(Appeal by Special Leave from the Judgment and order, dated September 7, 8, 1993 of the Gujarat High Court in Special Civil Application No.574 of 1980).

Income-tax---

----Return---Revised return---Draft assessment order---Revised return filed after draft assessment order-referred with assessee's objections to I.A.C.-- I.T.O. not entitled to entertain such revised return---Indian Income Tax Act, 1961, Ss.139(5) & 144-B---[Shri Vallabh Glass Works Ltd. v. I.T.O. (1995) 212 ITR 433 (Guj.) overruled].

Subsection (5) of section 139 of the Income Tax Act, 1961, which permits the filing of revised returns at any time before the completion of the assessment has to be construed and understood in a reasonable manner. In cases where section 144-B of the Act is applicants, the right has to be exercised before the making of the draft assessment order. Once a draft assessment order is made and the matter is referred to the Inspecting Assistant Commissioner on receiving the assessee's objections, the function of the Income-tax Officer practically comes to an end. Thereafter, the only thing remaining for him to do is to pass a final order in accordance with the directions given by the Inspecting Assistant Commissioner. He cannot vary or depart from those directions. If, even after the making of such a reference, the assessee is held entitled to file a revised return that would involve duplication of work and multiplicity of proceedings. It may mean re-doing the entire exercise over again The Act does not provide for such a situation.

For the assessment year 1977-78, the appellant filed its returns. Thereafter, it filed a revised return and then a second revised return. After making the appropriate enquiry, the Income-tax Officer made a draft assessment order under section 1448 of the Income Tax Act, 1961, and sent a copy to the appellant. The appellant submitted its objections. Thereafter, the Income-tax Officer referred the matter to the Inspecting Assistant Commissioner as required by section 144-B. While the matter was pending before the Inspecting Assistant Commissioner, the appellant submitted a third revised return. The Income-tax Officer rejected the third return. The appellant filed a writ petition, which the High Court dismissed. On appeal to the Supreme Court:

Held accordingly, affirming the decision of the High Court, that the appellant was not entitled to file a revised return after the Income-tax Officer had made a draft order and after receiving the objections of the appellant, had referred the matter to the Inspecting Assistant Commissioner for directions.

Panchmahal Steel Ltd. v. U.A. Joshi, I.T.O. (1994) 210 ITR 723 affirmed.

Shri Vallabh Glass Works Ltd. v. I.T.O. (1995) 212 ITR 433 (Guj.) overruled.

E.R. Kumar, P.H. Parekh and N.K. Sahoo, Advocates for Appellant.

K.N. Shukla, Senior Advocate (Ranbir Chandra and B. Krishna Prasad, Advocates with him) for Respondents.

JUDGMENT

This appeal is preferred by the assessee against the judgment of the Gujarat High Court (see (1994) 210 I.T.R. 723), dismissing its writ petition.

For the assessment year 1977-78, the assessee filed its returns. It appears that thereafter it filed a revised return and then a second revised return. After making the appropriate inquiry, the Income-tax Officer made a draft assessment order in view of the then existing provisions in section 1448 of the Income-tax Act. He sent a copy of the draft assessment order to the assessee as required by the said provision to which the assessee submitted its objection. Thereupon, the Income-tax Officer referred the matter to the Inspecting Assistant Commissioner, again as required by section 144B of the Act. While the matter was pending before the Inspecting Assistant Commissioner, the assessee came forward with the third revised return The Income-tax Officer rejected the third revised return by his letter, dated the March 5, 1980. In this letter, he stated that inasmuch as he had already made a draft assessment order and communicated the same to the assessee and has, after receiving the assessee's objections, referred the matter to the Inspecting Assistant Commissioner he can no longer entertain the said revised return. Thereupon, the appellant approached the High Court by way of a writ petition.

The High Court rejected the appellant's contention that he has a right to file a revised return until the final assessment order is made. It held that once the draft assessment order was made, the Income-tax Officer's function is practically over and that thereafter, there is no question of entertaining a revised return. Accepting such a return may involve, the High Court rightly pointed out, redoing the entire exercise done till then and may also require recalling the reference made to the Inspecting Assistant Commissioner.

