Calcutta High Court
Arrah Sasaram Light Railway Co. Ltd. vs Commissioner Of Income-Tax on 7 April, 1992
Equivalent citations: [1993]204ITR807(CAL)
JUDGMENT Ajit K. Sengupta, J.
1. This reference under Section 256(1) of the Income-tax Act, 1961, relates to the assessment years 1979-80 and 1980-81.
2. The facts leading to this reference are that the assessee-company was incorporated on October 19, 1909, under the Companies Act, 1866, and was an existing company within the meaning of the Companies Act, 1956. It was engaged in running a railway between Arrah and Sasaram. It observed the financial year as its accounting year. It closed its business operations with effect from February 15, 1978. At its extraordinary general meeting held on March 29, 1978, a resolution for voluntary winding-up was passed and two liquidators were appointed accordingly. A notice under Section 178 of the Act was given to the Income-tax Officer who, however, did not respond.
3. Assessment year 1979-80 :
On July 26, 1978, the assets, namely, the railway track, plant and machinery, etc., were sold by the assessee for a consideration of Rs. 95 lakhs. It opted to adopt the fair market value of these assets as on January 1, 1964, as the cost of acquisition for the purpose of computation of capital gains under Section 55 of the Act. Such market value was determined at Rs. 59,46,000 as per certificate of the approved valuer, Messrs. Talbot and Co. It submitted on October 17, 1979, a return showing business loss of Rs. 3,12,215. In the course of hearing before the Income-tax Officer, various contentions were raised regarding assessability of the capital gains and bank interest earned by the assessee during the year. The Income-tax Officer made a reference on November 25, 1981, to the Inspecting Assistant Commissioner under Section 144A of the Act. In the course of hearing under Section 144A before the Inspecting Assistant Commissioner, the assessee gave a long explanation about the facts of the case and the stand taken by it. The Inspecting Assistant Commissioner, by his letter dated March 15, 1982, gave certain directions to the Income-tax Officer under Section 144A. Thereafter, the Income-tax Officer made out a draft assessment order computing the capital gains at Rs. 55,53,100 as shown by the assessee and bank interest at Rs. 7,927 as shown by the assessee resulting in a total income of Rs. 55,61,000 (rounded off). The Income-tax Officer submitted this draft order on May 15, 1982, to the Inspecting Assistant Commissioner under Section 144B of the Act. In response to the draft order proposed by the Income-tax Officer, the assessee wrote a letter to the Income-tax Officer on March 30, 1982, in which it took the stand that it had already been heard by the Inspecting Assistant Commissioner under Section 144A and the assessment should have been completed in accordance with the instructions under Section 144A and that the Income-tax Officer no longer had any jurisdiction to proceed under Section 144B of the Act. The assessee also replied to the Inspecting Assistant Commissioner on similar lines in the course of proceedings under Section 144B. However, the Inspecting Assistant Commissioner gave a direction to the Income-tax Officer under Section 144B by his letter dated 7th/10th September, 1982. The Income-tax Officer thereafter completed the assessment on September 18, 1982, on a total income of Rs. 55,61,030.
4. The assessee appealed to the Commissioner of Income-tax (Appeals) and contended that the assessment made on September 18, 1982, was without jurisdiction. It was also the contention of the assessee that the assessment was barred by limitation since reference under Section 144B was uncalled for and, therefore, the period covered in the proceedings under Section 144B was not excludible in computing the period of limitation. Objections to the disallowance of a part of the expenses incurred for salaries and other miscellaneous expenditure were also taken before the Commissioner of Income-tax (Appeals). The assessability of the income of the assessee was also objected to. The Commissioner of Income-tax (Appeals) dismissed the appeal of the assessee.
5. The assessee then came in appeal before the Tribunal. The following objections as to the legality of the assessment order were taken by it :
(i) No tax was determined as payable as set out in the body of the order of assessment and, in view thereof, the order of assessment was not one under Section 143(3) of the Act and was as such non est in law. However, it may be mentioned here that the amount of tax was correctly entered in the demand notice served on the assessee.
