1. The assessee is a company and the proceedings relates to its assessment for the assessment year 1977-78. The main issue involved is whether the assessment for the year as made on 25-9-1980 under Section 143(3), read with Section 144B, of the Income-tax Act, 1961 ('the Act') is barred by limitation which in turn depends on the answer to the question whether the provisions of Section 144B are applicable in this case.
2. The relevant facts in brief are that by a notification issued on 31-7-1977 under Section 125A of the Act, the concurrent jurisdiction over the assessee for the purpose of the assessment was conferred on the IAC, Allahabad. Ordinary jurisdiction over the assessee for the purpose of assessment, etc., vested in the ITO. The territorial or the administrative IAC over the ITO is the IAC, Gorakhpur. It is on record that the IAC, Allahabad, issued a comprehensive letter dated 8-11-1979 giving certain guidelines/instructions to the ITO for proceeding with the assessee's assessment for the year. In spite of it, the ITO did not complete the assessment finally. He only prepared a draft assessment order on 25-3-1980 and forwarded a copy of it to the assessee as laid down in Section 144B(1) and on receipt of objections from the assessee forwarded the draft assessment order along with the assessee's objections to the IAC, Allahabad, under Sub-section (4) of Section 144B. On receipt of the directions dated 25-9-1980 from the IAC, Allahabad, the ITO has completed the assessment under Sub-section (3) of Section 143, read with Section 144B, on 27-9-1980.
3. The assessee's submission is that the provisions of Section 144B are not applicable in this case in view of Sub-section (7) of Section 144B thereof and, therefore, the assessment as made on 27-9-1980 by the ITO is barred by limitation, has been considered and rejected by the Commissioner (Appeals) for reasons given in paragraph Nos. 2 to 4 of his order.
4. At the time of hearing of the appeal before the Division Bench, the departmental representative relied on the order of the Tribunal, Allahabad Bench, in the case of Dr. Surendrasingh Majithia [IT Appeal No. 645 (All.) of 1981 dated 3-9-1982], to show that the contention raised by the assessee's counsel is not tenable in law. On hearing the parties, the Bench, however, took the view that the issue involved in the appeal was intricate and required careful consideration particularly as the order relied upon by the departmental representative was a ex parte order, none having appeared on behalf of the assessee. Reference was made to the President for constitution of a Special Bench. The proposal was accepted. This is how the appeal has come up before the Special Bench.
5. In order to appreciate the rival contentions, it is desirable to refer to the provisions of Sections 123 and 124 of the Act, which provide for the scope and jurisdiction to be ordinarily exercised by the IAC and the ITOs, respectively. Sections 125 and 125A of the Act, on the other hand, respectively, provide for conferring of powers of the ITOs in specified cases, exclusively or concurrently on the IACS.In contradistinction with Sections 123, where the expression used is 'Inspecting Assistant Commissioner', the expression 'the Inspecting Assistant Commissioner' is used in Sections 125 and 125A. The first question that arises for consideration is whether the use of the article 'the' before the expression 'Inspecting Assistant Commissioner' in Sections 125 and 125A is, if at all, of any significance. According to Shri Sharma, the learned Counsel for the assessee, the use of the article 'the' is not without significance. His submission is that the concurrent jurisdiction can be conferred on the IAC under whose administrative or territorial jurisdiction the particular ITO functions. The contention of the learned Counsel, according to us, is too good to be accepted. Section 123, it may be stated, contemplates assignments of functions to more than one IAC in respect of the same area or the same persons or the same incomes or classes of income, etc., who shall have concurrent jurisdiction and shall perform such functions concurrently in relation to all such cases. It is perhaps for this reason that no article is used before 'IACs' in Section 123. As against this, Sections 125 and 125A provide for conferment of jurisdiction, exclusively or concurrently on a particular IAC which justifies the use of the article 'the' before the expression 'Inspecting Assistant Commissioner'. Moreover, on going through the provisions of Section 125A(3), one is hardly left in doubt that the Legislature has contemplated jurisdiction of two IACs on an ITO in specified cases, i.e., the IAC, who has concurrent jurisdiction over an assessee along with the ITO and the IAC, who has administrative or territorial jurisdiction over the ITO. That is why the Legislature has taken particular care to make it clear by means of Sub-section (3) of Section 125A that even in cases where the IAC has got concurrent jurisdiction with the ITO over an assessee, the ITO shall also observe and follow any instructions as may be issued to him for his guidance by the IAC within whose jurisdiction he performs his functions, etc.
