COMMISSIONER OF INCOME-TAX VS SHAHZADI BEGUM, 1999 PTD-ANDHRA-PRADESH-HIGH-COURT-INDIA 463 (1996)

(a) Income-tax---

----Assessment---Draft assessment order under 5.144-B---Limitation for assessment---Extension of time in case of draft assessment order-- Computation of period _of extension---Meaning of "forward" in S.144-$ Indian Income Tax Act, 1961---Draft assessment order would be deemed to have been forwarded on the date on which it was given to a process-server or delivered at post office or handed over to a representative of assessee-- Indian Income Tax Act, 1961, Ss .144-B and 153(1)(a); Expln.l(iv).

(b) Words and phrases---

----"Forward"---Meaning of.

A plain reading of section 144-B of the Income Tax Act, 1961, shows, that where, in an assessment to be made under subsection (3) of section 143, the Assessing Officer proposes to make any variation either in the income or loss returned, which is prejudicial to the assessee, and the amount of such variation exceeds the amount fixed by the Central Board of Direct Taxes, the Assessing Officer has to forward a draft of the proposed order of assessment to .the assessee. The limitation for the exercise, contemplated under section 144-B, is to be found in section 153(1)(a) read with clause (iv) of Explanation 1 thereto. Section 153(1)(a) of the Act prescribes a period of two years from the end of the assessment year in which the income was first assessable, for making an order of assessment. This period of two years stands extended by virtue of clause (iv) of Explanation 1 in case of application of section 144-B. However, there is an outer limit of 180 days fixed for completing the exercise and the period would stand extended only by 180 days and no more. The period by which the limitation is extended, commences from the date on which the Assessing Officer forwards the draft order under subsection (1) of section 144-B of the Act to the assessee and ends with the date on which the Assessing Officer receives the direction from the Deputy Commissioner under subsection (4) of that section; or where no objections to the draft order are received from the assessee, the period of limitation would be extended only by 30 days. The word "forward" is a word of common usage and has to be understood in its usual meaning. From the dictionary meaning of the word "forward" the connotation of the expression is abundantly clear. It denotes sending forward or sending towards the place of destination or transmission. In all these situations the thing forwarded moves from the place of its origin towards its destination. That would show that it has left the place from which it was forwarded. It follows that on the date when a letter is despatched in the usual course, either through special messenger, or by handing it over to a responsible person for posting in the normal course or when a letter is handed over at the post office for delivery to the addressee, it can be said that the letter is forwarded on that date. The draft assessment order would be deemed to have been forwarded on the date on which it was given for purposes of service on the assessee, to any process-server of the Income-tax Department or when it was delivered at the post office or when it was handed over to any person, for posting the same through the media of the post office or when it is handed over to the representative of the assessee:

Held, that since in the instant case the Income-tax Officer handed over the draft order to the representative of the assessee on March 29, 1979, that would be the date of forwarding of the draft order. The assessment was for the assessment year 1976-77. So, the period of limitation from March 29, 1979 till September 22, 1979, the date on which the approval of the Deputy Commissioner (IAC) was received by the Assessing Officer, would be excluded. By excluding the said period the order ought to have been passed on or before September 24, 1979', but it was passed by the Assessing Officer on' September 26, 1979. Thus, the order was barred by limitation.

Goodyear India Ltd. v. State of Haryana (1991) 188 ITR 402 (1990) 76 STC 71 (SC) ref.

S.R. Ashok for the Commissioner.

Nemo for the Assessee

JUDGMENT

SYED SHAH MOHAMMED QUADRI, J. ---On the application of the Revenue, filed under section 256(2) of the Income Tax Act, 1961 (for short "the short "the Act"), this Court issued a direction to the Income-tax Appellate Tribunal to state the case and refer the following questions of law for opinion, by its order in I.T.C No.233 of 1985 passed on September 2, 1986. The questions read as follows:

"(1)Whether, on the facts and in the circumstances of the case, the Appellate Tribunal is justified in law in cancelling the assessment as time-barred by two days?

