdiction over the case under Section 144B, and that in the circumstances, no proceeding was pending before the ITO, B Ward, at that stage relating to the assessment year 1978-79. The IAC as well as the Commissioner (Appeals), as discussed briefly by us above, have given the same opinion that the ITO, after sending of the draft assessment order along with the objections of the assessee to the IAC Concerned, has no other power to rehear the assessee in view of the provisions of Section 144B. The provisions of Section 144B are quite clear and unambiguous. The ITO, in case he was of the opinion that there would be a variation of the assessed income vis-a-vis the returned income exceeding more than Rs. 1 lakh, has to conform to the requirements of Section 144B. He has to prepare a draft and send it to the assessee, and on receipt of the assessee's objection, if any, the ITO would have simply to forward those papers to the IAC concerned, who would have the jurisdiction to rehear the assessee on the points raised by the assessee only. The ITO cannot review the draft assessment order in the light of the assessee's objections. In fact, he has not to meet the assessee's objections, but has simply to forward those to the IAC, who, after hearing the assessee, would give directions to the ITO on those points and which would be binding on the ITO, as required by Section 144B(5).

14. On going through the different papers placed before us, it is seen that the assessee wanted a fresh draft order as there was a change of jurisdiction of the ITO over the case of the assessee. We find that there is no such provision or authority for the assessee to demand that the fresh draft should be made as and when the incumbent changes. We cannot import into the statute words which are not there. There is no such scope as such importation would be not to construe but to amend the statute. Reference may be made to the decision in the case of Smt.

Tarulata Shyam v. CIT [1977] 108 ITR 345 (SC). As indicated earlier, once the ITO, J Ward, sent a draft along with the assessee's objection to the IAC , the ITO, B Ward, could not make any variation in view of the provisions of Section 144B(3)/144B(5) and the results would have been the same. As soon as the ITO 'forwards' a draft assessment order to the IAC concerned, he has for the time being no other functions to perform except to await IAC's instructions which would be binding on the ITO, and he cannot alter, change or modify the draft except to the extent as directed by the IAC.15. Of course the assessee has the right to be heard under Section 129, and such right could not arise after the concerned ITO referred the matter to the IAC under Section 144B. The IAC concerned was seized of the matter, who, in the present case, did take into account the provision of Section 129. In our opinion, the opportunity extended by the IAC in the present case was effective and substantial. The assessee has, however, chosen not to avail of the opportunity in order to attack any point of the draft assessment order or any portion of it, apart from what it has been raised or agitated in its written objections dated 1-4-1981 sent to the ITO, J Ward. Apparently, the assessee was satisfied with its written objections sent to the ITO earlier, and there was no indication in its objection dated 1-4-1981 that the assessee would produce further evidence, material facts, etc., afterwards. In fact, at the last para of its aforesaid objection, at page 10 of the paper book, the assessee noted that it hoped that the ITO, J Ward, would examine each and every item objected to by the assessee and would finally frame the assessment which is in accordance with law. The IAC also has given a finding that the assessee did not tender any evidence in support of his letter of objection dated 1-4-1981. Actually, he has given a finding that when the matter was before him, Mr. B. Venkataratnam, who was present on behalf of the assessee in course of proceedings under Section 144B, refused to tender any evidence, etc., in view of the assessee's claim of hearing under Section 129 before the ITO. In this connection, we may refer to the decision in the case of Sadhan Kumar Roy v. CIT [1977] 107 1TR 954, in which, on the facts of that case, it was held by the Hon'ble Calcutta High Court that there was no non-compliance with the provision of Section 5(7C) of the Indian Income-tax Act, 1922 ('the 1922 Act'), as the assessee was not asking for any personal hearing by the Commissioner for the purpose of Section 33B of the 1922 Act. It was observed that it was not the case that the assessee had additional evidence to be produced when the case was fixed up for hearing before the Commissioner. In the present case before us also, we do not find any indication that the assessee had any fresh fact or material to be produced when it demanded for an opportunity to be reheard under Section 129. It insisted that the ITO, who would pass the assessment order, should have given the assessee an opportunity of being reheard, under Section 129, but as indicated above, the procedure laid down by Section 144B is quite clear. In fact the second ITO could not have sent a second draft. In this connection, reference may be made to the decision of the Hon'ble Delhi High Court in the case of Sudhir Sareen v. ITO [1981] 128 ITR 445, as relied on by the revenue.

