Gujarat High Court
Commissioner Of Income-Tax vs Shree Digvijay Woollen Mills Ltd. on 1 December, 1993
Equivalent citations: [1995]212ITR310(GUJ)
Author: M.B. Shah
Bench: J.M. Panchal, M.B. Shah
JUDGMENT M.B. Shah, J.
1. The Income-tax Appellate Tribunal, Ahmedabad Bench, has referred the following question under section 256(1) of the Income-tax Act, 1961 ("the Act", for short), for our opinion :
"Whether, on the facts and in the circumstances of the case, the Tribunal was justified in annulling the assessment order dated 19th September, 1984, framed under section 143(3)/144B of the Act ?"
2. The aforesaid question arises in the background of the following facts :
The assessee-company - Shri Digvijay Woollen Mills Limited, Jamnagar - is engaged in the manufacture of woollen and woollen fabrics and is also doing job work for woollen tops for outside parties. For the assessment year 1981-82, the assessee-company filed its return of income on July 27, 1981. A provisional assessment order under section 141A of the Act was made on August 20, 1981. The Income-tax Officer, Central Circle, Jamnagar, who had jurisdiction over the assessee had served notices under sections 142(1) and 143(2) of the Act on the assessee on June 2, 1983, calling for certain information. On March 17, 1984, a draft assessment order under section 144B read with section 143(3) of the Act was forwarded by the Income-tax Officer to the assessee. After hearing the parties and considering the objections raised by the assessee, on September 18, 1984, the Inspecting Assistant Commissioner issued directions to the Income-tax Officer to pass an assessment order. On September 19, 1984, the Income-tax Officer passed the assessment order on the basis of the directions issued by the Inspecting Assistant Commissioner. He assessed the income of the assessee at Rs. 1,38,85,270.
3. Against that order, the assessee preferred an appeal before the Commissioner of Income-tax (Appeals) raising various contentions with regard to the allowability of certain deductions under sections 36 and 37 of the Act. After considering the contentions raised by the assessee, by his detailed order dated August 6, 1984, the Commissioner of Income-tax (Appeals), Rajkot, allowed the appeal partly and directed the Income-tax Officer to give effect to his order for grant of certain deductions. In the last paragraph of the order, the Commissioner of Income-tax has observed :
"On details of the facts of the case, it is seen that the Inspecting Assistant Commissioner under the proceedings under section 144B has directed to consider the claim of the assessee and allow as per the provisions of the law. It appears that the Income-tax Officer has not followed the instructions given in this respect."
4. Against that order, the assessee preferred an appeal before the Income tax Appellate Tribunal. At the time of hearing of the appeal, the assessee raised the following additional ground with a request that the same should be permitted to be added and entertained :
"The assessment made, vide order dated 19th September, 1984, being barred by limitation laid down under section 153(1)(a)(iii) be held to be void in view of the decision of the Special Bench of the Income tax Appellate Tribunal in Saraya Sugar Mills (P.) Ltd. v. ITO [1985] 23 ITJ (All) 196."
5. The Tribunal granted permission to raise the aforesaid contention on the ground that no additional material was required for deciding it and thereafter upheld the aforesaid contention raised by the assessee. For this purpose, the Tribunal took into consideration the order dated August 29, 1983, made under section 125A(1) of the Act by the Commissioner of Income-tax, Central Gujarat, whereby the Inspecting Assistant Commissioner, Central Range-II, Ahmedabad, was directed to perform concurrently all the functions of the Income-tax Officer conferred under the Income-tax Act, 1961, for the assessee and others. The Tribunal observed that from the letters dated November 19, 1983, November 24, 1983, December 5, 1983, and December 12, 1983, it appeared that the Inspecting Assistant Commissioner had issued directions to the Income-tax Officer to pass an assessment order. As the provisions of section 144B of the Act were not applicable in the instant case, the assessment order ought to have been made on or before March 31, 1984. The Tribunal after applying the principles laid down in the case of Suraya Sugar Mills (P.) Ltd. v. ITD [1985] 13 ITD 163 (All), decided by the Special Bench of the Income-tax Appellate Tribunal, by its order dated September 19, 1984, allowed the appeal filed by the assessee and annulled the assessment order made under section 143(3)/144B of the Act, by holding that it was time-barred. Against that order, the Revenue preferred reference application before the Tribunal and the Tribunal has referred the aforesaid question for our opinion.
6. At the time of hearing of this reference, Mr. Thakore, learned counsel appearing for the Revenue, submitted that :
(i) for the assessment year 1981-82, the assessee had filed return of income on July 27, 1981, and the Income-tax Officer passed the assessment order on September 19, 1984, which is within time because in the present case, the provisions of section 144B of the Act are applicable. For this purpose, he placed reliance on section 153 read with Explanation 1(iv) thereto;
(ii) the Inspecting Assistant Commissioner has not exercised the powers nor performed the functions of an Income-tax Officer of making an assessment order under section 143 of the Act. Mere issuance of direction or instruction or guidance would not mean that the Inspecting Assistant Commissioner has exercised the powers or performed the functions of an Income-tax Officer. The phrase "exercise of the powers and performance of the functions of an Income-tax Officer by the Inspecting Assistant Commissioner" has to be read in the light of the powers and the functions of an Income-tax Officer under the Income-tax Act;
(iii) the order under section 125A empowering the Inspecting Assistant Commissioner to exercise concurrent jurisdiction would mean that in a particular case if the Inspecting Assistant Commissioner chooses to exercise the powers of an Income-tax Officer, he can do so, but it would not mean that if he issues directions or instructions as provided under sub-section (2) or (3) of section 125A or section 144A or section 144B of the Act, it would be an exercise of concurrent jurisdiction. The word "concurrent" cannot be equated with the word "jointly", as contended by learned counsel for the assessee.
7. In the alternative, he submitted that the Tribunal has erred in law in annulling the assessment order because -
(a) under section 254 of the Act, the Tribunal has jurisdiction to pass an appropriate order if it thinks fit which would mean that on the facts and in the circumstances of the ease, the Tribunal ought to have directed the Inspecting Assistant Commissioner to pass an assessment order or ought to have directed the Income-tax Officer to pass an assessment order without obtaining approval or without making a reference to the Inspecting Assistant Commissioner under section 144B of the Act; or
(b) the Tribunal ought to have treated the draft assessment order made by the Income-tax Officer on March 17, 1984, as a final assessment order which is within time.
8. It is his contention that these are procedural provisions and they should be interpreted in such a manner that they serve the objects sought to be achieved and not in a hyper-technical manner which would defeat the purpose of recovery of tax.
9. As against this, learned counsel, Mr. Kazi, appearing for the assessee, submitted that :
(i) from the facts, the Tribunal has rightly arrived at the conclusion that the Inspecting Assistant Commissioner had exercised the powers and performed the functions of the Income-tax Officer and, therefore, the assessment order made on September 19, 1984, was beyond the limitation because Explanation 1(iv) to section 153 of the Act would not be applicable in view of section 144B(7) read with section 125A(4) of the Act;
(ii) the Tribunal has rightly held that the Inspecting Assistant Commissioner had exercised the concurrent jurisdiction conferred on him under section 125A of the Act because the Inspecting Assistant Commissioner had issued directions for excluding or including particular amounts in the computation of total income while approving the draft assessment order and, accordingly, approved the draft assessment order;
(iii) under section 125A(4) or 144B(7), it is not necessary or incumbent on the Inspecting Assistant Commissioner to perform managerial functions of an Income-tax Officer, but the Inspecting Assistant Commissioner can distribute the functions to be discharged between himself and the Income-tax Officer and the Income-tax Officer shall exercise such powers as the Inspecting Assistant Commissioner may direct. Once that is done, the provisions of sections 125A(4) and 144B(7) would be applicable;
(iv) "concurrent jurisdiction" by the Inspecting Assistant Commissioner and the Income-tax Officer over an assessee would mean that both will function "jointly" and finalise the assessment of a particular assessee; and
(v) that such an assessment order has to be held to be time barred and the Tribunal is required to annul the assessment proceedings and had no jurisdiction to treat the draft assessment order as a final assessment order or direct the Inspecting Assistant Commissioner or the Income-tax Officer to pass any fresh assessment order.
