COMMNR. OF INCOME TAX, GUJARAT CENTRAL Vs. SAURASTHRA CEMENT & CHEM. INDUSTRIES LTD
Supreme Court of India (Division Bench (DB)- Two Judge)
Appeal (Civil), 2984 of 2008, Judgment Date: May 02, 2016
REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO(S).2984/2008
COMMISSIONER OF INCOME TAX, GUJARAT CENTRAL APPELLANT(S)
VERSUS
SAURASTHRA CEMENT & CHEM. INDUSTRIES LTD RESPONDENT(S)
WITH
CIVIL APPEAL NO(S).4971/2016
(Arising out of SLP(C) No. 13766/2011)
M/S. SARAYA SUGAR MILLS PVT. LTD. APPELLANT(S)
VERSUS
COMMISSIONER OF INCOME -A WARD, GORAKHPUR RESPONDENT(S)
J U D G M E N T
A.K. SIKRI,J.
Leave granted in SLP(C) No. 13766/2011.
2. The Commissioner of Income Tax, Gujarat Central, Ahmedabad- the
appellant (hereinafter referred to as “the Revenue”), is aggrieved by the
judgment dated 20.01.2005 passed by the High Court of Gujarat whereby the
High Court has dismissed the appeal of the Revenue affirming the order of
the Income Tax Appellate Tribunal (hereinafter referred to as “ITAT”)
holding that the assessment order dated 01.09.1984 passed by the Assessing
Officer in respect of Assessment Year 1981-82 was time barred. We may
mention at the outset that in terms of Section 153 of the Income Tax Act,
1961 (hereinafter referred to as “the Act”), time limit for completion of
the assessment to be made under Sections 143 or 144 of the Act is at any
time after the expiry of two years from the end of the Assessment Year in
which the income is first assessable, where Assessment Year is commencing
on or after 01.04.1969. On this reckoning, the date by which assessment
should have been carried out by the Assessing Officer in respect of
Assessment Year 1981-82 was 31.03.1984. The assessment order was, however,
passed on 01.09.1984. The Revenue claimed that this assessment order was
still within the prescribed period of limitation because of the reason that
on 13.03.1984 draft assessment order was passed pertaining to the aforesaid
Assessment Year and forwarded to the Inspecting Assistant Commissioner,
Central Range-II, Ahmedabad (hereinafter referred to as “the IAC”) on
13.03.1984 (i.e. before 31.03.1984). The IAC issued instructions under
Section 144B of the Act on 31.08.1984 and based on that the Assessing
Officer framed the assessment on 01.09.1984 under Section 143(3) of the Act
read with Section 144B of the Act.
3. The position that was taken by the Revenue was that the period from
13.03.1984 to 31.03.1984, when the matter was before the IAC, had to be
excluded while computing the period of limitation of two years and once the
period is excluded the assessment order was passed within the period of
limitation. The contention of the respondent/assessee, on the other hand,
was that, by order dated 29.08.1983, the Commissioner of Income Tax,
Central, Ahmedabad (hereinafter referred to as “the CIT”) passed under
Section 125A(1) of the Act had assigned all the powers and functions of the
Income Tax Officer, Central Circle, Jamnagar (hereinafter referred to as
“the ITO”) to the IAC. This order was passed specifically in the case of
the respondent herein which became effective from 01.09.1983. It was their
submission that once, by virtue of the aforesaid order dated 29.08.1983
passed by the CIT, the IAC is conferred concurrent jurisdiction, along with
ITO, empowering him to make assessment order in the case of the assessee,
there was no question of forwarding the draft assessment order by the ITO
to the IAC and this unnecessary and superfluous exercise would not enure to
the advantage of the Revenue giving it the benefit of the period from
13.03.1984 to 31.08.1984 while calculating the period of limitation of two
years provided under Section 153 of the Act. In nutshell, the submission
was that the conferment of the powers of the Assessing Officer upon the
IAC, he is in the same position as the ITO and draft assessment order could
not be sent to him who was brought at par with the ITO.
4. The Assessing Officer was not amused by the aforesaid contention of
the assessee and repelled the same resulting in framing of the assessment
order dated 01.09.1984. However, the ITAT found force in the said
submission of the assessee and allowed the appeal thereby setting aside the
assessment order. The High Court, as pointed out above, has upheld this
view of the ITAT, resulting in the dismissal of the appeal of the
appellant.
5. Before proceeding further, we may mention that in the appeal arising
out of SLP(C) No.13766/2011 which is preferred by the assessee-M/s. Saraya
Sugar Mills Pvt. Ltd., in the same circumstances, on the same question, the
Allahabad High Court has taken a contrary view. The High Court of Allahabad
has found merit in the stand taken by the Revenue and excluded the period
during which the draft assessment was forwarded to the IAC till the date of
receiving the instructions from the IAC under Section 144B of the Act. We
are, thus, faced with two conflicting views and to decide as to which High
Court has correctly decided the issue of limitation.
6. We have already stated, in detail, the facts of Civil Appeal No. 2984
of 2008. Before we embark upon our detailed discussion on the issue, we
would like to place on record the relevant provisions of the Act which have
bearing on the issue. As mentioned above, Section 153 prescribes limitation
of two years for making assessment under Section 143 or Section 144 of the
Act. Avoiding those portions of these Sections with which we are not
concerned, the material provisions are re-produced below:
"153. Time-limit for completion of assessments and reassessments. - (1) No
order of assessment shall be made under section 143 or section 144 at any
time after -
(a) the expiry of - ...