16. The assessee's learned counsel has elaborately narrated the facts of the case and the claim of the assessee at different stages in order to stress the claim of the assessee. But the findings of the Commissioner (Appeals), as indicated earlier, are that sufficient opportunity has been given by the IAC under Section 144B and under Section 129 before directions were given to the ITO. In fact, the IAC has intimated the assessee on this point as per letter being placed at page 28 of the paper book.

17. If the assessee's request was to be accepted, then on facts and in law, the first draft sent by the ITO, J Ward, would be non est, to enable another officer to reprocess the entire matter. As indicated above, the assessment for the assessment year 1978-79 would be time barred by 31-3-1981. In other words, if the assessee's request was to be accepted, then no income-tax authority, whether the ITO or the IAC, can give hearing to the assessee under Section 129 after 31-3-1981, as contended on behalf of the assessee. In such a situation, how then the ITO, B Ward, could restart the exercise of hearing of the assessee, or preparation of a fresh draft assessment order and the rest of it, when the case would have stood as time barred much earlier irrespective of the fact and time allowed under Section 129, read with Explanation l(i) to Section 153. It is seen when the draft order and the assessee's objections were forwarded by the ITO, J Ward, to the IAC concerned, that IAC gave hearing to the assessee who objected to the proceedings raising the contention that the said IAC cannot hear the assessee in view of Section 144B(7). But when the case was transferred to the ITO, B Ward, and another concerned IAC gave the hearing, the assessee raised the plea that hearing was to be given by the ITO, B Ward, only and that IAC can examine afresh the ITO, B Ward, who is under his jurisdiction.

Again, as pointed out earlier, the assessee was asking for some thing which, in our opinion, could not be done as the assessment proceedings were otherwise barred already by 31-3-1981.

18. Section 116 of the Act defines and enumerates the income-tax authorities which include the ITO, IAC, etc. Section 129 provides that whenever an income-tax authority ceases to exercise jurisdiction and is succeeded by another who has and exercises jurisdiction, the income-tax authority so succeeding may continue the proceeding from the stage at which the proceeding was left by his predecessor. There is a proviso that the assessee may demand that before proceeding is continued, the previous proceeding or any part thereof may be reopened or that before any order of assessment is passed against him, he may be heard. When the ITO, J Ward, 'forwarded' the draft assessment order along with the assessee's objection to the concerned IAC, he has no other authority to deal with any aspect of the matter relating to that assessment. In fact, he has only to forward those papers to the IAC concerned. He cannot even review the draft nor himself meet the assessee's objection.

In othet words, the powers of the ITO are kept in abeyance and in suspended animation. His powers would be reactivated on receipt of the IAC's instruction under Section 144B(4), which would also be binding on him as per Clause (5). In the instant case before us, the ITO, J Ward, after forwarding the draft, etc., to the IAC concerned did not leave or has not left any part of the proceeding which he was supposed to be handling. At this stage, it was the IAC concerned who has got the jurisdiction to hear the assessee on any point including the assessee's claim under Section 129. The IAC in his approval order dated 31-8-1981 has dealt with this point also, stating that as he has succeeded to the proceedings left by the other IAC, he has the power to take up the issue under Section 144B simultaneously and hear the assessee under Section 129 as demanded. In fact, the IAC concerned has not passed any order under Section 125A(2), which point was also dealt with by the Commissioner (Appeals) in the impugned order. The Commissioner (Appeals) has pointed out that once the draft assessment order is forwarded by the ITO to the IAC, the ITO has no power left with him to grant a hearing to the assessee, In our opinion, this view was reasonable.