(ii) Further, according "to the assessee, it was a company in liquidation which is not a person within the meaning of Section 2(31) of the Act and as such it was not assessable to tax. Even further objections were raised that the return of income signed and verified by one of the liquidators was non est in law and the assessment made on that basis was ab initio void; that, in view of the winding up of the company with effect from February 15, 1978, no capital asset was held by it after that date and as such no capital gains tax could be imposed upon it or the liquidators and that there being no rate of tax prescribed for companies in liquidation in the relevant Finance Act, no income of the assessee could be charged to tax.
6. It was also contended before the Tribunal that the Income-tax Officer, after having received directions under Section 144A had no jurisdiction to again seek directions of the Inspecting Assistant Commissioner under Section 144B and, therefore, the time occupied in obtaining directions under Section 144B could not be excluded under Section 153, Explanation 1(iv), of the Act.
7. The assessee also agitated the claim to deduction of the entire expenses out of the interest income assessed under the head "Income from other sources". None of the grounds taken by the assessee found favour with the Tribunal. The Tribunal held that the income of the assessee was assessable under the Act and that the assessment order was valid. The Tribunal also held that the Income-tax Officer had jurisdiction to make a reference under Section 144B and as such the assessment was not barred by limitation. The Tribunal also held that the Income-tax Officer had already allowed deduction of expenses relating to the interest income and the remaining expenses were not allowable.
8. Assessment year 1980-81.--Return for this assessment year was submitted on July 29, 1980. The assessee claimed expenses of Rs. 3,02,403 against the interest income of Rs. 32,960. The Income-tax Officer allowed expenses of Rs. 35,505 out of the said claim of Rs. 3,02,403.
9. The assessee appealed before the Commissioner of Income-tax (Appeals) and raised various contentions regarding the assessability of its income and disallowance of part of the expenses. The Commissioner of Income-tax (Appeals) dismissed the appeal.
10. The assessee then came in appeal before the Tribunal and raised similar contentions as have been stated in paras 5 (i and ii) of the Tribunal's order and also objected to partial disallowance of the expenses. The Tribunal, following its order for the earlier year in the case of the assessee, rejected the contentions of the assessee and dismissed the appeal.
11. From and out of these facts, the following questions of law have been referred to this court for opinion :
"1. Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that non-computation of tax in the body of the assessment order under Section 143(3) of the Income-tax Act, 1961, did not invalidate the assessment orders for the assessment years 1979-80 and 1980-81, when the amount of tax was mentioned in the demand notice ?
2. Whether, on the facts and in the circumstances of the case, the Tribunal was right in rejecting the stand of the assessee for the assessment years 1979-80 and 1980-81.
(a) that the return of income signed and verified by one of the liquidators was non est in law and the assessment made on that basis was ab initio void ?
(b) that the assessee being a company in liquidation had no taxable income within the meaning of Section 5 of the Income-tax Act, 1961 ?
(c) that, in view of the winding up of the company with effect from February 15, 1978, no capital asset was held by it after that date and as such no capital gains tax could be levied ?
(d) that there being no rate of tax prescribed for companies in liquidation in any of the relevant Finance Act, no income of the assessee could be charged to tax under Section 5 of the Income-tax Act, 1961 ?
3. Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the assessee was not entitled to deduction of the entire expenses on salaries, audit fees, miscellaneous expenses and bank charges out of the income of interest assessed under the head "Income from other sources" except the proportionate expenses incurred for earning that income of interest in the assessment years 1979-80 and 1980-81?
4. Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the reference under Section 144B of the Income-tax Act, 1961, was legally made by the Income-tax Officer and as such the assessment was not barred by limitation ?"
12. The first question is now concluded by the decision of the Supreme Court in the case of Kalyankumar Ray v. CIT . Following the said decision, we answer the first question in the affirmative and in favour of the Revenue.
13. Question No. 2(a) is concluded by the decision of a Division Bench of this court in United Provinces Electric Supply Co. Ltd. (in liquidation) v. CIT [1993] 204 ITR 794 (I. T. Reference No. 393 of 1980), where judgment was delivered on August 4, 1989. Following the said decision, we answer question No. 2(a) by saying that the Tribunal was right in rejecting the stand of the assessee.