10. For appreciating the contentions raised by the parties and for deciding the controversy, it would be necessary to refer to certain provisions of the Income-tax Act, which confer the jurisdiction on the Inspecting Assistant Commissioner and the Income-tax Officer and also provide for powers and functions of the income-tax authorities under the Act. In Chapter XIII, under the caption "Income-tax authorities - A. Appointment and control", there are sections 116 to 119 which provide for appointment of income-tax authorities for the purposes of the Act. Section 116 specifies the following classes of income-tax authorities for the purposes of the Act, namely :
(a) the Central Board of Direct Taxes constituted under the Central Boards of Revenue Act, 1963 (54 of 1963),
(b) Directors of Inspection,
(c) Commissioners of Income-tax, Commissioners of Income-tax (Appeals) and Additional Commissioners of Income-tax,
(d) Assistant Commissioners of Income-tax who may be either Appellate Assistant Commissioners of Income-tax or Inspecting Assistant Commissioners of Income-tax,
(e) Income-tax Officers, and
(f) Inspectors of Income-tax.
11. Section 117 provides that the Central Government is the appointing authority in the matter of income-tax authorities mentioned above except Inspector of Income-tax. Sub-section (2) of section 117 provides that the Commissioner of Income-tax may appoint as many Income-tax Officers of Class II Service and as many Inspectors of Income-tax as may be sanctioned by the Central Government. Section 118 provides for hierarchy of control of income-tax authorities. Section 119 empowers the Central Board of Direct Taxes to issue orders, instructions and directions to other income-tax authorities as it may deem fit for the proper administration of the Act with the specific provision that no such orders, instructions or directions shall be issued so as to require any income-tax authority to make a particular assessment or to dispose of a particular case in a particular manner or to interfere with the discretion of the Appellate Assistant Commissioner or the Commissioner (Appeals) in the exercise of his appellate functions. Thereafter, there are provisions which confer jurisdiction on the income-tax authorities. Sections 120, 121, 121A and 122 provide for jurisdiction of Directors of Inspection, Commissioners, Commissioners (Appeals) and Appellate Commissioners, respectively. In the present case, we are not concerned with the said sections. The material provisions for our purposes are sections 123, 124, 125 and 125A. They are as under :
"123. Jurisdiction of Inspecting Assistant Commissioners - (1) The Inspecting Assistant Commissioners shall perform their functions in respect of such areas or of such persons or classes of persons or of such incomes or classes of income or of such cases or classes of cases as the Commissioner may direct.
(2) Where any directions issued under sub-section (1) have assigned to two or more Inspecting Assistant Commissioners, the same area or the same persons or classes of persons or the same incomes or classes of income or the same cases or classes of cases, they shall have concurrent jurisdiction and shall perform such functions in relation to the said area or persons or classes of persons or incomes or classes of income or cases or classes of cases as the Commissioner may, by general or special order in writing, specify, for the distribution and allocation of the work to be performed.
124. Jurisdiction of Income-tax Officers. - (1) Income-tax Officers shall perform their functions in respect of such areas or of such persons or classes of persons or of such incomes or classes of income or of such cases or classes of cases as the Commissioner may direct.
(2) Where any directions issued under sub-section (1) have assigned to two or more Income-tax Officers, the same area or the same persons or classes of persons or the same incomes or classes of income or the same cases or classes of cases, they shall have concurrent jurisdiction and shall perform their functions in relation to the said area, or persons or classes of persons, or incomes or classes of income, or cases or classes of cases, in accordance with such general or special orders in writing as the Commissioner or the Inspecting Assistant Commissioner authorised by the Commissioner in this behalf may make for the purpose of facilitating the performance of such functions.
(3) Within the limits of the area assigned to him, the Income-tax Officer shall have jurisdiction -
(a) in respect of any person carrying on a business or profession, if the place at which he carries on his business or profession is situate within the area, or where his business or profession is carried on in more places than one, if the principal place of his business or profession is situate within the area, and
(b) in respect of any other person residing within the area.
(4) Where a question arises under this section as to whether an Income-tax Officer has jurisdiction to assess any person, the question shall be determined by the Commissioner; or where the question is one relating to areas within the jurisdiction of different Commissioners, by the Commissioners concerned or, if they are not in agreement, by the Board.
(5) No person shall be entitled to call in question the jurisdiction of an Income-tax Officer -
(a) after the expiry of one month from the date on which he has made a return under sub-section (1) of section 139 or after the completion of the assessment, whichever is earlier :-
(b) where he has made no such return, after the expiry of the time allowed by the notice under sub-section (2) of section 139 or under section 148 for the making of the return.
(6) Subject to the provisions of sub-section (5), where an assessee calls in question the jurisdiction of an Income-tax Officer, then the Income- tax Officer shall, if not satisfied with the correctness of the claim, refer the matter for determination under sub-section (4) before assessment is made.
(7) Notwithstanding anything contained in this section or in section 130A, every Income-tax Officer shall have all the powers conferred by or under this Act on an Income-tax Officer in respect of any income accruing or arising or received within the area for which he is appointed.
125. Powers of Commissioner respecting specified areas, cases, persons, etc. - (1) The Commissioner may, by general or special order in writing, direct that -
(a) the powers conferred on the Income-tax Officer, by or under this Act shall, in respect of any specified case or class of cases or of any specified person or class of persons, be exercised by the Inspecting Assistant Commissioner. . . . ;
(2) For the purposes of any case or person or proceeding under this Act in respect of which or whom an order under sub-section (1) applies, -
(a) where such order is made under clause (a) of the said sub-section (1), references in this Act or in any rule made thereunder to the Income-tax Officer shall be deemed to be references to the Inspecting Assistant Commissioner and any provision of this Act requiring approval or sanction of the Inspecting Assistant Commissioner shall not apply;
(b) where such order is made under clause (b) of the said sub-section (1), references in this Act or in any rule made hereunder to the Income-tax Officer shall be deemed to include references to the Inspector of Income-tax or the member of the ministerial staff specified in such order.
125A. Concurrent jurisdiction of Inspecting Assistant Commissioner and Income-tax Officer. - (1) The Commissioner may, by general or special order in writing, direct that all or any of the powers or functions conferred on, or assigned to, the Income-tax Officer or Income-tax Officers by or under this Act in respect of any area, or persons or classes of persons, or incomes or classes of income, or cases or classes of cases, shall be exercised or performed concurrently by the Inspecting Assistant Commissioner.
(2) Where under sub-section (1), an Inspecting Assistant Commissioner exercises concurrent jurisdiction with one or more Income-tax Officers in respect of any area, or persons or classes of persons, or incomes or classes of income, or cases or classes of cases, the Income-tax Officer or Income-tax Officers shall exercise the powers and perform the functions under this Act in relation-thereto as the Inspecting Assistant Commissioner may direct.