Accordingly, we hold that there is nothing wrong in the conferring of concurrent jurisdiction over the assessee to the IAC, Allahabad, along with the ITO, while the IAC within whose jurisdiction the ITO performs his functions continued to be the IAC, Gorakhpur.
6. It is pertinent to mention that Shri Bharatji Agarwal, the learned Counsel for the department, had contended that the authority of a notification could not be challenged before the Tribunal. It could be, if at all, challenged by way of writ before the Hon'ble High Court.
Though on the face of it, we are in agreement with the standing counsel, in the view, we have taken about the validity of the notification, we do not consider it necessary to express ourselves finally on the contention raised by him.
7. Assuming the provisions of Section 144B are attracted in a case like the one before us, the next pertinent question raised is which of the two IACs has or will have jurisdiction under that section. Having regard to the scheme of the Act and keeping in view the purpose for which Section 144B was introduced in the Act, with effect from 1-4-1976 and the provisions of Sub-section (7) of Section 144B which exclude the application of Section 144B in certain cases, we are inclined to accept Shri Sharma's submission that assuming the provisions of Section 144B are applicable, it is the IAC within whose jurisdiction the ITO performs his functions and not the IAC, who holds exclusive or concurrent jurisdiction under Section 125 or Section 125A, will have the jurisdiction.
8. There being no dispute that Section 144B will have no application to cases which are covered or fall within the provisions of Sub-section (7) of Section 144B, next question that requires consideration is as to the meaning, purport and scope of the provisions of Sub-section (7) of Section 144B, which read as under: Nothing in this section shall apply to a case where an Inspecting Assistant Commissioner exercises the powers or performs the functions of an Income-tax Officer in pursuance of an order made under Section 125 or Section 125A.It is evident that the sub-section uses the expressions 'exercises the powers' and 'performs the functions' of an ITO in pursuance of orders, respectively, passed under Section 125 or Section 125A. Emphasising on the use of the above expressions in contradistinction to the expressions such as 'has powers' and 'has powers to perform' the learned standing counsel contended that the mere fact that exclusive or concurrent jurisdiction has been conferred on the IAC under Section 125 or 125A is not sufficient and that in order to fall under Sub-section (7) of Section 144B, it is necessary that the IAC has, as a matter of fact, exercised the powers or performed the functions referred to in Sections 125 and 125A. In this context, the standing counsel relied on the Delhi High Court's decision in the case of Bishamber Nath Ram Sarup v. ITO and the Bombay High Court's decision in the case of Bhagwanji Haridas v. Premji Parashotam AIR 1959 Bom. 47. Shri Sharma, the learned Counsel for the assessee, on the other hand, submitted that the two decisions relied upon by the learned standing counsel are not applicable to the facts of the case and that once the concurrent jurisdiction has been conferred on the IAC, the powers of the ITO are circumscribed, who can thereafter exercise only such powers and perform only such functions under the Act as the IAC may direct. The submission, thus, is that if the IAC does not give any directions as such, it has to be presumed that in exercise of his powers under Section 125A, the IAC has allowed the ITO to exercise all the powers and functions under the Act in relation to a particular case. On carefully going through the two decisions, relied upon by the learned standing counsel, we find that they are not of any help to the department. No doubt, the Bombay High Court has held that the expression 'concurrent jurisdiction' in Section 3(1) of the Act only means that even though a court subordinate to a district court may be invested with jurisdiction under the Act, the district court would still continue to possess jurisdiction under the Act. Therefore, notwithstanding the fact that the assistant judge may have been invested with jurisdiction under the Act by a notification issued under Section 3(1), he would still be a court subordinate to the district court. To our mind, this is exactly the purport of the provisions contained in Sub-section (3) of Section 125A. The question before us is not whether the ITO continues to be subordinate to the IAC. It is, whether in view of the specific provisions of Sub-section (7) of Section 144B, the application of the provisions of Section 144B is excluded. The Delhi High Court is directly concerned with the provisions of Section 125A. The question in that case was whether, after the concurrent jurisdiction was conferred on the IAC, the ITO could reopen the proceedings for assessment under Section 148, read with Section 147(a), of the Act. It was held that the meaning of concurrent jurisdiction is that both the officers have the jurisdiction to make the assessment. However, by virtue of Sub-section (2) of Section 125A, the ITO has to exercise his powers and perform his functions as the IAC may direct. This only means that if the IAC has directed that in certain cases or kind of cases certain steps will be taken by him only, the ITO will not be competent to take such steps.