14. Questions Nos. 2(b), 2(c) and 2(d) are concluded by the decision of a Division Bench of this court in I. T. Reference No. 319 of 1982 (United Provinces Electric Supply Co. Ltd, (in voluntary liquidation) v. CIT, where judgment was delivered on 4th and 5th April, 1990. Following the said decision, we answer the aforesaid questions by saying that the Tribunal was right in rejecting the stand of the assessee.
15. The third question relates to the allowability of deduction of the entire expenses of salaries, audit fees, miscellaneous expenses and bank charges out of the income of interest assessed under the head "Income from other sources" except the proportionate expenses incurred for earning that income of interest. Our attention has been drawn to the decision of this court in I. T. Ref. No. 393 of 1990 (United Provinces Electric Supply Company Ltd. (In liquidation) [1993] 204 ITR 794. In that case, a similar question came up for consideration. The assessee in that case claimed a sum aggregating to Rs. 92,565 on several heads namely, liquidator's fees, legal expenses, travelling expenses, gratuity, stamps and telegrams, salary, audit fees, general charges, printing and stationery, bank charges. The Income-tax Officer, however, allowed the expenditure on salary, audit fees, general charges, printing and stationery and bank charges. The disallowance was upheld by the Appellate Assistant Commissioner as well as by the Tribunal. There this court held that the deductions claimed have to be allowed only to the extent that they were wholly and exclusively spent for making and earning the income from other sources. The court observed (at page 804) :
"An argument on the basis of the doctrine of real income was sought to be made out. I am unable to see how that doctrine can be invoked in the facts of this case. It is not the case of the assessee that the assessee did not receive any income in this year nor is it the case of the assessee that there has been no accrual of income. The expenditures which are specifically allowable have to be allowed under the provisions of the Income-tax Act. There is no general principle on the basis of which the expenditure claimed as deductible can be allowed as deduction. It is true that income-tax is not chargeable on gross profits. The profits must be computed in accordance with the provisions of the Income-tax Act. The specific provision as to deductions from business income laid down in Sections 30 to 43A of the Act cannot be disregarded on any assumed principle of real income."
16. Our attention has also been drawn to a decision in the case of CIT v. Benaras Electric Light and Power Company Ltd. (I. T. Ref. No. 44 of 1988), , where judgment was delivered on January 14, 1991. The question in that reference was as to whether the Tribunal was correct in law in holding that the expenses relating to salary and wages and rent would have to be allowed in full. There, the assessee-company was also in voluntary liquidation. In that case, this court held as follows (at page 806) :
"Before us, the contentions raised before the Tribunal have been reiterated. It appears that the Income-tax Officer allowed part of the expenses on account of salary and wages and rent. In our view, even if the company had gone into liquidation unless the winding up is complete and the name of the company struck off from the Register, the company has to maintain a skeleton staff for performing statutory duties and obligations. The Income-tax Officer has, therefore, allowed only a part of the salary and wages and the rent of the premises where the office of the company in liquidation is situate. In our view, when a company goes into liquidation, the expenditure which is incurred towards salary and wages of the staff and the rent would be an expenditure incurred wholly and exclusively for the purpose of earning income assessable under the head "Other sources". It does not appear from the facts which have been stated by the Tribunal that how many of its staff were engaged by the company in liquidation and what is the quantum of salary or wages payable to them. In our view, only the actual expenditure incurred for payment of the salary of the accountant, typist and stenographers and sub-staff should be allowed as a deduction. Similarly, actual rent paid for the office of the company in liquidation should also be allowed."
17. In the instant case, deduction was allowed by the Income-tax Officer for audit fees, commission paid to liquidators and printing and stationery. The Tribunal also allowed further deduction. In our view, the assessee is entitled only to the expenditure which is incurred wholly and exclusively for the purpose of making and earning income from other sources. The expenditure incurred on salary, audit fees, printing and stationery and rent is allowable. So long as the liquidation proceedings are not finally terminated, a minimum staff have to be retained; the auditor has to be appointed to audit the accounts; expenses on printing and stationery being incidental have to be incurred. Accordingly, such expenditure is allowable being wholly and exclusively laid out for earning the income from other sources. The Income-tax Officer in this case, as we had indicated, allowed commission to the liquidators and further relief was also given by the Tribunal. In our view, therefore, the order of the Tribunal does not call for any interference. We, therefore, answer the third question in the affirmative and in favour of the Revenue.