(3) Without prejudice to the generality of the provisions contained in sub-section (3) of section 119, every Income-tax Officer shall also observe and follow such instructions as may be issued to him for his guidance by the Inspecting Assistant Commissioner within whose jurisdiction he performs his functions in relation to any particular proceeding or the initiation of any proceeding under this Act :
Provided that no instructions, which are prejudicial to the assessee, shall be issued before an opportunity is given to the assessee to be heard.
Explanation. - For the purposes of this sub-section, no instruction as to the lines on which an investigation connected with the assessment should be made shall be deemed to be an instruction prejudicial to the assessee.
(4) Where an order is made under sub-section (1) and the Inspecting Assistant Commissioner exercises the powers or performs the functions of an Income-tax Officer in relation to and area, or persons or classes of persons, or incomes or classes of income, or cases or classes of cases, references in this Act or in any rule made thereunder to the Income-tax Officer shall be construed as references to the Inspecting Assistant Commissioner and any provision of this Act requiring approval or sanction of the Inspecting Assistant Commissioner shall not apply."
12. From the aforesaid sections, it is apparent :
(i) Under section 123 of the Act, the Inspecting Assistant Commissioners have jurisdiction in respect of such areas or of such persons or classes of persons or of such incomes or classes of income or of such cases or classes of cases as per the direction of the Commissioner. Where there are two or more Inspecting Assistant Commissioners, they are having concurrent jurisdiction and are required to exercise their powers and perform their functions as per the order in writing made by the Commissioner specifying for the distribution and allocation of the work to be performed.
(ii) Similarly, under section 124(1), the Income-tax Officers are also required to perform their functions as per the direction of the Commissioner. If there are two or more Income-tax Officers, they are having concurrent jurisdiction and are required to perform their functions as per the general or special orders in writing made by the Commissioner or Inspecting Assistant Commissioner authorised by the Commissioner in this behalf. Sub-section (3) provides that within the limits of the area assigned to him, the Income-tax Officer shall have jurisdiction in respect of any person carrying on business or profession, if the place at which he carries on his business or profession is situate within the area, or where his business or profession is carried on in more places than one, if the principal place of his business or profession is situate within the area and in respect of any other person residing within the area. Sub-section (4) provides as to who shall decide the dispute arising with regard to the jurisdiction of an Income-tax Officer to assess any person. Sub-section (5) provides that no person shall be entitled to call in question the jurisdiction of an Income-tax Officer beyond the time-limit prescribed therein;
(iii) In section 125, an exception is carved out with regard to the jurisdiction of an Income-tax Officer which provides that the Commissioner may by general or special order in writing direct that the powers conferred on the Income-tax Officer by or under the Act shall, in respect of any specified case or class of cases or of any specified person or class of persons, be exercised by the Inspecting Assistant Commissioner. By an order of the Commissioner under section 125(1)(a), the Income-tax Officer is divested of his jurisdiction to deal with the specified case or class of cases or specified person or persons. Hence, even though the Income-tax Officer is having jurisdiction in respect of any specified case or person, the Commissioner is empowered to direct that the said powers shall be exercised by the Inspecting Assistant Commissioner. Where such order is made under section 125(2)(a), any provision of the Act requiring approval or sanction of the Inspecting Assistant Commissioner will not be applicable.
(iv) Section 125A carves out further exception with regard to the jurisdiction of an Income-tax Officer. It does not oust the jurisdiction of Assistant Officer but confers concurrent jurisdiction on the Inspecting Assistant Commissioner. It provides that the Commissioner may, be general or special order in writing, direct that all or any of the powers of functions conferred on, or assigned to, the Income-tax Officer or Income-tax Officers by or under this Act in respect of any are, or persons of classes of persons, or incomes or classes of income, or cases or classes of cases, shall be exercised or performed concurrently by the Inspecting Assistant Commissioner. Sub-section (2) of section 125A also empowers the Inspecting Assistant Commissioner to issue direction to the Income-tax Officer and the Income-tax Officer is required to exercise his powers and perform his functions under the Act as per the said direction. Sub-section (3) thereto clarifies that the Income-tax Officer is also required to observe and follow such instructions as maybe issued to him for his guidance by the Inspecting Assistant Commissioner within whose jurisdiction he performs his functions in relation to any particular proceedings or the initiation of any proceeding under the Act. The proviso clarifies that no instructions which are prejudicial to the assessee shall be issued before an opportunity is given to the assessee to be heard.
13. For the purposes of this reference, the material provision which requires consideration is sub-section (4) at section 125A. It provides that where -
(a) an order is made under sub-section (1), and
(b) the Inspecting Assistant Commissioner exercises the powers or performs the functions of an Income-tax Officer in relation to any area, or persons or classes of persons, or incomes or classes of income, or cases or classes of cases, -
(i) references in this Act or in any rule made thereunder to the Income-tax Officer shall be construed as references to the Inspecting Assistant Commissioner, and
(ii) any provision of this Act requiring approval or sanction of the Inspecting Assistant Commissioner will not be applicable.
14. Hence, the provision of the Act requiring the approval or sanction of the Inspecting Assistant Commissioner will not be applicable only in those cases where both the aforementioned conditions (a) and (b) are satisfied. It would mean that, even though an order is made under section 125A(1) empowering the Inspecting Assistant Commissioner to perform the functions of an Income-tax Officer, yet if he has not exercised the power or performed the function of an Income-tax Officer, the provisions requiring approval or sanction of the Inspecting Assistant Commissioner will be applicable. Sub-section (4) nowhere provides that, if some directions by the Inspecting Assistant Commissioner are issued as provided under sub-section (2), then provisions requiring approval or sanction of the Inspecting Assistant Commissioner will not be applicable.
15. Apart from the aforesaid provisions, section 126 provides that the Board may empower Commissioners, Appellate Assistant Commissioners, Inspecting Assistant Commissioners and the Income-tax Officers to perform such functions in respect of such area or of such classes of persons or of such classes of income as may be specified in the notification and if such notification is published, the functions so specified shall cease to be performed in respect of the area or classes of persons or classes of income by the other authorities under section 121, 122, 123 or 124. Section 127 empowers the Commissioner to transfer any case from any Income-tax Officer to another Income-tax Officer or to an Income-tax Officer having concurrent Jurisdiction with the Inspecting Assistant Commissioner. Similarly, the Board is empowered to transfer any case from any Income-tax Officer to another Income-tax Officer or to Income-tax Officer having concurrent jurisdiction with the Inspecting Assistant Commissioner. It is made clear in this section that the Commissioner is empowered to transfer a case from the Income-tax Officer having concurrent jurisdiction with the Inspecting Assistant Commissioner to any other Income-tax Officer having no concurrent jurisdiction with the Inspecting Assistant Commissioner. Similarly, the Board is also entitled to transfer case from the Income-tax Officer having concurrent jurisdiction with the Inspecting Assistant Commissioner to any other Income-tax Officer having no concurrent jurisdiction with the Inspecting Assistant Commissioner. Further, when the case is transferred from any Income-tax Officer to two or more Income-tax Officers having concurrent jurisdiction with the Inspecting Assistant Commissioner, the officers including the Inspecting Assistant Commissioner to whom the case is so transferred shall have concurrent jurisdiction over such case and they are required to perform their functions in accordance with the general or special orders in writing made by the superior authority. The Income-tax Officers are also required to perform their functions in accordance with the orders or directions of the Inspecting Assistant Commissioner as provided under sub-section (2) of section 124 or under section 125A, as the case may be. This would be clear from clause (b) of the second proviso to section 127 which reads as under :
"(b) where any case has been transferred from any Income-tax Officer or Income-tax Officers (whether with or without concurrent jurisdiction with the Inspecting Assistant Commissioner) to two or more Income-tax Officers with concurrent jurisdiction with the Inspecting Assistant Commissioner, the officers (including the Inspecting Assistant Commissioner) to whom the case is so transferred shall have concurrent jurisdiction over such case and shall perform their functions in accordance with such general or special orders in writing as the Board or the Commissioner may make for the purpose of facilitating the performance of such functions, and the Income-tax Officers shall perform their functions also in accordance with such orders or directions as the Inspecting Assistant Commissioner may make under sub-section (2) of section 124 or, as the case may be, under sub-section (2) of section 125A.
