COMMISSIONER OF INCOME TAX vs HANSA AGENCIES (P) LTD.

N. K. AGRAWAL, J. :

The following question has been referred to this Court by the Tribunal under s. 256(1) of the IT Act, 1961 (for short, "the Act") :

"Whether, on the facts and in the circumstances of the case, the Tribunal is right in law in holding that reference made under s. 144B of the IT Act was bad in law and the assessment made on 31st July, 1982 is barred by limitation ?"

The assessee, as a private limited company, derived income from export of handicrafts, brass wares etc. Return was filed for the asst. yr. 1979-80, declaring income of Rs. 1,91,280. The ITO during assessment proceedings, proposed variation in the income of the assessee-company exceeding Rs. 1,00,000. He, therefore, proceeded under s. 144B of the Act and prepared a draft assessment order. The draft assessment order was forwarded to the assessee, as required under sub-s. (1) of s. 144B, on 25th January, 1982. Objections were received from the assessee on 1st February, 1982 and objections alongwith the draft assessment order were forwarded to the IAC on 12th February, 1982. Directions were received from the IAC on 19th July, 1982 and thereafter assessment was framed on the income of Rs. 6,86,940 on 31st July, 1982.

The assessee challenged the assessment on the ground that the ITO wrongly followed the procedure laid down in s. 144B of the Act and, therefore, the extended period of limitation was not available for completing the assessment. It was claimed that the ITO had concurrent jurisdiction along with the IAC under s. 125A of the Act and, therefore, in the light of sub-s. (7) of s. 144B, the procedure laid down in s. 144B was not required to be followed.

The Tribunal agreed with the assessee and annulled the assessment order on the ground that s. 144B had been wrongly applied by the ITO and, therefore, the extended period of limitation was not available for completing the assessment. It was held by the Tribunal that sub-s. (7) of s. 144B did not require the ITO to follow the procedure laid down in that section if the ITO had concurrent jurisdiction together with the IAC concerned.

A similar question has been examined by this Court in IT Ref. No. 63 of 1985, Commissioner of Income Tax Vs. Gheru Lal Bal Chand, , and it has been held that sub-s. (7) of s. 144B was not attracted and the procedure, laid down in that section, was rightly followed as the ITO, having concurrent jurisdiction with the IAC under s. 125A of the Act, proposed to make variation in the income of the assessee exceeding Rs. 1,00,000. Following the said view, the question is answered in the negative, i.e., in favour of the Department and against the assessee.