18. We are, therefore, concerned with the only question, being question No. 4, in this reference. Mr. Guha has highlighted that, on November 25, 1981, the Income-tax Officer made a reference under Section 144A to the Inspecting Assistant Commissioner. On March 15, 1982, the Inspecting Assistant Commissioner gave directions under Section 144A to the Income-tax Officer for his guidance to enable him to complete the assessment. On March 15, 1982, the Income-tax Officer made a draft assessment order under Section 144B and forwarded the same to the assessee. On March 30, 1982, the assessee wrote a letter to the Income-tax Officer stating that it had already been heard by the Inspecting Assistant Commissioner under Section 144A of the Act and that the assessment should have been completed in accordance with the directions given under Section 144A of the Act and the Income-tax Officer no longer had any jurisdiction to proceed under Section 144B of the Act. Similar contentions were made before the Inspecting Assistant Commissioner in the course of the proceedings under Section 144B of the Act. By means of his letter dated September 7/10, 1982, the Inspecting Assistant Commissioner gave his directions under Section 144B of the Act in the following terms :
"The basic question raised in the objection petition is that the Income-tax Officer had no jurisdiction to make a reference under Section 144B when he was finalising the assessment in consequence of the Inspecting Assistant Commissioner's instructions under Section 144A in the instant case. Elaborating this point, the authorised representative submitted that the assessment has now got barred by limitation as the extended period under Section 153, Explanation, will not be available in the case (after normal limitation period expiring on March 31, 1982). In rejecting the objection, you are required to briefly mention in the final order about your earlier reference under Section 144A and the Inspecting Assistant Commissioner's instruction thereon during the normal time limit and then emphasise that, on a plain reading of the provisions of Sections 144A and 144B, it is not possible to accept that both the provisions could not be independently applied in a given case, particularly when the latter section starts with the expression "Notwithstanding anything contained in the Act". The variation in the instant case having exceeded the limit of Rs. 1,00,000, had the interpretation of the authorised representative been accepted in not invoking the provision of Section 144B, the finalisation of assessment order would have violated the procedure prescribed in law."
19. The assessment was completed under Section 143(3)/144B on September 18, 1982.
The contentions of the assessee run as under :
(i) Under Section 144A of the Act, the Inspecting Assistant Commissioner gave directions on March 15, 1982, to the Income-tax Officer for his guidance to enable him to complete the assessment. Such directions are binding on the Income-tax Officer. Hence, there was no choice or option before the Income-tax Officer on March 15, 1982, except to complete the assessment in accordance with those directions. Section 144B of the Act comes into operation only when the Income-tax Officer proposes to make any variation in the income or loss "returned". On March 15, 1982, the Income-tax Officer, having received the directions under Section 144A of the Act from the Inspecting Assistant Commissioner which are binding on him, could not "propose" to make any variation. The assessment should have been completed on or before March 31, 1982, under Section 143(3) read with Section 144A of the Act. The meaning of the word "propose" as given in the Concise Oxford Dictionary (sixth edition) is "put forward for consideration",--"intend". When, on March 15, 1982, the Income-tax Officer had received directions under Section 144A of the Act which are binding on him for his guidance to enable him to complete the assessment, he could not again propose to make any variation. To do so would be to wipe out Section 144A of the Act and that is what the Income-tax Officer has done in the case by making the assessment on September 18, 1982, under Section 145(3)/144B of the Act,
(ii) The Inspecting Assistant Commissioner in his letter dated September 7, 10, 1982, to the Income-tax Officer wrote as follows :
"that, on a plain reading of the provisions of Sections 144A and 144B, it is not possible to accept that both the provisions cannot be independently applied, particularly when the latter section starts with the expression 'notwithstanding anything contained in this Act',"
20. The use of the non obstante clause "notwithstanding anything contained in the Act" does not help the Department; the crux of the matter is whether the Income-tax Officer can "propose" to make a variation in the returned income or loss when he is already bound by the directions given by the Inspecting Assistant Commissioner under Section 144A of the Act. About the other aspect of the Department's case, viz., both Sections 144A and 144B independently operate simultaneously, it is submitted that such a situation cannot come into play at all having regard to the language used in Sections 144A and 144B of the Act. In the instant case, although the Inspecting Assistant Commissioner had propounded the theory of simultaneous application of Sections 144A and 144B, as a matter of fact, what has been done was to make the assessment under Section 143(3)/ 144B after wiping out Section 144A of the Act.
