TMI Blog2001 (12) TMI 63X X X X Extracts X X X X X X X X Extracts X X X X ..... h short-term capital gains should be assessed as long-term gains?" The relevant facts, which are required to be noticed, are as follows: The assessment of capital gains on the sale of 355 kgs. of silver utensils, which were sold by the assessee during the accounting year en ing on Apri 7, 1976, is in dispute. The assessee claimed that the gains that arose on the said sale could not be taxed as the personal effects held for personal use by the assessee and the dependent members of his family being exempt under section 2(14)(ii) of the Income-tax Act, 1961 (in short, "the Act"). The Income-tax Officer (in short, 'the ITO") passed the draft assessment order dated February 9, 1979, wherein the Income-tax Officer proposed that the capital gains would be taxed as long-term capital gains, pursuant whereto the assessee filed his objection on February 15, 1979. The Income-tax Officer thereafter passed another draft assessment order dated March 15, 1979, wherein the Income-tax Officer changed his opinion on further reflection and held that the capital gains would be taxed as short-term capital gains. The assessee filed objection dated March 23, 1979, questioning the jurisdiction of the I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (Ker) ; Sarabjit Singh v. CIT [1998] 234 ITR 641 (Delhi); Ambica Mills Ltd.'s case [1999] 235 ITR 264 (Guj) and R. Dalmia v. CIT [1999] 236 ITR 480 (SC). Chapter XIV of the Act relates to procedure for assessment. Section 143 of the Act deals with the procedure for making assessment. Sub-sections (1) and (3) of section 143 of the Act provide for computation of total income of the assessee respectively without issuance of any notice as is otherwise provided under sub-section (2) thereof. It is beyond doubt whatsoever that section 143 of the Act is a procedural provision, as thereby tax is not charged. Section 143 of the Act in other words cannot be said to be a substantive provision, being not a charging provision. Section 144B of the Act applies to all assessments completed after January 1, 1976. The said provision was amended with effect from October 1, 1984, as in terms thereof for the words "the Income-tax Officer proposes to make any variation" the words "the Income-tax Officer proposes to make, before October 1, 1984, any variation" were substituted. By reason of the aforementioned provision, the assessee is given an opportunity to make an objection as regards an orde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... warded to the Deputy Commissioner before whom also the assessee gets an opportunity of hearing. Guidelines issued by the said higher authority to the Income-tax Officer would be binding on the latter and only on the basis thereof the assessment proceedings shall be finalised. It is, thus, evident that only because a second draft order is served, ordinarily the assessee would not be prejudiced, as the final outcome depends upon the opinion of the Deputy Commissioner. It is also not a case where the second draft order was issued upon considering the objections filed by the assessee. In our opinion, therefore, it would be incorrect to contend that the second draft order under no circumstances can be issued. It is one thing to say that the Income-tax Officer has absolutely no jurisdiction to issue a second draft order, but it is another thing to say that in the facts and circumstances of the case, he should not have issued the same. In Sudhir Sareen's case [1981] 128 ITR 445, a learned single judge of this court interfered with.the matter, inter alia, on the ground that such a second draft order was issued at the instance of the higher authority. Such is not the position here. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thereto. It will have to be appreciated that the dratt order if it is found to be required to be modified could not also be considered to be a second draft order. It appears that the parties have proceeded on the basis that the second draft order has come into emergence when the material on record clarifies the situation to the contrary, bringing on record a situation of modification in the nature of necessary-amendment to the original situation. In our judgment, such statutory provisions relating to the matters of procedure cannot be understood in the restrictive sense of literal interpretation and have to be understood that an occasion of issuance of draft assessment has to be meaningfully understood in relation to an occasion for modification. Such occasion cannot be in isolation in continuity of time and such occasion can be legitimately contemplated to occur more than once depending on the situation demanding." In Ambica Mills Ltd.'s case [1999] 235 ITR 264, the Gujarat High Court has stated the law in the following term: "That section 144B of the Income-tax Act, 1961, is a procedural provision under which the Income-tax Officer forwards a draft order to the assessee. At ..... X X X X Extracts X X X X X X X X Extracts X X X X
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