C. Rajagopala Prabhu vs Commissioner of Income Tax

K.A. Nayar, J.—At the instance of the assessee, the Income Tax Appellate Tribunal, Cochin Bench, has referred the following questions of law arising out of the order of the Tribunal dated February 29, 1984, in I.T.A No. 511/Coch. of 1981 relating to the assessment year 1971-72 :

"(1) Whether, on the facts and in the circumstances of the case, the Tribunal is right in law in holding that the provisions of Section 144B applied to the assessment year 1971-72 ?

(2) Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the assessment is not barred by limitation ?

(3) Whether, on the facts and in the circumstances of the case, the Tribunal is right in law in holding that the Income Tax Officer had complied with the provisions of Section 129 properly ?"

For the assessment year 1971-72, an assessment was made u/s 144 of the Income Tax Act on the assessee as a best judgment assessment. On an application u/s 146 of the Act, the assessment was reopened. Against the fresh assessment, an appeal was filed before the Appellate Assistant Commissioner who set aside the assessment by his order dated April 16, 1977, with a direction to make a fresh assessment after considering the various objections raised by the assessee. The said assessment was made on the basis of the directions issued by the Inspecting Assistant Commissioner after a draft order u/s 144B was made. On appeal by the Income Tax Officer against the order of the Appellate Assistant Commissioner, the Tribunal confirmed the order of the Appellate Assistant Commissioner setting aside the assessment. Subsequently, the Income Tax Officer initiated proceedings for fresh assessment in accordance with the directions of the Appellate Assistant Commissioner. A draft assessment order was issued u/s 144B. On July 1, 1980, the Inspecting Assistant Commissioner intimated the applicant that there was a change in the incumbent of the office of the Income Tax Officer and asked the assessee as to whether he desires to be re-heard. The assessee requested for a re-hearing. After the aforesaid proceeding, no further draft order u/s 144B was issued. But the Inspecting Assistant Commissioner posted the hearing of the objection of the applicant against the original draft order u/s 144B on September 18, 1980. The applicant did not appear for the hearing. Thereafter, the Inspecting Assistant Commissioner issued a direction to the Income Tax Officer to complete the assessment. The assessment was completed on September 25, 1980. The assessee filed ah appeal contending that the assessment order is barred by limitation on the ground that the provisions of Section 144B will not apply to the assessment in respect of the assessment year 1971-72. It was also contended that even otherwise the assessment was barred by limitation. A further contention was that the procedure u/s 129 of the Act has not been complied with. All the contentions have been rejected both by the Commissioner of Income Tax (Appeals) and by the Tribunal.

We heard counsel.

We are concerned herein with the assessment year 1971-72, A fresh assessment after cancellation of the original assessment made u/s 144 was made on March 30, 1976. This assessment was made after reopening the best judgment assessment at the assessee''s request made u/s 146. u/s 153(2A) read with Sub-section (3), an order of fresh assessment u/s 146 could be made at any time before the expiry of two years from the end of the financial year in which the order u/s 146 cancelling the assessment is passed by the Income Tax Officer. There is no case that the assessment completed on March 30, 1976, is made beyond two years from the end of the financial year in which the cancellation of assessment was made u/s 146 by the Income Tax Officer. The assessment which was reopened u/s 146 was completed on March 30, 1976, and that assessment has to be made still u/s 143(3). Section 144B was brought into force and would apply to any proceedings to be made after January 1, 1976, because Section 144B was brought into force with effect from January 1, 1976. Against the assessment made on March 30, 1976, the assessee went in appeal and the Appellate Assistant Commissioner, by his order dated April 16, 1977, set aside the assessment with a direction to make a fresh assessment after considering the various objections raised by the assessee. Even though the Revenue took up the matter further to the Tribunal, the Tribunal dismissed the same on December 7, 1979. Therefore, the Income Tax Officer has to complete the assessment u/s 143(3) read with Section 144B. The assessee''s contention that Section 144B does not apply to the assessment in respect of the year 1971-72, therefore, cannot be accepted. Section 144B would apply to proceedings completed after January 1, 1976. The draft assessment order was sent to the assessee within time. In fact, the assessee had raised objection against the draft assessment order and the Inspecting Assistant Commissioner gave the assessee an opportunity of being heard. The communication in this regard dated September 8, 1980, was served on the assessee on September 10, 1980, and the hearing was fixed on September 18, 1980, by the Inspecting Assistant Commissioner. Even though the assessee says that he requested for an adjournment, there was no evidence regarding such a request being sent. There was not even an acknowledgment for filing such an adjournment application. Therefore, it cannot be said that Section 144B has been wrongly applied in the case in question.

Regarding the question of limitation, the Appellate Assistant Commissioner said that learned counsel did not offer any argument in respect of the said proposition. In any case, the draft order was given to the assessee within the time permitted and the assessee did raise objections. The Inspecting Assistant Commissioner gave an opportunity to the assessee of being heard and thereafter has given direction. The assessment made on September 25, 1980, therefore, is within time and not vitiated.

The other contention of the assessee is that the provisions of Section 129 has not been complied with. On July 1, 1980, the Inspecting Assistant Commissioner has written to the assessee intimating that there has been a change of Income Tax Officer and asking the assessee whether he would like to be heard afresh. The assessee wanted to avail of the opportunity and he was heard. The contention was that after this no draft order was given to him. Under the provisions of Section 129, the assessee concerned may demand that, before the proceedings are continued, the previous proceedings or any part thereof be reopened or that before any order of assessment is passed against him, he be reheard. Admittedly, the assessee did not demand before the Income Tax Officer that the previous proceedings or part thereof should be reopened by the Income Tax Officer. Therefore, there was no question of a fresh draft order being issued. The assessee only wanted that he should be reheard before any order of assessment is passed and before the assessment order was passed, the assessee has been reheard. Therefore, we hold that it was rightly held by all the authorities below that Section 129 of the Act has been properly complied with and that the assessment order is not vitiated on that ground.

In the circumstances, we do not find any error in the order of the Appellate Tribunal. The Tribunal was right in law in holding that the provisions of Section 144B applied to the assessment in question, that the Tribunal was right in law in holding that the assessment is not barred by limitation and that the Tribunal was also right in law in holding that the provisions of Section 129 of the Act has been properly complied with.

Therefore, we answer all the questions referred to us in the affirmative, that is, in favour of the Revenue and against the assessee.

A copy of the judgment under the seal of the High Court and the signature of the Registrar shall be forwarded to the Income Tax Appellate Tribunal, Cochin Bench.