(iii) two years from the end of the assessment year in which the income was
first assessable, where such assessment year is an assessment year
commencing on or after the 1st day of April, 1969; or....
whichever is latest. . . .
(3) The provisions of sub-sections (1) and (2) shall not apply to the
following classes of assessments, reassessments and re-computations which
may, subject to the provisions of sub-section (2A), be completed at any
time - ...
(ii) where the assessment, reassessment or re-computation is : made on the
assessee or any person in consequence of or to give effect to any finding
or direction contained in an order under section 250, 254, 260, 262, 263 or
264 or in an order of any court in a proceeding otherwise than by way of
appeal or reference under this Act;...
Explanation 1. - In computing the period of limitation for the purposes of
this section - . . .
(iv) the period (not exceeding one hundred and eighty days) commencing from
the date on which the Income-tax Officer forwards the draft order under sub-
section (1) of section 144B to the assessee and ending with the date on
which the Income-tax Officer receives the directions from the Inspecting
Assistant Commissioner under sub-section (4) of that section, or, in a case
where no objections to the draft order are received from the assessee, a
period of thirty days, or (iva) the period (not exceeding sixty days)
commencing from the date on which the Income-tax Officer received the
declaration under sub-section (1) of section 158A and ending with the date
on which the order under sub-section (3) of that section is made by him,
or. . . .
shall be excluded. . . ."
7. Section 123 of the Act lays down the jurisdiction of the IAC and
reads as under:
"123. Jurisdiction of Inspecting Assistant Commissioners - (1) The
Inspecting Assistant Commissioners shall perform their functions in respect
of such areas or of such persons or classes of persons or of such incomes
or classes of income or of such cases or classes of cases as the
Commissioner may direct.
(2) Where any directions issued under sub-section (1) have assigned to two
or more Inspecting Assistant Commissioners, the same area or the same
persons or classes of persons or the same incomes or classes of income or
the same cases or classes of cases, they shall have concurrent jurisdiction
and shall perform such functions in relation to the said area or persons or
classes of persons or incomes or classes of income or cases or classes of
cases as the Commissioner may, by general or special order in writing,
specify, for the distribution and allocation of the work to be performed.”
8. Section 124, on the other hand, deals with the jurisdiction of the
Income Tax Officer and reads as under:
“124. Jurisdiction of Income-tax Officers. - (1) Income-tax Officers shall
perform their functions in respect of such areas or of such persons or
classes of persons or of such incomes or classes of income or of such cases
or classes of cases as the Commissioner may direct.
(2) Where any directions issued under sub-section (1) have assigned to two
or more Income-tax Officers, the same area or the same persons or classes
of persons or the same incomes or classes of income or the same cases or
classes of cases, they shall have concurrent jurisdiction and shall perform
their functions in relation to the said area, or persons or classes of
persons, or incomes or classes of income, or cases or classes of cases, in
accordance with such general or special orders in writing as the
Commissioner or the Inspecting Assistant Commissioner authorised by the
Commissioner in this behalf may make for the purpose of facilitating the
performance of such functions.
(3) Within the limits of the area assigned to him, the Income-tax Officer
shall have jurisdiction -
(a) in respect of any person carrying on a business or profession, if the
place at which he carries on his business or profession is situate within
the area, or where his business or profession is carried on in more places
than one, if the principal place of his business or profession is situate
within the area, and
(b) in respect of any other person residing within the area.
(4) Where a question arises under this section as to whether an Income-tax
Officer has jurisdiction to assess any person, the question shall be
determined by the Commissioner; or where the question is one relating to
areas within the jurisdiction of different Commissioners, by the
Commissioners concerned or, if they are not in agreement, by the Board.
(5) No person shall be entitled to call in question the jurisdiction of an
Income-tax Officer -
(a) after the expiry of one month from the date on which he has made a
return under sub-section (1) of section 139 or after the completion of the
assessment, whichever is earlier :-
(b) where he has made no such return, after the expiry of the time allowed
by the notice under sub-section (2) of section 139 or under section 148 for
the making of the return.
(6) Subject to the provisions of sub-section (5), where an assessee calls
in question the jurisdiction of an Income-tax Officer, then the Income- tax
Officer shall, if not satisfied with the correctness of the claim, refer
the matter for determination under sub-section (4) before assessment is
made.
(7) Notwithstanding anything contained in this section or in section 130A,
every Income-tax Officer shall have all the powers conferred by or under
this Act on an Income-tax Officer in respect of any income accruing or
arising or received within the area for which he is appointed.
9. Likewise, Section 125 of the Act prescribes the powers of the
Commissioner with respect to specified areas, cases, persons etc. Section
125A of the Act, to which we shall advert at a later stage, discusses the
concurrent jurisdiction of IAC and ITO under certain circumstances.
Further, Section 130A of the Act deals with competency of the ITO to
perform any function or functions under certain specified circumstances.
Sections 131 to 136 provide for various powers of the Income Tax
Authorities with which we are not concerned in the present case. The
important provisions directly relevant for the controversy in issue are
contained in Chapter XIV, namely, Sections 144A and 144B of the Act.
Section 144A authorises the IAC to issue directions in certain cases and
Sections 144B provides that in certain cases reference is to be made to the
IAC by the ITO before framing the final assessment order. Under Section
144A, the IAC may, on his own motion or on a reference being made to him by
the ITO or on the application of an assessee, call for and examine the
record of any proceedings in which the assessment is pending and, if he
considers that, having regard to the nature of the case or the amount
involved or for any other reason, it is necessary or expedient so to do, he
may issue such directions as he thinks fit for the guidance of the ITO to
enable him to complete the assessment. Directions so issued are binding on
the ITO.