We are of the opinion that the reasons given and the conclusion arrived at by the High Court are unexceptionable.

The assessee is expected to file a return within the time prescribed by subsection (1) of section 139. In some, cases, an individual notice may also be given as contemplated by subsection (2) of section 139 In addition to it, the assessee has been given a right to file a return at any time before the assessment is made by subsection (4) of section 139. A further right is given to the assessee, who has filed a return under subsection (1) or (2) of section 139, to file a revised return, at any time before making the assessment, if he discovers any omission or mistake in the return filed:

Subsection (5) of section 139, as it stood at the relevant time, read:

"If any person having furnished a return under subsection (1) or subsection (2), discovers any omission or any wrong statement therein, he may furnish a revised return at any time before the assessment is made. "

The question is whether this right can be exercised even after the Income-tax Officer makes a draft order and after receiving the objections of the assessee, refers the matter to the Inspecting Assistant Commissioner for directions.

"144-B. (1) Notwithstanding anything contained in this Act, where in an assessment to be made under subsection (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 subsection (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 assessee.

(2) On receipt of the draft order, the assessee may forward his objections, if any, to such variation to the Income-tax Officer within seven days of the receipt by him of the draft order 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 objection, 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 subsection before an opportunity is given to the assessee to be heard.

(5) Every direction issued by the Inspecting Assistant Commissioner under subsection (4) shall be binding on the Income-tax Officer.

(6) For the purpose of subsection (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 as it deems tit:

Provided that different amounts may be fixed for different areas:

Provided further that, the amount fixed under this subsection shall, in no case, be less than twenty-five thousand rupees.

(7) Nothing 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 135-A."

A reading of section 144-B shows that once a draft order is made and the matter is referred to, the Inspecting Assistant Commissioner on receiving the objections of the assessee, the function of the Income-tax Officer practically comes to an end. Thereafter, the only remaining thing to do by him is to pass a final order of assessment pursuant to and in accordance with the directions given by the Inspecting Assistant Commissioner. He cannot vary or depart from the directions given by the Inspecting Assistant Commissioner. If the assessee's contention is accepted and if it is held that even after making such a reference, the assessee is entitled to a revised return, it may mean re-doing the entire exercise over again. It may also happen that as a result of such re-doing, the reference already made to the Inspecting Assistant Commissioner may become unnecessary and has to be called back. The Act, however, does not provide for such a situation.

Subsection (5) has to be construed and understood in the context of section 139, indeed in the context of the entire enactment. It has to be construed and understood in a reasonable manner. Once the Income-tax Officer has done all that he has to do under the Act and makes a draft order and then refers to the Inspecting Assistant Commissioner as required by section 144-B, permitting the assessee to file a revised return would involve duplication of work and multiplicity of proceedings. By saying so, we are not rendering subsection (5) nugatory. All that it means is that the said right has to be exercised before the making of draft assessment order in cases where section 144-B was applicable.

Learned counsel for the appellant brought to our notice another judgment of the Gujarat High Court in Shri Vallabh Glass Works Ltd. v. I.T.O. (1995) 212.I.T.R. 433, S.C.A. No.2728 of 1981, in support of his contention. There it appears, after the draft assessment order was made and the matter referred to the Inspecting Assistant Commissioner, a revised return was filed by the assessee. The Inspecting Assistant Commissioner rejected it and passed final orders. On a writ petition being filed, the High Court held that the Inspecting Assistant Commissioner was bound to take notice of the revised return since by that date no final order of assessment was made. We do not think that the view taken in the later judgment is consistent with the provisions of section 139(5) read with section 144-B as it then stood. In our opinion the view taken in the judgment under appeal is the correct one and consistent with the provisions of the Act. The appeal accordingly fails and is dismissed. No costs.

M.B.A./1452/FCAppeal dismissed.