Again, in this case also the question did not pertain to the purport and scope of Sub-section (7) of Section 144B. Moreover, in view of Sub-section (2) of Section 125A, which provides for the exercising of powers and performing of functions by the ITO as the IAC may direct, we are inclined to accept that once concurrent jurisdiction is given to the IAC under Section 125A, the ITO even if he has exercised all the powers and functions to make the assessment he has and could do so as a result of the IAC's exercising powers to allow him to do so.
9. In any event, the discussion on the above aspect of the matter appears to us to be of academic nature inasmuch as on going through the facts on record, we find that the IAC, Allahabad has, as a matter of fact, exercised the powers and performed the functions conferred on him under Section 125A. In this context, it is desirable to mention that some time after the issue of notification dated 31-1-1977 conferring jurisdiction over the asses-see on the IAC, Allahabad, the IAC, Gorakhpur, informed the ITO about the concurrent jurisdiction and directed him vide his letter dated 1-9-1979 (copy on record), inter alia, not to leave the assessee's case entirely for the IAC, Allahabad, but to continue the proceedings for the assessment keeping in touch with the IAC, Allahabad, and if necessary to visit the Allahabad and discuss the matter concerning the assessee's case with him. The ITO acknowledged the above letter of the IAC, Gorakhpur, vide his letter dated 5-9-1979. The IAC, Allahabad, thereafter issued a long letter dated 23-11-1979 to the ITO. In this letter, a copy of which was endorsed to the IAC, Gorakhpur, the IAC, Allahabad, directed the ITO to proceed to make the assessment in the assessee's case in a particular manner. This letter runs into four single space typed full size pages.
The IAC, Allahabad also took care to inform the IAC, Gorakhpur, about the steps he had already taken or proposed to take in the matter.
10. It is difficult, if not impossible, to accept in the face of such a long letter containing directions and guidelines to the ITO to proceed with the case that the IAC, Allahabad had not, as a matter of fact, exercised concurrent jurisdiction vested in him under Section 125A.Apart from the fact that the directions and guidelines contained in this letter cannot be brushed aside as mere general administrative directions issued by an IAC to his ITO, the IAC, Allahabad, it may be stated, had no such powers over the ITO. He derived all or any powers/functions from the notification issued under Section 125A. In the circumstances, we have no difficulty in holding that the IAC, Allahabad, has exercised the powers and performed the functions of the ITO in terms of Section 125A. The contention of the learned standing counsel that in order to be able to say that the IAC, Allahabad, had exercised powers vested in him under Section 125A, it must be found as a fact that the IAC, Allahabad, had himself issued notices and taken proceedings under Sections 143, 142, 131, 132 etc., of the Act, to our mind, for reasons already stated by us above, deserves straightaway rejection. As already stated, the exercise of powers by the IAC, Allahabad, includes even directing the ITO to exercise powers and perform functions in a particular manner himself. It is not at all necessary that the IAC, Allahabad, must himself exercise all the powers of assessment, which he may have to do in a case where exclusive jurisdiction to make assessments is conferred on him under Section 125.
Accordingly, we hold that the assessee's case is squarely covered under Sub-section (7) of Section 144B and, therefore, the provisions of Section 144B are not applicable in this case.
11. The logical consequence of our above conclusion is that the assessment should and could have been completed on or before 31-3-1980, i.e., within the ordinary time limit laid down in Section 153(1)(a)(iii) of the Act. The assessment having been actually completed on 25-9-1980 is, thus, clearly barred by limitation. This takes us to two other important questions, viz., (1) whether the draft of the assessment order prepared by the ITO on 27-3-1980 is or can be treated as a valid order of the assessment, and (2) assuming that the draft assessment order is not and cannot be treated as a valid assessment order, whether such an order of assessment requires to be annulled as being void or whether it can be cancelled/set aside, so that the fresh assessment according to the law can be made.
12. With a view to appreciate the rival contentions in this regard, we have carefully looked into the original copy of the draft assessment order. Its each page is initialled by the ITO. However, the last page of the order where total income is computed is not signed. Tax on the total income proposed has also not been determined. The draft order has been forwarded to the assessee with a clear indication that it is a draft assessment order. The assessee has been called upon to give its objections to the disallowances/additions, if any. Having regard to all the above facts, we are in agreement with Shri Sharma that the draft assessment order is not and cannot be treated as an assessment order passed under Section 143(3), even after taking into account the enabling provisions of Section 292B of the Act. Under the circumstances, it has to be held that the assessment order for the year has been passed by the ITO on 25-9-1980 and is, therefore, clearly barred by limitation.