10. Section 144B of the Act deals with a situation where the ITO intends
to pass an assessment order which is in variation to the income or loss
that is shown in the return of the assessee and the amount of such
variation exceeds the amount that can be fixed by the Board under sub-
Section (6) thereof. In such a situation, the ITO is under obligation to
first forward a draft of the proposed order of assessment to the assessee
who can file his objections within 7 days thereof and if the objections are
received, the ITO is to forward the draft order together with the
objections to the IAC. The IAC, after considering the draft order and the
objections, is empowered to issue such directions as he thinks fit for the
guidance of the ITO to complete the assessment.
11. From the reading of Section 153, the period (not exceeding 180 days)
commencing from the date on which the ITO forwards the draft order under
sub-Section (1) of Section 144B to the assessee and ending with the date
on which the ITO receives the directions from the IAC under sub-Section (4)
of Section 144B, is to be excluded while computing the period of
limitation.
12. There is no quarrel up to this stage. However, as pointed out in the
earlier portion of this judgment, as per the assessee when the IAC was
vested/empowered with same powers as that of ITO, by specific order of the
CIT in respect of the respondent/assessee itself and with the conferring of
said powers the IAC and ITO had concerned jurisdiction over the assessee,
there was no reason to send the draft assessment order by the ITO to the
IAC. To appreciate this contention, we at this stage, reproduce the
provisions of Section 125A of the Act under which concurrent powers can be
assigned to the IAC as well.
“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 performed concurrently by the Inspecting Assistant
Commissioner.
(2) Where under sub-section (1), an Inspecting Assistant Commissioner
exercises concurrent jurisdiction with one or more Income-tax Officers in
respect of any area, or persons or classes of persons, or incomes or
classes of income, or cases or classes of cases, the Income-tax Officer or
Income-tax Officers shall exercise the powers and perform the functions
under this Act in relation-thereto as the Inspecting Assistant Commissioner
may direct.
(3) Without prejudice to the generality of the provisions contained in sub-
section (3) of section 119, every Income-tax Officer shall also observe and
follow such instructions as may be issued to him for his guidance by the
Inspecting Assistant Commissioner within whose jurisdiction he performs his
functions in relation to any particular proceeding or the initiation of any
proceeding under this Act :
Provided that no instructions, which are prejudicial to the assessee, shall
be issued before an opportunity is given to the assessee to be heard.
Explanation. - For the purposes of this sub-section, no instruction as to
the lines on which an investigation connected with the assessment should be
made shall be deemed to be an instruction prejudicial to the assessee.
(4) Where an order is made under sub-section (1) and the Inspecting
Assistant Commissioner exercises the powers or performs the functions of an
Income-tax Officer in relation to any area, or persons or classes of
persons, or incomes or classes of income, or cases or classes of cases,
references in this Act or in any rule made thereunder to the Income-tax
Officer shall be construed as references to the Inspecting Assistant
Commissioner and any provision of this Act requiring approval or sanction
of the Inspecting Assistant Commissioner shall not apply.
12. From the aforesaid sections, it is apparent:
(i) Under section 123 of the Act, the Inspecting Assistant Commissioners
have jurisdiction in respect of such areas or of such persons or classes of
persons or of such incomes or classes of income or of such cases or classes
of cases as per the direction of the Commissioner. Where there are two or
more Inspecting Assistant Commissioners, they are having concurrent
jurisdiction and are required to exercise their powers and perform their
functions as per the order in writing made by the Commissioner specifying
for the distribution and allocation of the work to be performed.
(ii) Similarly, under section 124(1), the Income-tax Officers are also
required to perform their functions as per the direction of the
Commissioner. If there are two or more Income-tax Officers, they are having
concurrent jurisdiction and are required to perform their functions as per
the general or special orders in writing made by the Commissioner or
Inspecting Assistant Commissioner authorised by the Commissioner in this
behalf. Sub-section (3) provides that within the limits of the area
assigned to him, the Income-tax Officer shall have jurisdiction in respect
of any person carrying on business or profession, if the place at which he
carries on his business or profession is situate within the area, or where
his business or profession is carried on in more places than one, if the
principal place of his business or profession is situate within the area
and in respect of any other person residing within the area. Sub-section
(4) provides as to who shall decide the dispute arising with regard to the
jurisdiction of an Income-tax Officer to assess any person. Sub-section (5)
provides that no person shall be entitled to call in question the
jurisdiction of an Income-tax Officer beyond the time-limit prescribed
therein;
(iii) In section 125, an exception is carved out with regard to the
jurisdiction of an Income-tax Officer which provides that the Commissioner
may by general or special order in writing direct that the powers conferred
on the Income-tax Officer by or under the Act shall, in respect of any
specified case or class of cases or of any specified person or class of
persons, be exercised by the Inspecting Assistant Commissioner. By an order
of the Commissioner under section 125(1)(a), the Income-tax Officer is
divested of his jurisdiction to deal with the specified case or class of
cases or specified person or persons. Hence, even though the Income-tax
Officer is having jurisdiction in respect of any specified case or person,
the Commissioner is empowered to direct that the said powers shall be
exercised by the Inspecting Assistant Commissioner. Where such order is
made under section 125(2)(a), any provision of the Act requiring approval
or sanction of the Inspecting Assistant Commissioner will not be
applicable.
