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TMI Blog2010 (11) TMI 685X X X X Extracts X X X X X X X X Extracts X X X X ..... 3. In the judgment, we have indicated the date that appeared to be correct and the other date (either in the statement of the case or in the different orders) are mentioned in the brackets. We say no more, except, greater care ought to have been taken ; we leave it there. Facts of the case 4. M/s. Saraya Sugar Mills Pvt Ltd., Gorakhpur (the assessee) is a private limited company, it manufactures and sells sugar. The assessee filed its return for the assessment year (AY) 1977-78 before the Income-tax Officer A-Ward, Gorakhpur (the ITO-Gorakhpur). He was the Assessing Officer for the assessee. According to the territorial jurisdiction, the Inspecting Assistant Commissioner, Gorakhpur (in short "the IAC, Gorakhpur") had the administrative control over him. 5. The Commissioner of Income-tax (the Commissioner) by notification dated July 31, 1977 (January 31, 1977) under section 125A of the Act, conferred powers and functions of the Income-tax Officer-Gorakhpur regarding the assessee on the IAC, Range-II, Allahabad (the IAC, Allahabad) rather than on the Inspecting Assistant Commissioner, Gorakhpur. 6. The Inspecting Assistant Commissioner-Gorakhp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as to be set aside. 12. On the aforesaid finding, the appeal of the assessee was allowed. This judgment of the Special Bench of the Tribunal is reported in Saraya Sugar Mills (P) Ltd. v. ITO [1985] 25 ITJ (All) 196 ; [1985] 13 ITD 163 (All) [SB]*. 13. The Income-tax Department (the Department) filed an application under section 256(1) of the Act for referring 17 questions to the High Court for opinion. It was partly allowed on April 11, 1986 and six questions were referred to the High Court. The questions referred 14. We have heard Sri Shambhu Chopra, standing counsel for the Department and Sri V. B. Upadhyaya, and Sri Anil Sharma for the assessee. The following six questions have been referred for our opinion : "(i) Whether the Tribunal was justified in holding that under sec-tion 144B the draft assessment order can be referred to the Inspecting Assistant Commissioner within whose territorial jurisdiction the Income-tax Officer performs his functions and not to the Inspecting Assistant Commissioner on whom jurisdiction has been conferred under section 125A of the Act ? * It is relevant to point ou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... section 143(3) the Tribunal instead of annulling the order should have set aside the case with a direction to the Income-tax Officer to treat the order dated March 27, 1980 as a final order ? First question : Reference to Inspecting Assistant Commissioner having concurrent jurisdiction-Proper 15. Sections 125 and 125A of the Act were titled "Powers of Commissioner respecting specified areas, cases, persons, etc." and "Concurrent jurisdiction of Inspecting Assistant Commissioner and Income-tax Officer". They empowered the Commissioner to confer powers of an Income-tax Officer on an Inspecting Assistant Commissioner with different consequences. 16. Section 125* of the Act empowered the Commissioner to confer powers and functions of an Income-tax Officer on an Inspecting Assistant Com-missioner in respect of any area or person or class of persons or cases or class of cases or incomes or classes of income. This was subject to the conditions mentioned in the order. In such a situation, subject to any condition mentioned in the notification, it was only the Inspecting Assistant Com-missioner, who could exercise the power and performs the functions but not the Income-tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Inspecting Assistant Commissioner, a higher officer, was given concurrent jurisdiction. He could issue binding directions and guidelines. 23. If the intention of the Legislature was as indicated in the preceding paragraphs, then it seems strange that an Income-tax Officer should work under the guidelines and directions of one Inspecting Assistant Commissioner and to get the draft order finalised by another Inspecting Assistant Commissioner : the one who was supervising and could pass the order himself, should be the one to finalise it too. 24. In our opinion, the draft order along with objections was to be sent to the Inspecting Assistant Commissioner who was conferred concurrent jurisdiction with the Income-tax Officer and under whose supervision and guidance the Income-tax Officer was to work. 25. The Income-tax Officer-Gorakhpur was under the administrative control of the Inspecting Assistant Commissioner-Gorakhpur as he had the territorial jurisdiction. However, the concurrent jurisdiction was conferred on the Inspecting Assistant Commissioner-Allahabad. The Inspecting Assistant Commissioner-Gorakhpur also sent a letter on September 1, 1977 to the In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cases". It provided that in case the variation in income or loss in the assessment under section 143(3) of the Act was more than the amount fixed by the Board then, * The Income-tax Officer was to prepare the draft order and send it to the assessee ; and * If the assessee objected to the same then the Income-tax Officer was to send the draft order along with the objections to the Inspecting Assistant Commissioner for his directions and guidance. 30. Sub-sections, namely, (1) and (4) of section 144B used the word "shall" and not "may". This indicated the mandatory nature of the duty cast upon the Income-tax Officer. He was bound to refer the draft order to the Inspecting Assistant Commissioner : he had no choice in this regard unless the case fell under section 144B(7) of the Act. 31. In our opinion, * section 144B(1) and (2) was mandatory ; * the Income-tax Officer was bound to refer the draft order along with the objection to the Inspecting Assistant Commissioner unless the case fell under section 144B(7) of the Act ; and * if the Income-tax Officer did not refer the draft order along with objections to the Inspecting A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot to pass it. The assessment order was ultimately passed by the Income-tax Officer-Gorakhpur and not the Inspecting Assistant Commissioner-Allahabad. Had the Inspecting Assistant Commissioner-Allahabad done so, then the matter would have different. 38. In our opinion, * merely because concurrent powers were conferred upon the Inspecting Assistant Commissioner or he issued the guidelines, did not lead to the conclusion or meant that he exercised the powers or performed the functions of an Income-tax Officer ; * in this case, the Inspecting Assistant Commissioner-Allahabad neither exercised the powers nor performed the functions of the Income-tax Officer-Gorakhpur ; * the case is not covered under section 144B(7) of the Act. 39. In view of the above, questions Nos. 2 to 4 are answered in the affirmative, in favour of the Department and against the assessee. Fifth and sixth questions : Not necessary to answer 40. We have answered questions Nos. 1 to 4 in favour of the Department and against the assessee. The counsel for the parties agree that in view of this, the answer to questions Nos. 5 and 6 have become academic and it is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nisterial staff, subordinate to the Commissioner or any other income-tax authority subordinate to him, and specified in such order, subject to such conditions, restrictions or limitations as may be specified therein :Provided that the Commissioner shall not, unless he is authorised in this behalf by the Board by general or special order in writing, make an order under clause (b) in relation to the functions of an Income-tax Officer mentioned in the following provisions of this Act, namely, sections 131, 132, 132A, 132B, 140A, 143, 144, 146, 147, 148, 162, 163, 171, 172,174, 175, 176, 177, 178, 183, 184, 185, 189, 221, 222, 226, 228, 228A, 253, 271 to 273 (both inclusive) and 274. 2. The relevant part of section 125A is as follows : 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 per ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Inc ..... 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