19. In our opinion, the IAC, Range III, has given effective and substantive opportunity to the assessee not only under Section 144B but also under Section 129. The different objections raised by the assessee at different stages do not appear to us to be tenable.

20. The assessment involved was for the assessment year 1978-79, which should be completed before 31-3-1981. The ITO on 28-3-1981 served the draft assessment order on the assessee. The provisions of Section 144B require 'forwarding' of the draft assessment order to the assessee for his objections, etc. Once this procedure is adopted as statutorily provided, the period of limitation is extended to enable the assessee concerned to raise objections which would be forwarded by the ITO to the IAC concerned for giving necessary instructions to the ITO only on the points objected to by the assessee. The period so extended is for 180 days, which commences from the day the ITO 'forwards' the draft order and ends with the period when the ITO 'receives' instructions from the IAC. It is not the case of the assessee before us that the ITO, J Ward, has not forwarded the draft assessment order, etc., as pointed out above within the period prescribed by law. The ITO, B Ward, who ultimately completed the assessment, passed the final order of assessment on the same day of receipt of the IAC's instruction. This too was within time. How the assessee could raise a plea before us that the assessment was time barred and the Commissioner (Appeals) was not justified in upholding such assessment order in the present case. In this connection, we may refer to the decision of the Hon'ble Madhya Pradesh High Court in the case of Gulabchand Manakchand v. CIT [1984] 148 ITR 404, in which it was held that the date to be counted for limitation was the date on which the instruction of the IAC was received and not the date on which the IAC issued direction. As repeatedly mentioned earlier, the assessee in the present case wanted the ITO, B Ward, to rehear the assessee under Section 129. This could not have been done as the assessment was time barred then in view of the limitation prescribed. The assessee cannot possibly ask the ITO to do any exercise, which is not within the prescribed limitation period.

21. In this case, the assessee has sent his written objections dated 1-4-1981 to the draft assessment order. As indicated earlier, the assessee did not ask for an opportunity to produce additional facts or additional evidence thereto, but simply asked the authorities concerned to rehear the assessee under Section 129. In the case of Sadhan Kumar Roy (supra), it was noted that it was not the case of that assessee that he had additional evidence to be produced before the Commissioner, who succeeded the previous Commissioner under Section 33B as provided by Section 5(7C) of the 1922 Act. It was observed by the Tribunal that the time was asked for to prolong or delay the passing of the impugned order, so that the making of the order could be frustrated in view of requirements of the section that the assessee wanted time. In a similar situation in the case of A.C. Metal Works v. CIT [1967] 66 ITR 14 (Raj), it was held that the succeeding officer has the authority to continue the proceeding under Section 28(3) of the 1922 Act, after considering the written representation already filed by the assessee without giving a fresh opportunity of being heard. The facts of that case were that the ITO issued a show cause penalty notice and the assessee remained content with submitting the explanation in writing but did not choose to appear before the ITO or ask for an opportunity to adduce evidence or address arguments, nor demanded rehearing under the proviso to Section 5, Sub-section (7C) of the 1922 Act. In the instant case, the written objections of the assessee were considered by the IAC concerned and an opportunity was also given under Section 129 by succeeding officer to the assessee. In our opinion, there was no non-compliance with the provisions of Section 129, as sought to be made out by the assessee before us. It is also pertinent to refer to the decision of the Hon'ble Supreme Court of India in the case of Gita Devi Aggarwal v. CIT [1970] 76 ITR 496, in which it was held on the facts of that case, that opportunity of being heard under Section 33B of the 1922 Act was given by the Commissioner. In a similar situation in the case of Shop Siddegowda & Family v. CIT [1964] 53 ITR 57, it was held by the Hon'ble Mysore High Court that opportunity of being heard was given by the succeeding officer, who has the authority to impose the penalty after considering the written representations of the assessee who did not desire to adduce evidence or present oral arguments.