(2) Whether, on the facts and in the circumstances of the case, the Appellate Tribunal is correct in law in interpreting the word 'forward' in Explanation 1, sub-clause (iv) under section 153 to mean 'despatch' and not 'issue'?

(3) If the answer to the above question is' in the affirmative, whether it could not be said that, on the facts and in the circumstances of the case, the draft order was effectively and constructively forwarded on March 27, 1979, viz., the date of issue of the said order?"

The assessee is an individual. In the assessment year 1976-77, the assessee filed her return. However, the Income-tax Officer considered it a fit case to proceed under section 144-B of the Act. He prepared a draft assessment order and signed it on March 27, 1979. That order appears to have been served on the representative of the assessee on March- 29, 1979. The objections of the assessee were filed on April 12, 1979. The draft assessment order and the objections of the assessee were sent to the Inspecting Assistant Commissioner of Income-tax (IAC) for approval. The Inspecting Assistant Commissioner granted his approval on September 22, 1979. Thereupon, the order of the assessment was passed by the Income-tax Officer on September 26, 1979. That order of the Income-tax Officer was questioned before the Commissioner of Income-tax (Appeals), inter alia, on the ground that it was barred by limitation. On September 4, 1981, the Commissioner dismissed the appeal. The assessee then carried the matter in second appeal before the Income-tax Appellate Tribunal. The Tribunal held that the assessment was barred by limitation and accordingly allowed the appeal of the assessee on November 30, 1982. Thus, the abovesaid questions are said to arise from that order of the Tribunal.

Mr. S.R. Ashok, learned standing counsel for the Revenue, vehemently contends that the expression "forward" in section 144-B could only mean that the draft order goes out of the control of the Income-tax officer and the moment it is signed it must be deemed that it has gone out of his control and, therefore, the date of signing should be taken as the date of "forwarding" He argues that a purposive construction should be given to the provisions of the taxing statute and the purpose of the provision is to give a fair opportunity to the assessee to object td the draft order and the time limit fixed should not be so strictly construed as to make the order of assessment barred by limitation.

None appeared for the assessee

To appreciate the contention of learned standing counsel for the Revenue, it would be apposite to refer to section 144-B of the Act, in so far as it is relevant for our purpose, which reads as follows:

"144-B (1) Notwithstanding anything contained in this Act, where in an assessment to be made under subsection (3) of section 143, the Assessing Officer proposes to make, before the 1st day of October, 1984, 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 Assessing 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 Assessing Officer within seven days of the receipt by him of the draft order or within such further period not exceeding fifteen days as the Assessing 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, of the assessee intimates to the Assessing Officer the acceptance of the variation, the Assessing Officer shall complete the Assessment on the basis of the draft order.

(4) If any objections are received, the Assessing Officer shall forward the draft order together with the objections to the Deputy Commissioner and the Deputy 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 things fit for the guidance of the Assessing 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 Deputy Commissioner under subsection (4) shall be binding on the Assessing Officer.

(6)For the purposes 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 fit "

Section 144-B was inserted by the Taxation Laws (Amendment) Act; 1975, with effect from April 1, 1976. It was on the statute book for 13 years and was omitted by the Direct Tax Law (Amendment) Act, 1987, with effect from April 1, 1989; it is no more on the statute book now. A plain reading of section 144-B shows that where, in an assessment to be made under subsection (3) of the section 143, the Assessing Officer proposes to make any variation either in the income or loss returned which is prejudicial to the assessee and the amount of such variation exceeds the amount fixed by the Central Board of Direct Taxes, the Assessing Officer has to forward a draft of the proposed order of assessment to the assessee. This power could have been exercised before October 1, 1984, and that provision is not controlled by subsection (3) of section 143 of the Act. On receipt of the draft order, the assessee has to forward his objections, if any, to the Assessing officer within seven days of the receipt of the order or within the extended time which should not exceed fifteen days. In the absence of filing of objections by the assessee, the Assessing Officer has the power to complete the assessment on the basis of the draft order; but, where objections are received, the Assessing Officer is obliged to forward the draft order together with the objections to the Deputy Commissioner who, after examining the draft order and the objections in the light of the record relating to the said order, has to issue directions in respect of the objections for the guidance of the Assessing Officer to enable him to complete the assessment. The limitation for the exercise, contemplated under section 144-B, is to be found in section 153(1)(a) read with clause (iv) of Explanation 1 thereto. We shall read this provision here:

"153. (1) No order of assessment shall be made under section 143 or section 144 at any time after the expiry of--

(a) two years from the end of the assessment year in which the income was first assessable; or...

