Kerala H.C : Whether, on the facts and in the circumstances of the case, the additions of Rs. 13,500, Rs. 25,000 and Rs. 22,500, as directed by the IAC under s. 144A are barred by limitation?

High Court Of Kerala

CIT vs. N. Krishnan

Section 153, Expln. 1(iv), 144A, 144B

Asst. Year 1974-75

T. Kochu Thommen & K.P. Radhakrishna Menon, JJ.

IT Ref. No. 215 of 1982

25th November, 1987 

Counsel Appeared

Menon, for the Applicant : Sudeer Gopal, for the Respondent

KOCHU THOMMEN, J.:

The following question has been, at the instance of the Revenue, referred to us by the Tribunal, Cochin Bench :

“Whether, on the facts and in the circumstances of the case, the additions of Rs. 13,500, Rs. 25,000 and Rs. 22,500, as directed by the IAC under s. 144A are barred by limitation?”

In respect of the asst. yr. 1974-75, the ITO in exercise of his power under s. 144B of the IT Act, 1961, proposed to make a variation in the income returned by the assessee for the previous year in regard to certain items. The draft order was forwarded to the assessee calling for his objections. In regard to four of the items on which variation was proposed to be made, the assessee’s submissions were accepted and the amounts were computed accordingly. In regard to the other items, the assessee raised objections. The officer accordingly forwarded the draft order and the objections of the assessee to the IAC. The IAC, after considering the objections and after hearing the assessee’s representative, recomputed the amounts in regard to the four items on which the ITO had originally accepted the submissions made by the assessee. It is stated in the order of the IAC that the four items in question were recomputed in concurrence with the assessee’s representative and it was on the basis of such concurrence that the additions were made. Three of the additions so made by the IAC were the subject-matter of challenge by the assessee in his appeal before the AAC, but without success. The Tribunal, on further appeal by the assessee, however, accepted the assessee’s contentions and held that the recomputation of the items in question was made by the IAC in the purported exercise of his power under s. 144A after the normal period of assessment prescribed under s. 153(1)(iii) had expired and was, therefore, time-barred. The Tribunal accordingly set aside the additions made on the basis of the recomputation in regard to the three items which are now the subject-matter of the question referred to us.

2. Counsel for the Revenue contends that in a case where reference has been validly made under s. 144B before the assessment is completed, the period of limitation, prescribed under s. 153(1)(a) (iii), for completion of the assessment is extended by reason of the exclusion, in computing that period of the time specified under Expln. 1(iv) to s. 153. During such extended period, it is open to the IAC to exercise his power under s. 144A and give such directions as he deems fit to the ITO in regard to any matter connected with the assessment, even when such a matter does not figure in the draft order and the normal period prescribed by s. 153(1) has expired. Counsel submits that by recourse to s. 144A and in exercise of the suo motu power conferred by that section, it is open to the IAC to give any direction which he deems necessary to the ITO and the officer is bound to carry out such a direction. Counsel further submits that the recomputation of the amounts as regards the four items on which the assessee raised no objections was an exercise of the suo motu power under s. 144A(1) and such exercise of power was not barred by limitation by reason of the extension of item in terms of Expln. 1(iv) to s. 153 consequent on the reference made under s. 144B.

Counsel for the assessee, Shri Sudheer Gopal, however, submits that the period of limitation prescribed under s. 153(1)(a)(iii) is extended in terms of Expln. 1 only to the extent that the ITO is authorised to make a reference under s. 144B. Such extended period cannot be availed of for any other purpose. The suo motu power under s. 144A can be exercised only within the normal period of two years prescribed by s. 153(1)(a)(iii). Counsel further submits that, in any view, in regard to the four items on which the amounts were recomputed by the IAC, there was no reference as the amounts in regard to these items had been varied by the ITO in accordance with the submission of the assessee. In regard to such items, the IAC, counsel says, was not entitled to make a recomputation, even if it was done with the concurrence of the assessee.

The normal period of two years prescribed by s. 153(1)(a)(iii) for completion of assessment is automatically extended for a further period, as provided under Expln. 1(iv) to that section, as soon as a draft order under s. 144B(1) is forwarded to the assessee by the ITO. This is because Expln. 1 to s. 153 provides for exclusion, in the specified cases, of the specified length of time in the computation of the relevant period of limitation. When the time is so extended, there being only one assessment, all questions relating to that assessment are open to be dealt with during the extended period. Since the IAC has power under s. 144A to issue directions either suo motu or on a reference or on an application by an assessee, he may suo motu issue directions whenever he finds it necessary to do so in regard to any matter relating to the assessment. If directions are issued by him on matters not arising from the reference, as in the present case, such directions emanate from his suo motu power under s. 144A. The time for completing the assessment having been statutorily extended by reason of the reference for the additional period prescribed under Expln. 1(iv) to s. 153, the recomputation of the amounts by the IAC, whether or not with the concurrence of the assessee, on items on which the assessee had not raised any objection on receipt of the draft order, was a perfectly valid exercise of power in terms of s. 144A(1).

Accordingly, we answer the question in the negative, that is, in favour of the Revenue and against the assessee. We make it clear that we express no view as regards the quantum of the additions made on the three items in question, for that was not a matter which, although raised, was dealt with by the Tribunal.

We direct the parties to bear their respective costs in the tax referred case.

[Citation : 172 ITR 604]

Malcare WordPress Security