(iv) Section 125A carves out further exception with regard to the
jurisdiction of an Income-tax Officer. It does not oust the jurisdiction of
Income Tax Officer but confers concurrent jurisdiction on the Inspecting
Assistant Commissioner. It provides that the Commissioner may, be 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 are, or persons of
classes of persons, or incomes or classes of income, or cases or classes of
cases, shall be exercised or performed concurrently by the Inspecting
Assistant Commissioner. Sub-section (2) of section 125A also empowers the
Inspecting Assistant Commissioner to issue direction to the Income-tax
Officer and the Income-tax Officer is required to exercise his powers and
perform his functions under the Act as per the said direction. Sub-section
(3) thereto clarifies that the Income-tax Officer is also required to
observe and follow such instructions as may be issued to him for his
guidance by the Inspecting Assistant Commissioner within whose jurisdiction
he performs his functions in relation to any particular proceedings or the
initiation of any proceeding under the Act. The proviso clarifies that no
instructions which are prejudicial to the assessee shall be issued before
an opportunity is given to the assessee to be heard.“
13. Thrust of the counsel for the assessee was on sub-Section (4) of
Section 125A with the submission that on the conferment of the concurrent
jurisdiction, provisions of the Act requiring approval and the sanction of
the IAC are not applied and, therefore, the provisions of Section 144B
seize to apply and should not have been invoked by the ITO in the instant
case. It was also argued that the High Court in the impugned judgment has
rightly discussed that with the passing of a specific order dated
29.08.1983 by the CIT directing that all the powers and functions assigned
to the ITO, Central Circle, Jamnagar are thereby available to the IAC,
Central Range II, Ahmedabad, the IAC, Central Range II, Ahmedabad was
brought at par with the ITO, insofar as it pertains to the assessment of
the assessee herein and he did not remain an Officer higher in status than
ITO insofar as assessment of the assesse is concerned and for this reason
also no such reference to the IAC was called for.
14. These arguments are without any force and the result which the
respondent/assessee wants does not flow from the reading of Section 125A of
the Act. A bare reading of sub-Section(4) of Section 125A of the Act
provides that where-
(a) an order is made under sub-section (1), and
(b) the Inspecting Assistant Commissioner exercises the powers or performs
the functions of an Income-tax Officer in relation to any area, or persons
or classes of persons, or incomes or classes of income, or cases or classes
of cases, -
(i) references in this Act or in any rule made thereunder to the Income-tax
Officer shall be construed as references to the Inspecting Assistant
Commissioner, and
(ii) any provision of this Act requiring approval or sanction of the
Inspecting Assistant Commissioner will not be applicable.
15. Hence, the provision of the Act requiring the approval or sanction of
the Inspecting Assistant Commissioner will not be applicable only in those
cases where both the aforementioned conditions (a) and (b) are satisfied.
It would mean that, even though an order is made under section 125A(1)
empowering the Inspecting Assistant Commissioner to perform the functions
of an Income-tax Officer, yet if he has not exercised the power or
performed the function of an Income-tax Officer, the provisions requiring
approval or sanction of the Inspecting Assistant Commissioner will be
applicable. Sub-section (4) nowhere provides that, if some directions by
the Inspecting Assistant Commissioner are issued as provided under sub-
section (2), then provisions requiring approval or sanction of the
Inspecting Assistant Commissioner will not be applicable.
16. In the instant case, we find that it is not the IAC who exercises the
powers or performs the functions of the ITO, even when such a power was
conferred upon him, concurrently with the ITO. The significant feature of
Section 125A of the Act is that even when the IAC is given the same powers
and functions which are to be performed by the ITO in relation to any area
or classes or person or income or classes of income or cases or classes of
cases, on the conferment of such powers, the ITO does not stand denuded of
those powers. With conferment of such powers on the IAC gives him
“concurrent” jurisdiction which means that both, ITO as well as the IAC,
are empowered to exercise those functions including passing assessment
order. It is still open to the ITO to assume the jurisdiction and pass the
order in case the IAC does not exercise those powers in respect of the
assessment year. Provisions of Section 144B would not apply only if the IAC
exercises powers or performs the functions of an ITO. What is important is
the actual exercise of powers and not merely conferment of the powers that
are borne out from the bare reading of sub-Section (4) of Section 125B.
17. The position becomes abundantly clear when we read Section 144B,
particularly, sub-Section (7) thereof, though for the sake of clarity we
reproduce hereunder the entire provision:
“(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."
18. Sub-Section (7), in no uncertain terms, mentions that Section 144B
will not apply only in that case where the IAC “exercises the powers or
performs the functions of an ITO” in pursuance of an order made under
Section 125 or Section 125A.
19. In the instant case, as already noted above, no such power was
exercised or function of an ITO was performed by the IAC. We would like to
point out here that the High Court of Gujarat while dismissing the appeal
of the Revenue failed to take into account the earlier judgment of the Co-
ordinate Bench of the High Court in CIT vs. Shree Digvijay Woollen Mills
Ltd. [1995] 212 ITR 310], which has taken the view that we have expressed
above. We agree with the view taken in CIT vs. Shree Digvijay Woollen Mills
Ltd. thereby allowing Civil Appeal No. 2984 of 2008 and setting aside the
impugned judgment.
20. For these reasons, the Civil Appeal arising out of
SLP(C)No.13766/2011 filed by the assesee against the judgment of the
Allahabad High Court is dismissed affirming the view in the said case which
is reported as Commissioner of Income tax vs. Saraya Sugar Mills P. Ltd.
[2011] 336 ITR 572 (All).