21. In this connection, it is relevant to mention that Sections 144A and 144B of the Act were inserted by the Taxation Laws (Amendment) Act, 1975, giving effect to the recommendations of the Wanchoo Committee. The relevant recommendations with regard to Section 144A are as follows:
"We recommend that the law should authorise the Inspecting Assistant Commissioner to call for the records of a case on his own motion or on a reference by the Income-tax Officer or a petition made by the assessee before the assessment is finalised and issue such directions as he considers fit in the circumstances of the case for completion of the assessment. The directions given will be legally binding on the Income-tax Officer. The law should provide for an opportunity to the assessee of being heard by the Inspecting Assistant Commissioner before any directions prejudicial to him are issued."
22. There are cases where there could be no suo motu calling for records of a case by the Inspecting Assistant Commissioner or a reference either from the Income-tax Officer or the assessee and high-pitched assessments are made by the Income-tax Officer.
23. Thus, the object of Section 144B is to provide for a check and balance against arbitrary assessments and the tendency to high-pitched assessments causing difficulty for the taxpayers as also the tax administration.
24. The Board in Circular No. 197, dated April 17, 1976 (see [1977] 110 ITR (St.) 17), explains the scope and effect of the two provisions. It would be useful to refer to them as they afford some clue to the scope and effect and the differentia of the two legislative measures.
"Powers of the Inspecting Assistant Commissioner to issue pre-assessment directions [new Section 144A].
2. The Amending Act has inserted a new Section 144A empowering the Inspecting Assistant Commissioner to issue pre-assessment directions to the Income-tax Officer. It provides that the Inspecting Assistant Commissioner may, either on his own motion or on a reference from the Income-tax Officer or on the application of the assessee, call for and examine the assessment record of any assessee in which an assessment is pending, and issue such directions to the Income-tax Officer as he deems fit so as to enable the Income-tax Officer to complete the assessment. The directions shall be issued only where the Inspecting Assistant Commissioner considers it necessary or expedient to do so having regard to the nature of the case or the amount involved or for any other reason. The directions in question shall be binding on the Income-tax Officer. However, any directions which are prejudicial to the assessee shall be issued by the Inspecting Assistant Commissioner only after the assessee has been given an opportunity of being heard. Any direction issued by the Inspecting Assistant Commissioner in regard to the lines on which investigation may be made in an assessment, shall not be treated as a direction prejudicial to the assessee.
3. The above-mentioned power of the Inspecting Assistant Commissioner to issue pre-assessment directions to the Income-tax Officer in individual cases is in addition to the general power conferred on him by Section 119(3) to issue instructions."
25. Thus, in one word, it can be said that the purpose and object of this section were to avoid multiplicity of proceedings and unnecessary appeals.
