TMI Blog1981 (1) TMI 167X X X X Extracts X X X X X X X X Extracts X X X X ..... ee also. At that stage on 26-2-1977 the assessee addressed a letter to the ITO objecting to certain additions proposed to be made by the ITO in the draft assessment order. While concluding this letter of objection, the assessee put in a fresh claim before the ITO for enhanced exports development expenditure under section 35B of the Act in the following terms: "XIV. Export development expenditure --- In the earlier year the AAC has allowed rebate on certain additional expenditure though incurred in India. We, accordingly, claim the rebate on the expenditure incurred on staff engaged directly on export of Rs. 35,760, shipment and sampling expenses Rs. 71,427, export credit guarantee premium of Rs. 24,132, and difference due to foreign excha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elated enlargement of the claim, he was of the opinion that the assessee was entitled to a consideration of the claim. He directed the ITO to examine the claim under section 35B and dispose of the same in accordance with law. 6. The revenue is in appeal against the order of the Commissioner (Appeals) on this issue. It is submitted on behalf of the revenue that at the assessment stage before the ITO, the assessee had not made any such claim in respect of these four items. Therefore, there was no variation between the income as returned by the assessee and the income proposed to be determined by the ITO. Once the ITO submitted a draft assessment order to the IAC, he became functus officio and he was entirely subordinate to the IAC under sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... utside the scope of the assessment order. It was a part and parcel of the assessment order. Therefore, the assessee had a right of appeal. No additional evidence was necessary for consideration of the assessee's claim, when the assessee made the claim before the ITO. The facts were already on record. Formerly the assessee had not made this claim. The assessee by its letter dated 26-2-1977 brought to the notice of the ITO that it was entitled to certain additional deductions under section 35B which should be allowed while framing the assessment. Therefore, the Commissioner (Appeals) was competent to entertain the assessee's appeal on this ground and the Commissioner (Appeals)' order did not suffer from any infirmity on the basis of the dictu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he fact that while submitting its objections to the variations proposed by the ITO under section 144B(2), the assessee made a fresh claim before the ITO for further deduction under section 35B, which according to the assessee it was entitled on the basis of the facts already on record. The question to be considered is whether the ITO was justified in ignoring the assessee's claim. According to the learned departmental representative in a case to which the provisions of section 144B applied, once the ITO forwarded a draft assessment order to the IAC under section 144B(1), he became functus officio. He had nothing further to do except to carry out the orders of the IAC issued by the IAC under section 144B(4). Further, under section 144B(5) ev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act, 1974, with effect from 1-1-1976. Under section 144B, wherein an assessment to be made under section 143(3) the ITO proposed to make any variation in the income or loss returned by the assessee which was prejudicial to the assessee and the amount of such variation exceeded the amount fixed by the CBDT under section 144B(6), the ITO was under an obligation, in the first instance, to forward a draft of the proposed order to the assessee. Thereafter, after following the further formalities laid down in section 144B, he was to finalise the assessment. By placing the two provisions alongside, namely, section 143(3) and section 144B(1) it is abundantly clear that the provisions of section 144B came into operation only where there was a variat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g all the claims for deductions, remissions, allowances, etc., which the assessee would make before the ITO actually made an assessment under section 143(3). 12. To our mind, in the facts and circumstances of the case, the mere fact that the assessee included its claim for additional allowance under section 35B in its letter placing on record its objections to the additions proposed in the draft assessment order did not detract the basic nature of the assessee's claim, it was a claim made before the ITO before he made an assessment under section 143(3). The claim should have been dealt with by the ITO in the normal course. Since he failed to deal with this claim either allowing or rejecting it, it was an outstanding issue between the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X
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