21. The Revenue shall be entitled to costs in both the appeals.
......................J.
[A.K. SIKRI]
REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO(S).2984/2008
COMMISSIONER OF INCOME TAX, GUJARAT CENTRAL APPELLANT(S)
VERSUS
SAURASTHRA CEMENT & CHEM. INDUSTRIES LTD RESPONDENT(S)
WITH
CIVIL APPEAL NO(S).4971/2016
(Arising out of SLP(C) No. 13766/2011)
M/S. SARAYA SUGAR MILLS PVT. LTD. APPELLANT(S)
VERSUS
COMMISSIONER OF INCOME -A WARD, GORAKHPUR RESPONDENT(S)
J U D G M E N T
A.K. SIKRI,J.
Leave granted in SLP(C) No. 13766/2011.
2. The Commissioner of Income Tax, Gujarat Central, Ahmedabad- the
appellant (hereinafter referred to as “the Revenue”), is aggrieved by the
judgment dated 20.01.2005 passed by the High Court of Gujarat whereby the
High Court has dismissed the appeal of the Revenue affirming the order of
the Income Tax Appellate Tribunal (hereinafter referred to as “ITAT”)
holding that the assessment order dated 01.09.1984 passed by the Assessing
Officer in respect of Assessment Year 1981-82 was time barred. We may
mention at the outset that in terms of Section 153 of the Income Tax Act,
1961 (hereinafter referred to as “the Act”), time limit for completion of
the assessment to be made under Sections 143 or 144 of the Act is at any
time after the expiry of two years from the end of the Assessment Year in
which the income is first assessable, where Assessment Year is commencing
on or after 01.04.1969. On this reckoning, the date by which assessment
should have been carried out by the Assessing Officer in respect of
Assessment Year 1981-82 was 31.03.1984. The assessment order was, however,
passed on 01.09.1984. The Revenue claimed that this assessment order was
still within the prescribed period of limitation because of the reason that
on 13.03.1984 draft assessment order was passed pertaining to the aforesaid
Assessment Year and forwarded to the Inspecting Assistant Commissioner,
Central Range-II, Ahmedabad (hereinafter referred to as “the IAC”) on
13.03.1984 (i.e. before 31.03.1984). The IAC issued instructions under
Section 144B of the Act on 31.08.1984 and based on that the Assessing
Officer framed the assessment on 01.09.1984 under Section 143(3) of the Act
read with Section 144B of the Act.
3. The position that was taken by the Revenue was that the period from
13.03.1984 to 31.03.1984, when the matter was before the IAC, had to be
excluded while computing the period of limitation of two years and once the
period is excluded the assessment order was passed within the period of
limitation. The contention of the respondent/assessee, on the other hand,
was that, by order dated 29.08.1983, the Commissioner of Income Tax,
Central, Ahmedabad (hereinafter referred to as “the CIT”) passed under
Section 125A(1) of the Act had assigned all the powers and functions of the
Income Tax Officer, Central Circle, Jamnagar (hereinafter referred to as
“the ITO”) to the IAC. This order was passed specifically in the case of
the respondent herein which became effective from 01.09.1983. It was their
submission that once, by virtue of the aforesaid order dated 29.08.1983
passed by the CIT, the IAC is conferred concurrent jurisdiction, along with
ITO, empowering him to make assessment order in the case of the assessee,
there was no question of forwarding the draft assessment order by the ITO
to the IAC and this unnecessary and superfluous exercise would not enure to
the advantage of the Revenue giving it the benefit of the period from
13.03.1984 to 31.08.1984 while calculating the period of limitation of two
years provided under Section 153 of the Act. In nutshell, the submission
was that the conferment of the powers of the Assessing Officer upon the
IAC, he is in the same position as the ITO and draft assessment order could
not be sent to him who was brought at par with the ITO.
4. The Assessing Officer was not amused by the aforesaid contention of
the assessee and repelled the same resulting in framing of the assessment
order dated 01.09.1984. However, the ITAT found force in the said
submission of the assessee and allowed the appeal thereby setting aside the
assessment order. The High Court, as pointed out above, has upheld this
view of the ITAT, resulting in the dismissal of the appeal of the
appellant.
5. Before proceeding further, we may mention that in the appeal arising
out of SLP(C) No.13766/2011 which is preferred by the assessee-M/s. Saraya
Sugar Mills Pvt. Ltd., in the same circumstances, on the same question, the
Allahabad High Court has taken a contrary view. The High Court of Allahabad
has found merit in the stand taken by the Revenue and excluded the period
during which the draft assessment was forwarded to the IAC till the date of
receiving the instructions from the IAC under Section 144B of the Act. We
are, thus, faced with two conflicting views and to decide as to which High
Court has correctly decided the issue of limitation.
6. We have already stated, in detail, the facts of Civil Appeal No. 2984
of 2008. Before we embark upon our detailed discussion on the issue, we
would like to place on record the relevant provisions of the Act which have
bearing on the issue. As mentioned above, Section 153 prescribes limitation
of two years for making assessment under Section 143 or Section 144 of the
Act. Avoiding those portions of these Sections with which we are not
concerned, the material provisions are re-produced below:
"153. Time-limit for completion of assessments and reassessments. - (1) No
order of assessment shall be made under section 143 or section 144 at any
time after -
(a) the expiry of - ...
(iii) two years from the end of the assessment year in which the income was
first assessable, where such assessment year is an assessment year
commencing on or after the 1st day of April, 1969; or....
whichever is latest. . . .