22. In fact, the Hon'ble Calcutta High Court in the case of Kanailal Gatani v. CIT [1963] 48 ITR 262 has enunciated certain guidelines in a similar situation. It was held amongst other things that where no witnesses had to be called and no arguments had been advanced, but the matter depended on written objections, the succeeding officer was in the same position as the officer who originally was in the conduct of the case, and as long as the successor applies his mind to the materials before him, an order made by him cannot be held to be invalid. The facts of that case were that the draft order for imposition of the penalty under Section 2.8(3) was prepared by one officer, who was transferred in the meanwhile. The succeeding officer looked into the draft order and after he had concurred therein, sent the same with a forwarding memo to the IAC concerned. It was held on the facts of that case that no illegality has been committed. Of course the decision was rendered before the introduction of Section 5(7C) in 1953.

23. As indicated by us, the ITO, J Ward, in the instant case, has 'left' no pending issue before him as the requirements of Section 144B are that the IAC concerned would give hearing to the assessee. In the meanwhile, the jurisdiction was changed to the ITO, B Ward, and the IAC, Range III, has the jurisdiction over the case. The IAC, Range III, took over the matter from the stage 'left' by his predecessor. The Hon'ble Supreme Court of India in the case of CIT v. National Taj Traders [1980] 121 ITR 535, on the facts of the case, held that the principle that a fiscal statute should be construed strictly is applicable only to taxing provisions, such as a charging provision or a provision imposing penalty and not to those parts of the statute which contain machinery provision. The Hon'ble Madhya Pradesh High Court in the case of H.H. Maharaja Raja Pawer Dewas v. CIT [1982] 138 ITR 518 was of the view that the provisions of Section 144B are procedural. We are of the opinion, on the facts of the case as found, that there was no non-compliance of the provisions of Section 144B or the provisions of Section 129. In the case of Sevantilal Maneklal Sheth v. CIT [1968] 68 ITR 503 the Supreme Court held that it is a sound rule of interpretation that the statute should be so construed so as to prevent the mischief and to advance the remedy according to the true intention of the makers of the statute. The assessee in addition to the voluminous paper book has also placed before us copy of notes on Craics on Statute Law, which is reproduced in at para 9 above and have bearing on the point. As indicated earlier, if the claim of the present assessee was to be accepted, it would lead to an unreasonable result and the purpose of the statute would be frustrated.

24. As discussed earlier, we found that there is force in the submissions made on behalf of the revenue that the IAC'S powers under Section 144B are very restricted in the sense that he cannot deal with any point raised in the draft assessment order, which has not been objected to by the assessee. He cannot even enhance or reduce any proposed addition, if such item is not covered by the draft. We may, in this connection, refer to the decision of the Hon'ble Calcutta High Court in the case of Bengal & Assam Investors Ltd. [1983] 142 ITR 156.

The learned departmental representative has drawn the distinction and the basic difference between the provisions of Section 144B and of Section 144A. In the present case before us, apparently, every conceivable objection was raised by the assessee at different times harping on the same tune that opportunity should be given by the 'income-tax authority' to the assessee under Section 129. But when the effective and substantive opportunity was given by the IAC, Range III, the assessee's counsel refused to tender any evidence, etc , relating to the assessee's objections to the draft assessment order, as noted in the order of the IAC itself. From the papers before us, it is seen that the assessee has not chosen to rely on any additional evidence or material, as apparently it was satisfied with the written objections filed earlier.

25. In view of what we have discussed and dealt with in the preceding paragraphs, we are of the opinion that there was no non-compliance with the provisions of Section 129 by the income-tax authority nor in respect of the provisions under Section 144B. In this view of the matter, we agree with the findings of the Commissioner (Appeals) on this point that the proviso to Section 129 stood complied with. This point of appeal by the assessee cannot be accepted.

26. to 34. [These paras are not reproduced here as they involve minor issues.]


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