26. Now, there has been a similar explanatory note by the Board in the said Circular for Section 144B which reads as follows :
"The Amending Act has inserted another provision, namely, Section 144B which empowers the Inspecting Assistant Commissioner to issue pre-assessment directions to the Income-tax Officer. Under the provisions of this section, the Income-tax Officer is required to send a draft order of assessment to the assessee in a case where he proposes to make an assessment under Section 143(3) and the proposed addition or disallowance is in excess of the amount fixed by the Board in this behalf. If the assessee objects to such addition or disallowance, he will have to forward his objection to the Income-tax Officer within seven days of the receipt of the draft order. The time available for filing of the objection can, on an application by the assessee, be extended by the Income-tax Officer by a further period not exceeding 15 days. If the assessee intimates acceptance of the variation proposed by the Income-tax Officer or no objection thereto is received from him, the Income-tax Officer shall complete the assessment on the basis of the draft order. Where, on the other hand, any objections are received by the Income-tax Officer, he will be required to forward the draft order together with the assessee's objections to the Inspecting Assistant Commissioner. After considering the draft assessment order and the objections raised by the assessee and after examining the assessment record, if necessary, the Inspecting Assistant Commissioner shall issue, in respect of the matters covered by the objections, such directions as he thinks fit to enable the Income-tax Officer to complete the assessment. While issuing any directions which are prejudicial to the assessee, the Inspecting Assistant Commissioner will have to give an opportunity of being heard to the assessee. The directions issued by the Inspecting Assistant Commissioner shall be binding on the Income-tax Officer. The Board is empowered to fix the amount (which shall not be less than Rs. 25,000) variations in excess whereof proposed by the Income-tax Officer will attract the provisions of this section. The Board is also empowered to fix different amounts for different areas. By its order F.No. 201/121/75-IT(A-II), dated December 23, 1975, the Board has fixed an amount of Rs. 1 lakh for the purpose." (see Circular No. 197, dated April 17, 1976, [1977] 110 ITR (St.) 18)
27. The object of the provisions of Section 144B is the same as that of Section 144A. The real object appears to be to provide competent scrutiny at the level of the Inspecting Assistant Commissioner and to reduce relatively the finality of free play at the level of the Income-tax Officer. The provisions of Section 144B can be said to have reduced the area of dispute between the Income-tax Officer and the assessee so that unnecessary appeals against the order need not be filed.
28. We may note at this stage the underlying difference between Sections 144A and 144B. Section 144A though having as its central idea the avoidance of multiplicity of proceedings and unnecessary appeals, has a wider coverage than Section 144B. Section 144B is meant only to protect the assessee from arbitrary and ill-conceived additions. Both provide for a pre-assessment review. But the review which Section 144B provides for is limited only to the additions proposed by the Assessing Officer. In the proceedings before him under Section 144B, the Inspecting Assistant Commissioner is expected to exercise moderation over the decision of the Income-tax Officer. The consideration of the interest of the assessee in receiving a fair deal in assessment is a weightier consideration than the protection of the interests of the Revenue, but, under Section 144A, the vigil is meant not only for protection of the assessee's interest but also the interests of the Revenue. When a matter conies before the Inspecting Assistant Commissioner under Section 144B, he is not entitled to travel beyond the proposed additions and has to confine his review in respect of the additions that are proposed by the Income-tax Officer in the draft order.
29. Under Section 144A, the Inspecting Assistant Commissioner has his hands free. The language is such as does not bind the Inspecting Assistant Commissioner to issue directions only on the points which are referred to him by the Income-tax Officer or by the assessee even where the provisions are invoked at the instance of the Officer or the assessee. He has as well the power to call for, on his own motion, the records of any assessment pending and it is the totality of the assessment that is open before him for directions. Therefore, the directions 'have no limitation unlike the directions under Section 144B.
30. On a comparison of the provisions of Sections 144A and 144B, it is apparent that, while under Section 144A, the Inspecting Assistant Commissioner can suo motu call for the records of any proceeding pending assessment, he had no suo motu power to call for records in exercise of his powers under Section 144B. The power under Section 144B could be exercised by the Inspecting Assistant Commissioner only where a reference is made to him by the Income-tax Officer under Section 144B(4).
31. The other point of distinction is that, while issuing the directions under Section 144A, the Inspecting Assistant Commissioner may deal with the assessment in its entirety, the same being open and at large before him once the proceedings under Section 144A are set in motion. But, that is not the case under Section 144B. The Inspecting Assistant Commissioner cannot look beyond the additions which the Income-tax Officer has proposed in the draft order.