(3) The provisions of sub-sections (1) and (2) shall not apply to the
following classes of assessments, reassessments and re-computations which
may, subject to the provisions of sub-section (2A), be completed at any
time - ...
(ii) where the assessment, reassessment or re-computation is : made on the
assessee or any person in consequence of or to give effect to any finding
or direction contained in an order under section 250, 254, 260, 262, 263 or
264 or in an order of any court in a proceeding otherwise than by way of
appeal or reference under this Act;...
Explanation 1. - In computing the period of limitation for the purposes of
this section - . . .
(iv) the period (not exceeding one hundred and eighty days) commencing from
the date on which the Income-tax Officer forwards the draft order under sub-
section (1) of section 144B to the assessee and ending with the date on
which the Income-tax Officer receives the directions from the Inspecting
Assistant Commissioner under sub-section (4) of that section, or, in a case
where no objections to the draft order are received from the assessee, a
period of thirty days, or (iva) the period (not exceeding sixty days)
commencing from the date on which the Income-tax Officer received the
declaration under sub-section (1) of section 158A and ending with the date
on which the order under sub-section (3) of that section is made by him,
or. . . .
shall be excluded. . . ."
7. Section 123 of the Act lays down the jurisdiction of the IAC and
reads as under:
"123. Jurisdiction of Inspecting Assistant Commissioners - (1) The
Inspecting Assistant Commissioners shall perform their functions in respect
of such areas or of such persons or classes of persons or of such incomes
or classes of income or of such cases or classes of cases as the
Commissioner may direct.
(2) Where any directions issued under sub-section (1) have assigned to two
or more Inspecting Assistant Commissioners, the same area or the same
persons or classes of persons or the same incomes or classes of income or
the same cases or classes of cases, they shall have concurrent jurisdiction
and shall perform such functions in relation to the said area or persons or
classes of persons or incomes or classes of income or cases or classes of
cases as the Commissioner may, by general or special order in writing,
specify, for the distribution and allocation of the work to be performed.”
8. Section 124, on the other hand, deals with the jurisdiction of the
Income Tax Officer and reads as under:
“124. Jurisdiction of Income-tax Officers. - (1) Income-tax Officers shall
perform their functions in respect of such areas or of such persons or
classes of persons or of such incomes or classes of income or of such cases
or classes of cases as the Commissioner may direct.
(2) Where any directions issued under sub-section (1) have assigned to two
or more Income-tax Officers, the same area or the same persons or classes
of persons or the same incomes or classes of income or the same cases or
classes of cases, they shall have concurrent jurisdiction and shall perform
their functions in relation to the said area, or persons or classes of
persons, or incomes or classes of income, or cases or classes of cases, in
accordance with such general or special orders in writing as the
Commissioner or the Inspecting Assistant Commissioner authorised by the
Commissioner in this behalf may make for the purpose of facilitating the
performance of such functions.
(3) Within the limits of the area assigned to him, the Income-tax Officer
shall have jurisdiction -
(a) in respect of any person carrying on a business or profession, if the
place at which he carries on his business or profession is situate within
the area, or where his business or profession is carried on in more places
than one, if the principal place of his business or profession is situate
within the area, and
(b) in respect of any other person residing within the area.
(4) Where a question arises under this section as to whether an Income-tax
Officer has jurisdiction to assess any person, the question shall be
determined by the Commissioner; or where the question is one relating to
areas within the jurisdiction of different Commissioners, by the
Commissioners concerned or, if they are not in agreement, by the Board.
(5) No person shall be entitled to call in question the jurisdiction of an
Income-tax Officer -
(a) after the expiry of one month from the date on which he has made a
return under sub-section (1) of section 139 or after the completion of the
assessment, whichever is earlier :-
(b) where he has made no such return, after the expiry of the time allowed
by the notice under sub-section (2) of section 139 or under section 148 for
the making of the return.
(6) Subject to the provisions of sub-section (5), where an assessee calls
in question the jurisdiction of an Income-tax Officer, then the Income- tax
Officer shall, if not satisfied with the correctness of the claim, refer
the matter for determination under sub-section (4) before assessment is
made.
(7) Notwithstanding anything contained in this section or in section 130A,
every Income-tax Officer shall have all the powers conferred by or under
this Act on an Income-tax Officer in respect of any income accruing or
arising or received within the area for which he is appointed.
9. Likewise, Section 125 of the Act prescribes the powers of the
Commissioner with respect to specified areas, cases, persons etc. Section
125A of the Act, to which we shall advert at a later stage, discusses the
concurrent jurisdiction of IAC and ITO under certain circumstances.
Further, Section 130A of the Act deals with competency of the ITO to
perform any function or functions under certain specified circumstances.
Sections 131 to 136 provide for various powers of the Income Tax
Authorities with which we are not concerned in the present case. The
important provisions directly relevant for the controversy in issue are
contained in Chapter XIV, namely, Sections 144A and 144B of the Act.
Section 144A authorises the IAC to issue directions in certain cases and
Sections 144B provides that in certain cases reference is to be made to the
IAC by the ITO before framing the final assessment order. Under Section
144A, the IAC may, on his own motion or on a reference being made to him by
the ITO or on the application of an assessee, call for and examine the
record of any proceedings in which the assessment is pending and, if he
considers that, having regard to the nature of the case or the amount
involved or for any other reason, it is necessary or expedient so to do, he
may issue such directions as he thinks fit for the guidance of the ITO to
enable him to complete the assessment. Directions so issued are binding on
the ITO.
