Commissioner Of Income-Tax vs Indo Asiatic Engineers P. Ltd.
2001 Latest Caselaw 161 Del

JUDGMENT

Arijit Pasayat, C.J.

1. At the instance of the Revenue, the following question has been referred for the opinion of this court under Section 256(1) of the Income-tax Act, 1961 (in short the "Act"), by the Income-tax Appellate Tribunal, Delhi Bench "D" (in short the "Tribunal"):

"Whether, on the facts and in the circumstances of the case, the learned Tribunal is correct in law in holding that the provisions of Section 144B of the Income-tax Act, 1961, were not applicable to the present case ?"

2. The dispute relates to the assessment year 1975-76 for which the relevant previous year ended on December 31, 1974.

3. The factual position, in a nutshell, is as follows :

The assessed had furnished a return on June 30, 1975, declaring a loss of Rs. 69,898 and unabsorbed loss of Rs. 1,33,077 brought forward from earlier years. The aggregate amount of loss, i.e., the loss for the assessment year 1975-76, together with the unabsorbed loss brought forward from earlier years, was shown by the assessed at Rs. 2,02,915. The Income-tax Officer (in short the "ITO"), was of the view that on determining the loss at Rs. 28,059 and unabsorbed depreciation for the year at Rs. 2,717 (making an aggregate of Rs. 30,776), the variation between the returned and determined figures would be more than Rs. 1 lakh and, therefore, the approval of the Inspecting Assistant Commissioner of Income-tax (in short the "IAC") would be necessary. On receiving the draft assessment order, the assessed pointed out that if the brought forward loss of the earlier years is added to the current year's loss as determined by the Income-tax Officer, the aggregate loss would be Rs. 1,63,853 as against the aggregate loss of Rs. 2,02,915 as returned by the assessed and therefore the variation would be less than Rs. 1 lakh. That being the position, the assessed's stand

was that the draft assessment order under Section 144B was not necessary to be approved by the Inspecting Assistant Commissioner. The objection was rejected by the Inspecting Assistant Commissioner, who held that as the assesses had shown an aggregate loss of Rs. 2,02,975 in the return of income and the Income-tax Officer determined the loss at Rs. 30,776 the variation was more than Rs. 1 lakh and recourse to Section 144B was in order. On receiving the directions given by the Inspecting Assistant Commissioner under Section 144B, the Income-tax Officer, completed the regular assessment. The assessed preferred an appeal before the Commissioner of Income-tax (Appeals) (in short the "CIT(A)"). The said authority held that as the Assessing Officer had not made any variation in the unabsorbed loss brought forward from the earlier years and as the only variation related exclusively to the current year's loss, there was no necessity for taking a recourse to Section 144B. Accordingly, it was held that the provisions of Section 144B were not applicable. It was also held that the assessment had to be completed within the period of limitation laid down under Section 153(1) of the Act, without the benefit of extended time limit provided in clause (iv) of Explanation (1) to Section 153 of the Act. The assessment was, therefore, held to be barred by limitation. The Revenue carried the matter in appeal before the Tribunal. Its stand was that the total amount of loss, as returned by the assessed, i.e., Rs. 2,02,915, was to be taken note of and not the loss relatable to the year. The Tribunal did not accept the plea and held that the Commissioner of Income-tax (Appeals) order was justified. On being moved under Section 256(1) of the Act, a reference, as aforesaid, has been made.

4. We have heard learned counsel for the Revenue. There is no appearance on behalf of the assessed in spite of service of notice.

5. Learned counsel for the Revenue submitted that the Tribunal was not justified in coming to a conclusion that only the loss of the year in question and not of the previous year was to be taken note of. In order to appreciate the stand taken by the Revenue, it is necessary to take note of the provisions, i.e., of Section 144B. The same, at the relevant point of time, reads as follows :

"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 any variation in the income or loss returned which is prejudicial to the assessed 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 assessed.

(2) On receipt of the draft order, the assessed 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 assessed 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 assessed shall be issued under this sub-section before an opportunity is given to the assessed 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."

6. The pivotal clause which would throw light on the controversy is "any variation in the income or loss returned". Obviously, the loss returned is relatable to the assessment year in question. It cannot be said that the same related to a carry forward loss or unabsorbed loss, brought forward from earlier years. There is no requirement, as rightly observed by the Tribunal, to show the unabsorbed loss brought forward from the earlier years in the return of income, as was required to be filed for the assessment year in question, i.e., 1975-76. Even though the assessed chose to indicate the same, it does not mean that the aggregate loss of Rs. 2,02,915, which comprised two components, i.e., the brought forward loss of Rs. 1,33,077 and the loss of the year in question, i.e., Rs. 69,898, were to be taken to be the

"loss returned" by the assessed for the relevant assessment year in question. The loss returned was Rs. 69,898 and only the variation to the said loss alone was to be taken into account for the purpose of determining the question regarding applicability of Section 144B of the Act. The above being the position the Tribunal was justified in its view.

7. Accordingly, the question referred is answered in the affirmative, in favor of the assessed and against the Revenue.

8. Reference accordingly is disposed of.