32. Learned counsel for the assessee contends that the assessment which the Income-tax Officer frames in terms of the directions of the Inspecting Assistant Commissioner under Section 144A preclude the provisions of Section 144B, even if such assessment contains additions to the tune of Rs. 1 lakh or more. According to him the law is clear that the direction of the Inspecting Assistant Commissioner under Section 144A is binding on him. That being the case, the assessment framed by him accordingly cannot be an assessment that he "proposes". Section 144B opens with the words "Notwithstanding anything contained in this Act, where in an assessment to be made under Sub-section (3) of Section 143, the Income-tax Officer proposes to make, any variation . . .". It is contended that Section 144B can be switched on only where the Income-tax Officer proposes to make any variation. But, under Section 144A, he does not propose to make any variation but effects variation in terms of the directions of the Inspecting Assistant Commissioner. According to learned counsel, the directions under Section 144A having binding force on him, the Income-tax Officer ceases to have his own will power or free play of mind. Therefore, it is beyond him to "propose" any additions. To buttress this line of argument, reliance was placed on the dictionary meaning of the word "propose". "Propose" means "intend" or "want". If the Income-tax Officer cannot propose while framing the assessment under Section 144A, he cannot invoke the provisions of Section 144B.
33. Though, on first blush, the argument seems to be very attractive, it does not stand scrutiny--true, the direction under Section 144A is binding on the Assessing Officer, still he does not become functus officio. He remains the de jure assessing authority for the purpose of Section 143(3), when he frames the assessment according to the directions under Section 144A. We do not take the narrow view that he is stripped of the power to "propose". The additions are still the outcome of exercise of his jurisdiction to assess which vests in him. If we accept the view of learned counsel that he loses all his power once the proceeding has come under the scope of Section 144A, that creates a discrepancy. Section 144A does not contemplate that the Inspecting Assistant Commissioner shall go the whole hog of completing the assessment. His directions may consist in the requirement of certain investigations to be made by the Income-tax Officer; The Explanation below Sub-section (1) of Section 144A in fact envisages Such contingency. The said Explanation reads :
"For the purposes of this sub-section, no direction as to the lines on which an investigation connected with the assessment should be made, shall be deemed to be a direction prejudicial to the assessee."
34. In such an event, the Income-tax Officer shall have to work on the lines of investigation directed. The outcome of the investigation and the conclusion drawn therefrom may give rise to a new situation for exercise of discretion by the Income-tax Officer. It, therefore, cannot be said that Section 144A intends to take away from the Income-tax Officer all power of discretion and decision making. The assessment that he will have in his mind on the basis Of the fresh materials relied upon by him will surely give rise to a situation where he proposes additions, in his own right. In such a contingency, the question of the Income-tax Officer proposing to make variations shall arise and it will certainly attract the provisions of Section 144B. Therefore, the contention on behalf of the assessee that Section 144A excludes the operation of Section 144B is not tenable. We cannot agree with the contention that prior operation of the provisions of Section 144A cancels the scope for the operation of Section 144B. If the assessment, made on the basis of directions under Section 144A are of the order of Rs. 1 lakh or more, resort to Section 144B can, by no means, be assailed as illegal. Rather such a course will be beneficial to the assessee inasmuch as it will give the assessee a further opportunity of contesting the additions. The interpretation of the beneficial provisions meant for protection of the assessee from an arbitrary and hasty assessment should be interpreted liberally so as to avail to the assessee the maximum benefit from such scheme of the law. The Income-tax Officer by sending the draft order under Section 144B to the assessee after incorporating directions of the Inspecting Assistant Commissioner has not violated the law.
35. In fact, the ultimate thrust of the assessee's argument is that the assessment is ineffective on account of being barred by limitation of time. This contention assumes that if a proceeding was initiated under section 144A, no proceeding can be initiated under Section 144B. There is no such prohibition envisaged in the statute. The resort to Section 144B on the facts and in the circumstances of this case cannot be said to be without jurisdiction and the consequential assessment order cannot be held to be barred by limitation. No illegalities result from the recourse taken to Section 144B by the Income-tax Officer for completing the assessment.
36. We, therefore, answer the fourth question in the affirmative and in favour of the Revenue and against the assessee.
37. There will be no order as to costs.
Shyamal Kumar Sen, J.
38. I agree.