10. Section 144B of the Act deals with a situation where the ITO intends
to pass an assessment order which is in variation to the income or loss
that is shown in the return of the assessee and the amount of such
variation exceeds the amount that can be fixed by the Board under sub-
Section (6) thereof. In such a situation, the ITO is under obligation to
first forward a draft of the proposed order of assessment to the assessee
who can file his objections within 7 days thereof and if the objections are
received, the ITO is to forward the draft order together with the
objections to the IAC. The IAC, after considering the draft order and the
objections, is empowered to issue such directions as he thinks fit for the
guidance of the ITO to complete the assessment.
11. From the reading of Section 153, the period (not exceeding 180 days)
commencing from the date on which the ITO forwards the draft order under
sub-Section (1) of Section 144B to the assessee and ending with the date
on which the ITO receives the directions from the IAC under sub-Section (4)
of Section 144B, is to be excluded while computing the period of
limitation.
12. There is no quarrel up to this stage. However, as pointed out in the
earlier portion of this judgment, as per the assessee when the IAC was
vested/empowered with same powers as that of ITO, by specific order of the
CIT in respect of the respondent/assessee itself and with the conferring of
said powers the IAC and ITO had concerned jurisdiction over the assessee,
there was no reason to send the draft assessment order by the ITO to the
IAC. To appreciate this contention, we at this stage, reproduce the
provisions of Section 125A of the Act under which concurrent powers can be
assigned to the IAC as well.
“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 performed concurrently by the Inspecting Assistant
Commissioner.
(2) Where under sub-section (1), an Inspecting Assistant Commissioner
exercises concurrent jurisdiction with one or more Income-tax Officers in
respect of any area, or persons or classes of persons, or incomes or
classes of income, or cases or classes of cases, the Income-tax Officer or
Income-tax Officers shall exercise the powers and perform the functions
under this Act in relation-thereto as the Inspecting Assistant Commissioner
may direct.
(3) Without prejudice to the generality of the provisions contained in sub-
section (3) of section 119, every Income-tax Officer shall also observe and
follow such instructions as may be issued to him for his guidance by the
Inspecting Assistant Commissioner within whose jurisdiction he performs his
functions in relation to any particular proceeding or the initiation of any
proceeding under this Act :
Provided that no instructions, which are prejudicial to the assessee, shall
be issued before an opportunity is given to the assessee to be heard.
Explanation. - For the purposes of this sub-section, no instruction as to
the lines on which an investigation connected with the assessment should be
made shall be deemed to be an instruction prejudicial to the assessee.
(4) Where an order is made under sub-section (1) and the Inspecting
Assistant Commissioner exercises the powers or performs the functions of an
Income-tax Officer in relation to any area, or persons or classes of
persons, or incomes or classes of income, or cases or classes of cases,
references in this Act or in any rule made thereunder to the Income-tax
Officer shall be construed as references to the Inspecting Assistant
Commissioner and any provision of this Act requiring approval or sanction
of the Inspecting Assistant Commissioner shall not apply.
12. From the aforesaid sections, it is apparent:
(i) Under section 123 of the Act, the Inspecting Assistant Commissioners
have jurisdiction in respect of such areas or of such persons or classes of
persons or of such incomes or classes of income or of such cases or classes
of cases as per the direction of the Commissioner. Where there are two or
more Inspecting Assistant Commissioners, they are having concurrent
jurisdiction and are required to exercise their powers and perform their
functions as per the order in writing made by the Commissioner specifying
for the distribution and allocation of the work to be performed.
(ii) Similarly, under section 124(1), the Income-tax Officers are also
required to perform their functions as per the direction of the
Commissioner. If there are two or more Income-tax Officers, they are having
concurrent jurisdiction and are required to perform their functions as per
the general or special orders in writing made by the Commissioner or
Inspecting Assistant Commissioner authorised by the Commissioner in this
behalf. Sub-section (3) provides that within the limits of the area
assigned to him, the Income-tax Officer shall have jurisdiction in respect
of any person carrying on business or profession, if the place at which he
carries on his business or profession is situate within the area, or where
his business or profession is carried on in more places than one, if the
principal place of his business or profession is situate within the area
and in respect of any other person residing within the area. Sub-section
(4) provides as to who shall decide the dispute arising with regard to the
jurisdiction of an Income-tax Officer to assess any person. Sub-section (5)
provides that no person shall be entitled to call in question the
jurisdiction of an Income-tax Officer beyond the time-limit prescribed
therein;
(iii) In section 125, an exception is carved out with regard to the
jurisdiction of an Income-tax Officer which provides that the Commissioner
may by general or special order in writing direct that the powers conferred
on the Income-tax Officer by or under the Act shall, in respect of any
specified case or class of cases or of any specified person or class of
persons, be exercised by the Inspecting Assistant Commissioner. By an order
of the Commissioner under section 125(1)(a), the Income-tax Officer is
divested of his jurisdiction to deal with the specified case or class of
cases or specified person or persons. Hence, even though the Income-tax
Officer is having jurisdiction in respect of any specified case or person,
the Commissioner is empowered to direct that the said powers shall be
exercised by the Inspecting Assistant Commissioner. Where such order is
made under section 125(2)(a), any provision of the Act requiring approval
or sanction of the Inspecting Assistant Commissioner will not be
applicable.