16. This would indicate that, even when concurrent jurisdiction is conferred by section 125A to the Inspecting Assistant Commissioner, it is not required that he should perform the functions of an Income-tax Officer and he may issue only necessary directions as provided under section 125A(2) of the Act.
17. The other material provision which may assist us in interpreting the scope of section 125A is section 130A. It reads as under :
"130A. Income-tax Officer competent to perform any function or functions. - In respect of any function to be performed by an Income-tax Officer under any provision of this Act in relation to an assessee, the Income-tax Officer referred to therein shall, -
(a) in a case where only one Income-tax Officer has jurisdiction over such assessee, be such Income-tax Officer;
(b) in a case where two or more Income-tax Officer have concurrent jurisdiction over such assessee, be the Income-tax Officer empowered to perform such function by the Board or, as the case may be, the Income-tax Officer to whom such function has been assigned by an order of the Commissioner or of the Inspecting Assistant Commissioner authorised by the Commissioner in this behalf;
(c) in case, where two or more Income-tax Officers have concurrent jurisdiction over such assessee in relation to any function, be the Income-tax Officers empowered to perform such function by the Board or, as the case may be, the Income-tax Officers to whom such functions has been assigned by an order of the Commissioner or by an order or a direction of the Inspecting Assistant Commissioner under sub-section (2) of section 124 or, as the case may be, under sub-section (2) of section 125A."
18. As per clause (a) of section 130A, with regard to an assessee where only one Income-tax Officer has jurisdiction over such assessee, he is empowered to perform all the functions under the Act. As per clause (b) where two or more Income-tax Officers have concurrent jurisdiction, they are required to perform such functions as per the direction of the Board or the Income-tax Officer to whom such function has been assigned by an order of the Commissioner or of the Inspecting Assistant Commissioner authorised by the Commissioner in this behalf. Clause (c) clarifies the situation that, where an Income-tax Officer is exercising concurrent jurisdiction, he is required to exercise it as per the order or direction of the Inspecting Assistant Commissioner under sub-section (2) of section 124 or, as the case may be, under sub-section (2) of section 125A. This also indicates that, even though an order under section 125A(1) is passed, yet the Inspecting Assistant Commissioner may not exercise the powers and perform the functions of the Income-tax Officer but he can issue directions as he deems fit under sub-section (2) of section 125A.
19. There are other provisions under the caption "Powers" starting from sections 131 to 136. They provide for various powers of the Income-tax authorities. However, for deciding the present controversy, it is not necessary to discuss them. Thereafter, Chapter XIV provides procedure for assessment. For the present case, it would be necessary to refer to sections 144A and 144B. They are as under :
"144A. Power of Inspecting Assistant Commissioner to issue directions in certain cases. - (1) An Inspecting Assistant Commissioner may, on his own motion or on a reference being made to him by the Income-tax Officer or on the application of an assessee, call for and examine the record of any proceeding in which an assessment is pending and, if he considers that, having regard to the nature of the case or the amount involved or for any other reason, it is necessary or expedient so to do, he may issue such directions as he thinks fit for the guidance of the Income-tax Officer to enable him to complete the assessment and such directions shall be binding on the Income-tax Officer :
Provided that no directions which are prejudicial to the assessee shall be issued before an opportunity is given to the assessee to be heard.
Explanation. - 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.
(2) The provisions of this section shall be in addition to, and not in derogation of, the provisions contained in sub-section (3) of section 119."
144B. Reference to Inspecting Assistant Commissioner in certain cases. - (1) 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, before the 1st day of October, 1984, any variation in the income or loss returned which is prejudicial to the assessee and the amount of such variation exceeds the amount fixed by the Board under sub-section (6), the Income-tax Officer shall, in the first instance, forward a draft of the proposed order of assessment (hereafter in this section referred to as the draft order) to the assessee.
(2) On receipt of the draft order, the assessee may forward his objections, if any, to such variation to the Income-tax Officer within seven days of the receipt by him of the draft order or within such further period not exceeding fifteen days as the Income-tax Officer may allow on an. application made to him in this behalf.
(3) If no objections are received within the period or the extended period aforesaid, or the assessee intimates to the income-tax Officer, the acceptance of the variation, the Income-tax Officer shall complete the assessment : on the basis of the draft order.
(4) If any objections are received, the Income-tax Officer shall forward the draft order together with the objections to the Inspecting Assistant Commissioner and the Inspecting Assistant Commissioner shall, after considering the draft order and the objections and after going through (wherever necessary) the records relating to the draft order, issue, in respect of the matters covered by the objections, such directions as he thinks fit for the guidance of the Income-tax Officer to enable him to complete the assessment :
Provided that no directions which are prejudicial to the assessee shall be issued under this sub-section before an opportunity is given to the assessee to be heard.
(5) Every direction issued by the Inspecting Assistant Commissioner under sub-section (4) shall be binding on the Income-tax Officer.
(6) For the purposes of sub-section (1), the Board may, having regard to the proper and efficient management of the work of assessment, by order, fix, from time to time, such amount as it deems fit Provided that different amounts may be fixed for different areas :
Provided further that the amount fixed under this sub-section shall, in no case, be less than twenty-five thousand rupees.
(7) 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."
20. By referring to section 144A, it is clear that the Inspecting Assistant Commissioner is empowered to issue directions as he thinks fit for the guidance of an Income-tax Officer to enable him to complete the assessment on the basis of a reference being made to him by the Income-tax Officer and/or on the basis of an application of the assessee or on his own motion. The directions can be issued by the Inspecting Assistant Commissioner by taking into consideration the nature of the case or the amount involved or for any other reason. The directions re required to be issued so as to enable the Income-tax Officer to complete the assessment and the directions are binding on the Income-tax Officer. It is also provided that, no directions, which are prejudicial to the assessee, shall be issued without giving an opportunity of being heard. Sub-section (2) of section 144A makes it clear that the directions would be in addition to, and not in derogation of, the directions which are issued under sub-section (3) of section 119. These powers of the Inspecting Assistant Commissioner are similar to the powers conferred on him under section 125A(2) and (3). Section 144B provides that, where in an assessment the Income-tax Officer proposes to make any variation in the income or loss returned and the amount of such variation exceeds the amount fixed by the Board, he is required to prepare draft assessment order and to forward it to the assessee. On receipt of the draft assessment order, the assessee is entitled to forward his objections. If objections are received, the Income-tax Officer is required to forward the draft assessment order together with objections to the Inspecting Assistant Commissioner. The Inspecting Assistant Commissioner is required to consider the draft assessment order and the objections and is entitled to issue such directions as he thinks fit for the guidance of the Income-tax Officer to enable him to complete the assessment. It also provides for giving an opportunity of hearing to the assessee if such directions are prejudicial to him. The directions issued by the Inspecting Assistant Commissioner are binding on the Income-tax Officer. Sub-section (7) provides that nothing provided in section 144B shall apply to a case where an Inspecting Assistant Commissioner exercises the powers and performs the functions of an Income-tax Officer. The requirement of sub-section (7) is that the procedure which is required to be followed under section 144B, will not be required to be followed by the Inspecting Assistant Commissioner if he exercises the powers or performs the functions of an Income-tax Officer. This sub-section clarifies only what is obvious. That is, in a case where the Inspecting Assistant Commissioner exercises the powers or performs the functions of an Income-tax Officer on the basis of an order under section 125 or 125A, there is no question of preparing a draft assessment order by the Income-tax Officer and that the Inspecting Assistant Commissioner also would not be required to prepare a draft assessment order and is not required to follow the procedure of inviting objections from the assessee.