13. Placing strong reliance on the decisions of the Calcutta High Court in the cases of Ram Kumar Sitaram v. Certificate Officer  49 ITR 797 at p. 800 and Cachar Plywood Ltd. v. ITO  114 ITR 379 at p.
388 and of the Supreme Court in the cases of Director of Inspection of Income-tax (Investigation) v. Pooran Mall & Sons  96 ITR 390 at pp. 398-399 and Grindlays Bank Ltd. v. ITO  122 ITR 55 at p. 60, the learned standing counsel submitted that the illegality supervened, if at all, at the stage the ITO treated the order of assessment to be the draft assessment order and forwarded a copy of the same to the assessee in terms of Section 144B(1). He urged that the assessment should, therefore, be set aside with a direction to the ITO to treat the raft order as a final order of assessment under Section 143(3).
Shri Sharma, on the other hand, relied on the Gujarat High Court's decision in the case of P.V. Doshi v. CIT  113 ITR 22 and order of the Tribunal, Delhi Bench, in the case of Shelley Products v. ITO  10 ITD 136, paragraph No. 2, for the proposition that in a case like the one before us, the assessment has got to be annulled.
14. The question posed is quite interesting and intricate. The provisions contained in Section 153 prescribing the time limit for completing assessments in different circumstances are absolute. It is categorically provided that 'No order of assessment shall be made under Section 143 or Section 144 at any time after ....' This leaves hardly any scope for doubt that an order of assessment can be passed only within the stipulated time and not beyond. Besides exceptions referred to in that section itself, the Supreme Court has held in the case of CIT v. National Taj Traders  121 ITR 535 that the time limit applies to various orders to be passed by the authorities originally suo motu and not to orders which are or have to be passed in pursuance of the appellate or revisionary orders. That apart the Supreme Court has explained the effect of orders passed within time but without following certain statutory mandatory provisions or complying with the principles of natural justice, in the cases of Guduthur Bros. v. ITO  40 ITR 298 and Kapurchand Shrimal v. CIT  131 ITR 451. It has been held that orders so passed cannot be sustained as valid orders but it does not mean that the orders have to be quashed straightaway.
The appellate authority has to and should direct for passing of orders afresh in accordance with law. In both the above cases, however, the orders in question were passed in time. Legal and valid orders could be passed on those dates on which the orders which were found to suffer from certain irregularity or illegality were passed. In the present case, no order of assessment has been passed within the time limit. The above two cases, thus, do not help the department's contention.
15. As regards the two Supreme Court's decisions and the two Calcutta High Court's decisions relied upon by the learned standing counsel also the position is not very much different. The question involved in Ram Kumar Sitaram's case (supra) was about the validity of fresh certificate proceedings which were started after the earlier proceedings were filed. The question of time limit was not involved at all. In Cachar Plywood Ltd.'s case (supra), the question was, no doubt, similar. But in that case, the assessee had challenged the transfer of its Income-tax file in the High Court. During the pendency of proceedings, the ITO to whom the assessee's cases were transferred had passed the orders of assessment which were in time. These orders were quashed on the ground that the orders of transfer were invalid. It was in these circumstances the High Court directed the ITO who had jurisdiction since inception to pass fresh assessment orders even though time limit for completing the assessment orders had expired.
Issue in the Supreme Court decision in Pooran Mall & Sons' case (supra) did not pertain to orders of assessment at all. It pertained to other provisions. However, some order was passed in that case which was agreed upon by the assessee. This case has, thus, no application whatsoever. In Grindlays Bank Ltd.'s case (supra), the time for completing assessment expired because of stay of proceedings by the High Court from 17-3-1975 to 31-3-1977. Since the assessment order passed on or before 31-3-1975 would have been in time, it was held that the assessment order passed on 31-3-1977 would be in time.
16. Our decision in short, thus, is that once concurrent jurisdiction is conferred on the IAC under Section 125A, he is deemed to have exercised the powers vested in him under Section 125A even if he allows the ITO to exercise all the powers of assessment by himself in as much as Sub-section (2) of Section 125(1)(a) circumscribes the powers of the ITO, within the parameter of the directions that the IAC may give. In any event, so far as the present case is concerned, the IAC, Allahabad has, as a matter of fact, exercised the powers vested in him under Section 125A. Therefore, the provisions of Section 144B are not applicable in this case in view of Sub-section (7) of Section 144B thereof. The order of assessment has been made on 25-9-1980 and is, thus, clearly barred by limitation. Such an order requires to be annulled and not set aside.