(iv) Section 125A carves out further exception with regard to the
jurisdiction of an Income-tax Officer. It does not oust the jurisdiction of
Income Tax Officer but confers concurrent jurisdiction on the Inspecting
Assistant Commissioner. It provides that the Commissioner may, be 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 are, or persons of
classes of persons, or incomes or classes of income, or cases or classes of
cases, shall be exercised or performed concurrently by the Inspecting
Assistant Commissioner. Sub-section (2) of section 125A also empowers the
Inspecting Assistant Commissioner to issue direction to the Income-tax
Officer and the Income-tax Officer is required to exercise his powers and
perform his functions under the Act as per the said direction. Sub-section
(3) thereto clarifies that the Income-tax Officer is also required to
observe and follow such instructions as may be issued to him for his
guidance by the Inspecting Assistant Commissioner within whose jurisdiction
he performs his functions in relation to any particular proceedings or the
initiation of any proceeding under the Act. The proviso clarifies that no
instructions which are prejudicial to the assessee shall be issued before
an opportunity is given to the assessee to be heard.“
13. Thrust of the counsel for the assessee was on sub-Section (4) of
Section 125A with the submission that on the conferment of the concurrent
jurisdiction, provisions of the Act requiring approval and the sanction of
the IAC are not applied and, therefore, the provisions of Section 144B
seize to apply and should not have been invoked by the ITO in the instant
case. It was also argued that the High Court in the impugned judgment has
rightly discussed that with the passing of a specific order dated
29.08.1983 by the CIT directing that all the powers and functions assigned
to the ITO, Central Circle, Jamnagar are thereby available to the IAC,
Central Range II, Ahmedabad, the IAC, Central Range II, Ahmedabad was
brought at par with the ITO, insofar as it pertains to the assessment of
the assessee herein and he did not remain an Officer higher in status than
ITO insofar as assessment of the assesse is concerned and for this reason
also no such reference to the IAC was called for.
14. These arguments are without any force and the result which the
respondent/assessee wants does not flow from the reading of Section 125A of
the Act. A bare reading of sub-Section(4) of Section 125A of the Act
provides that where-
(a) an order is made under sub-section (1), and
(b) the Inspecting Assistant Commissioner exercises the powers or performs
the functions of an Income-tax Officer in relation to any area, or persons
or classes of persons, or incomes or classes of income, or cases or classes
of cases, -
(i) references in this Act or in any rule made thereunder to the Income-tax
Officer shall be construed as references to the Inspecting Assistant
Commissioner, and
(ii) any provision of this Act requiring approval or sanction of the
Inspecting Assistant Commissioner will not be applicable.
15. Hence, the provision of the Act requiring the approval or sanction of
the Inspecting Assistant Commissioner will not be applicable only in those
cases where both the aforementioned conditions (a) and (b) are satisfied.
It would mean that, even though an order is made under section 125A(1)
empowering the Inspecting Assistant Commissioner to perform the functions
of an Income-tax Officer, yet if he has not exercised the power or
performed the function of an Income-tax Officer, the provisions requiring
approval or sanction of the Inspecting Assistant Commissioner will be
applicable. Sub-section (4) nowhere provides that, if some directions by
the Inspecting Assistant Commissioner are issued as provided under sub-
section (2), then provisions requiring approval or sanction of the
Inspecting Assistant Commissioner will not be applicable.
16. In the instant case, we find that it is not the IAC who exercises the
powers or performs the functions of the ITO, even when such a power was
conferred upon him, concurrently with the ITO. The significant feature of
Section 125A of the Act is that even when the IAC is given the same powers
and functions which are to be performed by the ITO in relation to any area
or classes or person or income or classes of income or cases or classes of
cases, on the conferment of such powers, the ITO does not stand denuded of
those powers. With conferment of such powers on the IAC gives him
“concurrent” jurisdiction which means that both, ITO as well as the IAC,
are empowered to exercise those functions including passing assessment
order. It is still open to the ITO to assume the jurisdiction and pass the
order in case the IAC does not exercise those powers in respect of the
assessment year. Provisions of Section 144B would not apply only if the IAC
exercises powers or performs the functions of an ITO. What is important is
the actual exercise of powers and not merely conferment of the powers that
are borne out from the bare reading of sub-Section (4) of Section 125B.
17. The position becomes abundantly clear when we read Section 144B,
particularly, sub-Section (7) thereof, though for the sake of clarity we
reproduce hereunder the entire provision:
“(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."
18. Sub-Section (7), in no uncertain terms, mentions that Section 144B
will not apply only in that case where the IAC “exercises the powers or
performs the functions of an ITO” in pursuance of an order made under
Section 125 or Section 125A.
19. In the instant case, as already noted above, no such power was
exercised or function of an ITO was performed by the IAC. We would like to
point out here that the High Court of Gujarat while dismissing the appeal
of the Revenue failed to take into account the earlier judgment of the Co-
ordinate Bench of the High Court in CIT vs. Shree Digvijay Woollen Mills
Ltd. [1995] 212 ITR 310], which has taken the view that we have expressed
above. We agree with the view taken in CIT vs. Shree Digvijay Woollen Mills
Ltd. thereby allowing Civil Appeal No. 2984 of 2008 and setting aside the
impugned judgment.
20. For these reasons, the Civil Appeal arising out of
SLP(C)No.13766/2011 filed by the assesee against the judgment of the
Allahabad High Court is dismissed affirming the view in the said case which
is reported as Commissioner of Income tax vs. Saraya Sugar Mills P. Ltd.
[2011] 336 ITR 572 (All).
21. The Revenue shall be entitled to costs in both the appeals.
......................J.
[A.K. SIKRI]
......................J.
[ROHINTON FALI NARIMAN]
NEW DELHI;
MAY 02, 2016.
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