21. The other provision which requires consideration is section 153 which provides a time-limit for completion of assessments and reassessments. The relevant portion is as under :
"153. Time-limit for completion of assessments and reassessments. - (1) No order of assessment shall be made under section 143 or section 144 at any time after -
(a) the expiry of - ...
(iii) two years from the end of the assessment year in which the income was first assessable, where such assessment year is an assessment year commencing on or after the 1st day of April, 1969; or....
whichever is latest. . . .
(3) The provisions of sub-sections (1) and (2) shall not apply to the following classes of assessments, reassessments and recomputations which may, subject to the provisions of sub-section (2A), be completed at any time -
(ii) where the assessment, reassessment or recomputation is : made on the assessee or any person in consequence of or to give effect to any finding or direction contained in an order under section 250, 254, 260, 262, 263 or 264 or in an order of any court in a proceeding otherwise than by way of appeal or reference under this Act;...
Explanation 1. - In computing the period of limitation for the purposes of this section - . . .
(iv) the period (not exceeding one hundred and eighty days) commencing from the date on which the Income-tax Officer forwards the draft order under sub-section (1) of section 144B to the assessee and ending with the date on which the Income-tax Officer receives the directions from the Inspecting Assistant Commissioner under sub-section (4) of that section, or, in a case where no objections to the draft order are received from the assessee, a period of thirty days, or (iva) the period (not exceeding sixty days) commencing from the date on which the Income-tax Officer received the declaration under sub-section (1) of section 158A and ending with the date on which the order under sub-section (3) of that section is made by him, or. . . .
shall be excluded. . . ."
22. Admittedly, in the present case, the Income-tax Officer has followed the procedure prescribed under section 144B. The draft assessment order was prepared by him on March 17, 1984. It was forwarded to the assessee. The assessee had submitted its objections. Thereafter, the Inspecting Assistant Commissioner had given an opportunity of hearing to the assessee and learned advocates, Messrs. K. C. Patel and G. K. Sureka had made their submissions before the Inspecting Assistant Commissioner. After taking into consideration the submissions made by the learned advocates for the assessee, the Inspecting Assistant Commissioner had issued necessary directions under section 144B of the Act to the Income-tax Officer. On the basis of the said directions, the Income-tax Officer had passed an assessment order on September 19, 1984. Further, it is not disputed that, if it is held that the Income-tax Officer was required to follow the procedure prescribed under section 144B, then the order is within time in view of Explanation 1 to section 153. The Inspecting Assistant Commissioner has specifically stated that he has exercised his powers under section 144B of the Act. When this is the position, the court, by a process of interpretation, cannot say that in fact powers have been exercised by the Inspecting Assistant Commissioner under section 125A and not under section 144B of the Act. Even the assessee and its counsel all throughout considered that the Inspecting Assistant Commissioner was exercising the powers and performing the functions under section 144B.
23. However, the contention of the assessee is that the Income-tax Officer was not required to follow the procedure prescribed under section 144B of preparing a draft assessment order and forwarding it along with the objections to the Inspecting Assistant Commissioner for his direction because of sub-section (7) of section 144B. It is contended that in the present case, the Inspecting Assistant Commissioner issued directions to the Income-tax Officer with regard to the disputed questions and, therefore, he has exercised the powers or has performed the functions of the Income-tax Officer on the basis of an order passed under section 125A and, therefore, the procedure prescribed under section 144B was not required to be followed. It is the contention of learned counsel, Mr. Kaji, for the assessee that the passing of an order by the Income-tax Officer is of no consequence for interpreting sub-section (7) of section 144B or sub-section (4) of section 125A. It is also contended that the Tribunal has given a finding of fact on the basis of the evidence on record that the Inspecting Assistant Commissioner has exercised the powers and discharged the functions of the Income-tax Officer and there is no challenge to the said finding. Hence, this court should decide the question referred to it by holding that the Inspecting Assistant Commissioner has exercised the powers and discharged the functions of the Income-tax Officer. It is his further contention that the finding of the Tribunal is based upon the various instructions and directions issued by the Inspecting Assistant Commissioner for including or excluding a particular amount in the computation of the total income and of approving the draft assessment order.
24. In our view, it would be difficult for us to accept the contention raised by learned counsel, Mr. Kaji, for the assessee. Sub-section (7) of section 144B specifically provides that the provisions of section 144B shall not be applicable to a case where an Inspecting Assistant Commissioner exercises the powers or performs the functions of an Income-tax Officer. The phrase "Inspecting Assistant Commissioner exercises the powers or performs the functions of an Income-tax Officer" would mean that the Inspecting Assistant Commissioner performs the functions as provided under section 130A, has also exercises his powers which are enumerated in section 131 to 136 and thereafter makes an assessment order as provided under section 143. Apart from other powers and functions, the jurisdiction or function of the Income-tax Officer is of assessing a particular assessee, that is to say, to make an order of assessment or reassessment. Unless that jurisdiction or function of the Income-tax Officer of making an assessment order by following the prescribed procedure is exercised by the Inspecting Assistant Commissioner, it cannot be said that the Inspecting Assistant Commissioner has exercised the powers or performed the functions of the Income-tax Officer. It is also established law that "assessment" is one integrated process involving not only assessment of total income but also the determination of tax. Admittedly, it is not done by the Inspecting Assistant Commissioner.
25. This would be further clear from the fact that, when an order under section 125A(1) is made conferring exclusive jurisdiction on the Inspecting Assistant Commissioner, then the Inspecting Assistant Commissioner is required to perform all functions of an Income-tax Officer and in that including the passing of an assessment order. Therefore, in the context of section 125A, it would be apparent that the phrase "Inspecting Assistant Commissioner exercises the powers or performs the functions of an Income-tax Officer" would only mean that he is required to pass an assessment order and is also required to perform all other functions of an Income-tax Officer with regard to a particular assessee or class of assessees. Therefore, in the context of section 125A, the said phrase is required to be given the same meaning and mere issuance of a direction or guidance under section 125A(2) would not be sufficient for coming to the conclusion that the Inspecting Assistant Commissioner has exercised the powers or performed the functions of the Income-tax Officer. Issuance of directions under section 125A(2) would be statutory exercise of his powers by the Inspecting Assistant Commissioner.
