TMI Blog1989 (9) TMI 390X X X X Extracts X X X X X X X X Extracts X X X X ..... course of the assessment proceedings on 2-3-1979. Pursuant to the search conducted at the business premises and the residence of the deceased-assessee on 7/8-1-1976 under section 132 of the Act, cash, fixed deposit receipts and other documents and papers including a diary were seized during that search. An order under section 132(5) was made on 5-4-1976 and the appeal against that order is still pending. After the search, the deceased-assessee filed the return for the year under consideration on 25-3-1977. The said return was processed by the ITO and thereafter a draft assessment order was prepared by the ITO. A copy of the said order was forwarded by the ITO to the assessee on 23-3-1978 inviting his objections, if any, to the following additions, among others, as income from undisclosed source in the said draft order : (i)Payments of illegal gratification of ₹ 1,22,032 mainly made to M.L. Jha and Capt. Sikand of Angus Co. Ltd. Since the source of the payments of the said illegal gratification to the aforesaid two persons of Angus Co. Ltd. with whom the deceased-assessee had business connection could not be explained, the ITO had proposed to treat those payments amou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d draft order was once again forwarded to the assessee inviting his objections, if any, to the additions proposed in the draft assessment order. In the meanwhile, the assessee died. The ITO brought his legal heirs on the records. He, therefore, invited objections, if any, from the said legal heirs of the deceased-assessee to the additions proposed in the second draft order. The legal heirs, vide their letter dated 10-7-1979, objected to the additions proposed in the draft order. On 12-3-1979, the ITO forwarded the second draft assessment order along with the objections, referred to herein-before, to the IAC, Range-Ill, Calcutta. The IAC, after due hearing in accordance with law, made certain adjustments and reduced the additions proposed for the first time in the second draft order from ₹ 1,68,590 to ₹ 1,48,490. On receipt of the second approval of the IAC, the ITO passed the assessment order under section 143(3) of the Act on 30-3-1979 on a total income of ₹ 3,58,129 against the legal heirs of the deceased-assessee. 3. Aggrieved by the said order, the legal heirs brought the matter by way of appeal before the Commissioner (Appeals)-IX, Calcutta. The first poin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns, such directions as he thinks fit for the guidance of the ITO to enable him to complete the assessment. There could be only one set of instructions. There could not be two draft assessment orders and two sets of instructions as in the present case. According to Mr. Bhattacharjee, the ITO after the issue of the draft assessment order and the receipt of the instructions from the IAC became functus officio as to the matters beyond the said draft assessment order and the instructions issued by the IAC. 7. The controversy in this case centres around the scope of section 144B. Section 144B provides as follows : 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 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d could be for a period of 30 days. 9. Therefore, Dr. Pal's argument is that the ITO by making successive draft orders unnecessarily prolonged the assessment proceedings and thereby frustrated the object of section 153 which provides for a period of limitation for completion of assessment proceedings. 10. In my judgment, both the points taken by Dr. Pal are without any substance. Usually when a return has been filed under section 139 of the Act, the ITO may proceed to assess the income on the basis of the return. The proceedings will be under section 143(3). If there is any failure to file return or any other failure as mentioned in section 144, an assessment order can be passed under section 144 of the Act. But where the ITO proposes to pass an order under sub-section (3) of section 143 and the ITO is of the view that variation in the income or loss prejudicial to the assessee will take place and the amount of such variation will exceed the amount fixed by the Board under sub-section (6) of section 144B, then the ITO shall in the first instance forward a draft order, of proposed assessment to the assessee. On receipt of the draft order the assessee will forward his objec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing huge transaction which he could not possibly ignore. 13. Moreover, it is to be noted that if the ITO with full knowledge decides not to take any action on the basis of his discovery of facts then he will not be able to reopen the case under section 147 or rectify the assessment under section 154. If Dr. Pal's argument has to be accepted, then the fact that comes to the knowledge which is relevant to the assessment will have to be ignored after the draft order is forwarded. 14. In this connection Dr. Pal cited a decision of this Court in the case of Jagmohan Goenka v. K.D. Banerjee [1954] 26 ITR 637 . A question was raised whether a successive reassessment can be made. In that case it was held by this Court that within the time limit specified in section 34 of the Indian Income-tax Act, 1922, there is no restriction as to the number of proceedings which can be taken to reopen the assessment, whether by way of assessment or reassessment for computation or recomputation. 15. In that case adverting to the question of limitation it was observed that if the process of reassessment was repeated mala fide, the High Court could or will always interfere. This judgment was ci ..... X X X X Extracts X X X X X X X X Extracts X X X X
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