26. Further, a plain reading of sub-section (4) of section 125A indicates that the provisions of the Act requiring approval or sanction of the Inspecting Assistant Commissioner shall not apply in those cases where (i) an order is made under sub-section (1) conferring concurrent jurisdiction on the Inspecting Assistant Commissioner, and (ii) the Inspecting Assistant Commissioner has exercised the powers or performed the functions of the Income-tax Officer in relation to any area or persons or classes of persons or incomes or classes of income or cases or classes of cases. Hence, the mere passing of an order under section 125A(1) would not be sufficient for holding that the provision of the Act requiring approval or sanction of the Inspecting Assistant Commissioner is dispensed with. The second condition is also required to be satisfied, i.e., the Inspecting Assistant Commissioner has exercised the powers and performed the functions of the Income-tax Officer. The Legislature has not provided that, once an order under sub-section (1) of section 125A is issued conferring concurrent jurisdiction and the Inspecting Assistant Commissioner has given directions as provided under sub-section (2), the provision of the Act requiring approval or sanction of the Inspecting Assistant Commissioner will not be applicable and the references in the Act or in any rules to the Income-tax Officer should be considered as reference to the Inspecting Assistant Commissioner. The material requirement is that he should have exercised the functions of the Income-tax Officer. In the present case, there is nothing on record to suggest that the Inspecting Assistant Commissioner has consciously or otherwise exercised the powers and performed the functions of the Income-tax Officer. As stated earlier, he has exercised his powers of issuing directions. The Inspecting Assistant Commissioner has jurisdiction to issue directions either under sections 119(3), 125A(2), 144A or 144B, as the case may be.
27. Further, looking to the phraseology used in sub-section (7) of section 144B and sub-section (4) of section 125A, it is clear that the Legislature intended to cover only those cases where all powers and functions of an Income-tax Officer are exercised by the Inspecting Assistant Commissioner, otherwise in both the sections it would have been sufficient to only mention that nothing in this section shall apply to a case where an order is passed under section 125 or under section 125A, and the relevant phrase "Inspecting Assistant Commissioner exercises the powers or performs the functions of an Income-tax Officer" used in sub-section (4) of section 125A or sub-section (7) of section 144B would be redundant.
28. Learned counsel, Mr. Kaji, for the assessee, submitted that the Legislature was conscious of the fact that the powers and functions of an Income-tax Officer can be exercised by the Inspecting Assistant Commissioner without passing an order and; therefore, under section 144B(7), the Legislature has consciously not added the words "assessment order". For this purpose, he referred to section 246(2)(b), (d) and (f) of the Act. Section 246 provides for appeals against the orders mentioned in clauses (a) to (o). Sub-section (1) of section 246 provides that subject to the provisions of sub-section (2), any assessee aggrieved by any of the orders of an Income- tax Officer mentioned therein may appeal to the Appellate Assistant Commissioner against such order. Sub-section (2) provides that notwithstanding anything contained in sub-section (1), any assessee aggrieved by any of the orders mentioned in clauses (a) to (i) may appeal to the Commissioner (Appeals) against such order. The relevant clauses of sub-section (2) of section 246 are as under :
"(b) an order specified in clauses (c) to (o) (both inclusive) of sub-section (1) where such order is made by the Inspecting Assistant Commissioner in exercise of the powers or functions conferred on or assigned to him under section 125 or section 125A;
(d) an order of assessment made after the 30th day of September, 1984, on the basis of directions issued by the Inspecting Assistant Commissioner under section 144A;
(f) an order of assessment under sub-section (3) of section 143 or section 144 made on the basis of directions issued by the Inspecting Assistant Commissioner under section 144B."
29. From the aforesaid clauses (b), (d) and (f), it is apparent that the Legislature has contemplated two categories of orders - (1) where the orders are passed by the Inspecting Assistant Commissioner and (2) where the orders are made by the Income-tax Officer on the basis of issuance of directions of the Inspecting Assistant Commissioner under section 144A or 144B. This also would indicate that the phrase "Inspecting Assistant Commissioner has exercised the powers or performed the functions of the Income-tax Officer" would mean exercising of all the powers of the Income- tax Officer including making of a final assessment order. In our view, clause (b) provides that, if an assessment order is made by the Inspecting Assistant Commissioner in exercise of the powers or functions conferred on or assigned to him under section 125 or section 125A, the appeal would lie before the Commissioner (Appeals). As stated earlier, once powers under section 125 are conferred on an inspecting Assistant Commissioner, the Inspecting Assistant Commissioner is required to exercise the powers and perform the functions of an Income-tax Officer and is required to pass a final assessment order. The same meaning is required to be given to the phrase used in clause (b) of sub-section (2) of section 246. The Legislature has not enacted any separate provision that when an Inspecting Assistant Commissioner has issued directions under section 125A(2) of the Act, the appeal would not lie before the Appellate Assistant Commissioner but would lie before the Commissioner (Appeals). Clause (d) specifically provides that against the order passed on the basis of directions issued by the Inspecting Assistant Commissioner under section 144A, the appeal would lie to the Commissioner (Appeals). In clause (f), similar provision is made in those cases where an assessment order is made on the basis of directions issued by the Inspecting Assistant Commissioner under section 144B. Thus, the appeal would lie before the Commissioner (Appeals) only in those cases where the assessment order is made by the Inspecting Assistant Commissioner in exercise of the powers and performance of the functions of an Income-tax Officer under section 125A. Hence, what is contemplated under sections 125A(4) and 144B(7) is passing of an assessment order by the Inspecting Assistant Commissioner and not mere issuance of directions for the guidance of an Income-tax Officer under sub-section (2) of section 125A.
30. It was further contended by Mr. Kaji, learned counsel for the assessee, that the words "concurrent exercise of jurisdiction by the Inspecting Assistant Commissioner" used in section 125A would mean that the Inspecting Assistant Commissioner is entitled to exercise his jurisdiction jointly with the Income-tax Officer and where an order under section 125A is issued by the Commissioner, the powers of an Income-tax Officer are to be exercised jointly by the Inspecting Assistant Commissioner. He, therefore, submitted that the word "concurrently" would mean "jointly". In our view, this contention requires to be rejected, because, in no set of circumstances; the concurrent jurisdiction would mean that both the authorities are required to exercise the jurisdiction simultaneously or jointly. Normally, when concurrent jurisdiction is conferred, it would mean that each of the authorities mentioned in the provision would have jurisdiction to deal with the same subject-matter, that is to say, the jurisdiction of one authority would be co-extensive with that of the other authority. Normally, in the case of concurrent jurisdiction, when one authority has taken cognizance of the matter, then the other authority would not take cognizance of the said subject-matter. Apart from the general principles, under section 125A, there is a specific provision to that effect. Sub-section (2) empowers the Inspecting Assistant Commissioner to issue necessary directions to the Income-tax Officer which would include a direction not to proceed with the matter of which the Inspecting Assistant Commissioner has taken cognizance. If the contention of learned counsel for the assessee is accepted, it may result in absurdity and, in some cases, the assessee will be put to double jeopardy. Further, it would be against the scheme of sections 123, 124, 125A, 127 and 130A. All these sections contemplate concurrent jurisdiction of the Inspecting Assistant Commissioners, Income-tax Officers, or Income-tax Officer and Inspecting Assistant Commissioner. In all these sections, it is provided that these authorities are required to exercise their jurisdiction in accordance with general or special orders in writing by the Commissioner or by the Inspecting Assistant Commissioner authorised by the Commissioner of Income-tax. Under section 124, where two Income-tax Officers are having concurrent jurisdiction as provided under the Act, then both cannot pass an assessment order with regard to the particular assessee and the division of the work would be as per the direction of the Commissioner or of the Inspecting Assistant Commissioner. Similarly, in a case where the Income-tax Officer and the Inspecting Assistant Commissioner are having concurrent jurisdiction, the Inspecting Assistant Commissioner is not required to exercise the powers or perform the functions of the Income-tax Officer with regard to the same assessee jointly. An order under section 125A confers discretionary jurisdiction. It. is not incumbent upon the Inspecting Assistant Commissioner in all cases to exercise the powers of an Income-tax Officer. Considering the facts, he may only issue directions or exercise all powers and perform the functions of an Income-tax Officer. If he decides to exercise the powers and perform the functions of an Income-tax Officer, then he can issue directions to the Income-tax Officer to that effect and the Income-tax Officer would be bound to follow the said directions. In that case, the Income-tax Officer would not exercise the powers and perform the functions with regard to the particular assessee or class of assessees.
31. Further, sections 125A and 144B are procedural sections. By the said sections, no tax is levied nor any charge is imposed on the assessee. The said sections deal with the machinery of assessment and in interpreting a provision of this kind, the rule is that that construction should be preferred which makes the machinery workable. The interpretation which makes the machinery unworkable should as far as possible be avoided. Therefore, if the contention of learned counsel for the assessee is accepted, it would mean that, once an order under section 125A is passed, the Inspecting Assistant Commissioner is required to exercise the jurisdiction jointly with the Income-tax Officer. As discussed above, this type of joint exercise of powers is not contemplated by the scheme nor would it be a workable one. Similarly, section 144B merely provides additional procedure of issuance of a draft assessment order, of inviting objections to the said order, and, if the objections are received, of referring the said draft assessment order along with the objections to the Inspecting Assistant Commissioner for guidance and directions in respect of the matters covered by the objections so as to enable the Income-tax Officer to complete the assessment. The procedure is evolved for the benefit of the assessee in a case where the Income-tax Officer proposes to make any variation in the income or loss returned which is prejudicial to the assessee and the amount of such variation exceeds the amount fixed by the Board having regard to the proper and efficient management of the work of assessment. Admittedly, this procedure was followed in the present case.
32. Further, at no point of time, the assessee, who was ably assisted by learned counsel, raised a contention that the aforesaid procedure was not required to be followed. No such contention was taken by it when the assessee preferred objections to the proposed draft assessment order nor such a contention was raised in the appeal before the Commissioner of Income-tax (Appeals). On the contrary, from the order of the Income-tax Officer, it is apparent that he has passed the assessment order under section 143(3) read with section 144B of the Act. This would be clear from the first and last pages of the order. Even the Inspecting Assistant Commissioner has issued directions under section 144B of the Act on September 18, 1984. The same is the position if we refer to the order dated August 6, 1984, passed by the Commissioner of Income-tax (Appeals). It was accepted by the assessee as well as the Department that the assessment order was made under section 143(3) read with section 144B of the Act. In the said order; it is repeatedly mentioned that the Inspecting Assistant Commissioner issued directions under section 144B of the Act. In this view of the matter, when the Income-tax Officer and the Inspecting Assistant Commissioner have fallowed the procedure under section 144B of the Act, it cannot be said that the assessment order is time-barred or that Explanation 1(iv) to section 153 would not be applicable. Explanation 1(iv) in terms provides that, in computing the period of limitation for the purposes of section 153, the period commencing from the date on which the Income-tax Officer forwards the draft assessment order under sub-section (1) of section 144B to the assessee and ending with the date on which the Income-tax Officer receives the directions from the Inspecting Assistant Commissioner under sub-section (4) of that section, shall be excluded. It also prescribes the maximum period of 180 days, which could be excluded. In our view, once this procedure is rightly or wrongly followed, then it cannot be said that the said procedure was not required to be followed and the provisions of Explanation 1(iv) for exclusion of time taken in computing the period of limitation would not be applicable. Explanation 1(iv) would be applicable and the time provided thereunder is required to be excluded. This would be in conformity with the provisions of section 292B. Section 292B, inter alia, provides that no assessment or other proceedings made or taken or purported to have been made or taken in pursuance of any of the provisions of the Act shall be invalid or shall be deemed to be invalid merely by reason of any mistake, defect or omission in such assessment or other proceeding if such assessment or other proceeding is in substance and effect in conformity with or according to the intent and purpose of the Act. The said section reads as under :
"292B. No return of income, assessment, notice, summons or other proceeding, furnished or made or issued or taken or purported to have been furnished or made or issued or taken in pursuance of any of the provisions of this Act shall be invalid or shall be deemed to be invalid merely by reason of any mistake, defect or omission in such return of income, assessment, notice, summons or other proceeding if such return of income, assessment, notice, summons or other proceeding is in substance and effect in conformity with or according to the intent and purpose of this Act."
33. Indisputably, the intent and purpose of the Act is to levy, assess and collect income-tax by following the prescribed procedure. Section 144B provides for additional procedure which is required to be followed in the cases contemplated therein.
34. However, Mr. Kaji, learned counsel for the assessee, vehemently submitted that, in view of sub-section (7) of section 144B, when an order under section 125A was made by the Commissioner of Income-tax conferring concurrent jurisdiction on the Inspecting Assistant Commissioner and when the Inspecting Assistant Commissioner has exercised the powers under section 125A by issuing necessary directions under section 125A(2) of the Act, it is required to be held that he has exercised the powers and performed the functions of the Income-tax Officer. For this purpose, firstly he relied upon the order passed by the Commissioner dated August 29, 1983, which, inter alia, reads as under :
"In pursuance of sub-section (1) of section 125A of the Income-tax Act, 1961 (43 of 1961), the Commissioner of Income-tax, Gujarat (Central), Ahmedabad, hereby directs that the Inspecting Assistant Commissioner of Income-tax specified in column 2 and the Income-tax Officer as specified in column 3 of the schedule appended to this order shall perform concurrently all the functions of the Income-tax Officer conferred under the Income-tax Act, 1961, in respect of persons whose particulars are mentioned in column 5 thereof and in respect of income of such persons except in respect of such cases as have been or may here-after be made specifically assigned to any other Inspecting Assistant Commissioner.
This order shall take effect from September 1, 1983.
Schedule : Inspecting Assistant Commissioner, C. R. II, Ahmedabad
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Sl. Designation of the Designation of the P.A. No. Name and address
No. Inspecting Assistant Income-tax Officer GIR No. of the assessee
Commissioner
----------------------------------------------------------------------
(1) (2) (3) (4) (5)
----------------------------------------------------------------------
1. * * *
2. * * *
3. IAC, Central Range ITO, Central Circle, Saurashtra Cement II, Ahmedabad Jamnagar and Chemical Indus-
tries Limited, Ranavav
4. do. do. Shri Digvijay Woollen Mills Limited, Jamnagar
5. * * *
6. * * *
----------------------------------------------------------------------
35. It is his contention that, in pursuance of the aforesaid order, the Income-tax Officer sought guidance by his letter dated November 19, 1983, from the Inspecting Assistant Commissioner. He further contended that in that very letter, it is specifically mentioned that on October 30, 1983, there was personal discussion between the Inspecting Assistant Commissioner and the Income-tax Officer with regard to the assessee's matter and the Income-tax Officer has sought guidance with regard to the specific issues such as allowability of selling commission and also claim of the assessee for deduction under section 35(1)(ii) of the Act. Thereafter, by letter dated November 24, 1983, the Inspecting Assistant Commissioner has given his opinion on the questions raised by the Income-tax Officer. Further, by letter dated December 5, 1983, the Income-tax Officer sought directions with regard to the contention of the assessee's representative for deduction of commission paid by the party after the end of the accounting year. He further relied upon the letter dated December 12, 1983, written by the Inspecting Assistant Commissioner to the Income-tax Officer. In our view, from the correspondence referred to hereinabove, the Income-tax Officer has sought guidance or direction from the Inspecting Assistant Commissioner with regard to the claims made by the assessee. At no point of time, the Inspecting Assistant Commissioner has decided the matter finally. In his letters, he has expressed his opinion and asked the Income-tax Officer to decide the matter in accordance with law. In the letter dated December 12, 1983, the Inspecting Assistant Commissioner has merely asked the Income-tax Officer to decide the issue in the light of his observations in paragraph 4 of his report. In our view, this would not mean that the powers and functions of the Income-tax Officer are exercised by the Inspecting Assistant Commissioner. The Inspecting Assistant Commissioner is empowered to issue directions in certain cases under section 144A of the Act. Under section 144B also, he can issue directions after considering the draft assessment order and the objections raised by the assessee. He can also issue directions under section 125A(2) and also under section 119(3) of the Act. That would not mean that the Inspecting Assistant Commissioner has exercised the powers and functions of the Income-tax Officer under the Act in relation to the particular assessee. Further, assuming for the sake of argument that at the time of giving directions or instructions, the Inspecting Assistant Commissioner decides certain questions which are required to be decided by the Income-tax Officer, it would not mean that the Inspecting Assistant Commissioner has exercised powers and performed the functions of the Income-tax Officer in relation to any area, or persons or classes of persons; or income or classes of income, or cases or classes of cases. It would only mean that he has exercised his powers under the provisions of the Act of giving directions/instructions to the Income-tax Officer. He can exercise his statutory powers as provided under section 119(3), 125A(2), 144A or 144B of the Act. This also would be in conformity with section 130A(c) of the Act which; inter alia provides that the Income-tax Officer shall perform his functions as per the directions of the Inspecting Assistant Commissioner under sub-section (2) of section 124 or, as the case may be, under sub-section (2) of section 125A. Therefore, in our view, the Tribunal has manifestly erred in holding that the Inspecting Assistant Commissioner has exercised the powers or performed the functions of the Income-tax Officer by issuing necessary directions under section 125A(2) of the Act.
36. From the aforesaid discussion, it can be held that :
I. Sections 123, 124, 125A, 127 and 130A provide for concurrent jurisdiction of two or more Income-tax Officers, the Income-tax Officer and the Inspecting Assistant Commissioner and the Inspecting Assistant Commissioners. The aforesaid sections contemplate that, even though the officers are having concurrent jurisdiction, yet they have to exercise the powers and to perform the functions of the Income-tax Officers assigned to them on the basis of the directions issued by the Board, the Commissioner of Income-tax or the Inspecting Assistant Commissioner; as the case may be. If the contention of the assessee that they are required to work jointly is accepted, then the scheme would fail and the assessee will be put to double jeopardy and, in some cases, it will lead to absurd results because of conflicting orders or difference of opinion between the income-tax authorities. The scheme of the Act does not envisage that two authorities should act jointly and pass a common order in the case of the assessee.
II. The phrase "Inspecting Assistant Commissioner exercises the powers or performs the functions of an Income-tax Officer" would mean that the Inspecting Assistant Commissioner performs the functions as provided under section 130A and also exercises his powers which are enumerated in sections 131 to 136 and thereafter makes an assessment order as provided under section 143. Apart from other powers and functions, the jurisdiction or function of the Income-tax Officer is of assessing a particular assessee, that is to say, to make an order of assessment or reassessment. Further, it is established law that "assessment" is one integrated process involving not only assessment of total income but also the determination of tax. Admittedly, that jurisdiction or function of the Income-tax Officer of making assessment order by following the prescribed procedure and of determining the tax is not exercised by the Inspecting Assistant Commissioner. Hence, it cannot be said that the Inspecting Assistant Commissioner has exercised the powers or performed the functions of the Income-tax Officer.
III. Sub-section (7) of section 144B would apply only to those cases where the Inspecting Assistant Commissioner exercises the powers or performs the functions of the Income-tax Officer in pursuance of an order made under section 125 or 125A. When the Inspecting Assistant Commissioner exercises the powers or performs the functions of the Income-tax Officer on the basis of the order made under section 125, it would mean that he would be discharging all the functions of the Income-tax Officer including the function of jurisdiction and of making an assessment order. Hence, the phrase "Inspecting Assistant Commissioner exercises the powers or performs the functions of an Income-tax Officer" cannot be given a different meaning in the context of section 125A.
IV. Sections 125A and 144B are procedural sections. By the said sections, no tax is levied nor is any charge imposed on the assessee. The said sections deal with machinery of assessment and interpreting a provision of this kind, the rule is that that construction should be preferred which makes the machinery workable. The interpretation which makes the machinery unworkable should as far as possible be avoided.
V. Statutory exercise of the powers by the Inspecting Assistant Commissioner of issuing directions and instructions or guidance which are binding on the Income-tax Officers under different provisions of the Act would not mean that he has exercised the powers or performed the functions of the Income-tax Officer. It is only exercise of his statutory function.
VI. The Income-tax Officer exercised his powers and performed his functions of assessing and making the assessment order, as stated by him, by invoking the jurisdiction under section 143(3) read with section 144B of the Income-tax Act. The Inspecting Assistant Commissioner stated that he has also invoked his jurisdiction under section 144B of the Income-tax Act. The assessee also considered all throughout that the Income-tax Officer had exercised his powers and performed his functions under section 143 of the Income-tax Act and the Inspecting Assistant Commissioner has also discharged his functions under section 144B of the Income-tax Act, till the appeal was decided by the Commissioner against the assessee. Only for the first time, the assessee raised the contention before the Tribunal that the Income-tax Officer ought not to have followed the procedure prescribed under section 144B and by a process of interpretation the Tribunal arrived at the conclusion that the Income-tax Officer was not required to follow the procedure prescribed under section 144B. Considering the aforesaid facts, in our view, this would not be a ground for not applying the provisions of Explanation 1(iv) to section 153 which provides for exclusion of time in computing the period of limitation.
37. Now, we would deal with the alternative contention of learned counsel, Mr. Thakore, for the Revenue, that in any set of circumstance, the Tribunal has erred in annulling the assessment order. At the outset, we would state that it is not possible for us to accept the contention of learned counsel for the Revenue that the draft assessment order dated March 17, 1984, should be considered as the final order. Admittedly, in the draft assessment order, the tax liability is not computed nor is it signed by the Income-tax Officer. Hence, the draft assessment order cannot be treated as the final assessment order. In the present case, in view of our findings with regard to the main question, it is not necessary to decide the ambit and scope of jurisdiction of the Tribunal under section 254 of the Act of passing appropriate orders as it thinks fit.
38. In the result, the Tribunal was not justified in annulling the assessment order dated September 19, 1984, made under section 143(3)/ 144B of the Income-tax Act. We answer the question in the negative, i.e., in favour of the Revenue and against the assessee. The reference stands disposed of accordingly with no order as to costs.
39. Mr. Kaji, learned counsel for the assessee, submitted that a certificate as provided under section 261 of the Act be granted. In our view, no substantial question of law is involved and that the question involved in this reference is not likely to occur repeatedly nor can it be said that the question involved in this reference is of public importance. Further, the question involved in this reference only pertains to procedural aspect. Hence, the prayer for grant of certificate is rejected.