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 Assessing Officer forwards the draft order under subsection (1) of section 144-B to the assessee and ending with the date on which the Assessing Officer receives the directions from the Deputy Commissioner under subsection (4) of that section, or, in case where no objections to draft order are received from the assessee, a period of thirty days, or...shall be excluded

Thus, section 153(1)(a) of the Act prescribes a period of two years from the end of the assessment in which the income was first assessable for making an order of assessment. This period of two years stands extended by virtue of clause (iv) of Explanation 1 in case of application of section 144-B. However, there is an outer limit of 180 days fixed for completing the exercise and the period would stand extended only by 180 days and no more. The period by which the limitation is extended, commences from the date on which the Assessing officer forwards the draft order under subsection (1) of Section 144-B of the Act to the assessee and ends with the date on which the Assessing Officer receives the direction from the Deputy Commissioner under subsection (4) of that section; or were no objections to the draft order are received from the assessee, the period of limitation would be extended only by 30 days.

The debate centres round the interpretation of the expression "forward". Learned standing counsel for the Revenue, as noted above, submits that the signing of the order by the Income-tax Officer would amount to "forwarding" the order as, after signing, he becomes functus officio and cannot further deal with the said 'draft order; it does not mean that the order should be served on the assessee or his representative. The Tribunal took the view that the expression "forward" means "despatch". It negatived the contention that it should be understood as meaning "issue". It also did not agree that it means "served". It has observed that "forward" comprehends something more than mere issue though it should not be taken to mean actual service of the order. As a fact the Tribunal noted that on March 29, 1979, the draft order was handed over by the income-tax Officer to the assessee's representative.

The word "forward" is a word of common usage and has to be understood in the meaning it bears in the English language. In Black's Law Dictionary, Sixth edition, at page 655, the meaning of the word "forward" is given as under:

To send forward; to send towards the place of destination; to transmit; to ship goods by common carrier. "

Thus from the dictionary meaning of the word "forward", the connotation of the expression is abundantly clear. It denotes sending forward or sending towards the place of destination or transmission. In all these situations the thing forwarded moves from the place of its origin towards its destination. That would show that it has left the place from which it was forwarded. It follows that on the date when a letter is despatched in the usual course either through special messenger or 'by handing it over to a responsible person for posting in the normal course and when a letter is handed over at the post office for delivery to the addressee, it can be said that the letter is forwarded on that date. The draft order in this case would be deemed to have been forwarded on the date on which it was given for purposes of service on the assessee to any process server of the Income-tax Department or when it was delivered at the post office or when it was handed over to any person for posting the same through the media of post office. However, in the instant case the Income-tax Officer handed over the draft order to the representative of the assessee on March 29, 1979, and that would be the date of forwarding of the draft order.

Having understood the concept of the word "forward", we would revert to the facts of this case. This pertains to the assessment year 1976-77; the year of the assessment ends on March 31, 1977. The period of limitation mentioned in section 153(1)(a) would expire by March 31, 1979. That is the last date for making the assessment, but by virtue of the provisions of clause (iv) of Explanation 1 to section 153, the said period of two years would get extended from the date of forwarding of the draft order till the date of receipt of directions from the Deputy Commissioner (IAC). The draft order was signed on March 27, 1979, and it was handed over to the representative of the assessee on March 29, 1979. We have already held that that date is the date of forwarding of the draft order. So the period of limitation from March 29, 1979, till September 22, 1979, the date on which the approval of the Deputy Commissioner (IAC) was received by the Assessing Officer, would be excluded: by excluding the said period the order ought to have been passed on or before September 24, 1979, but it was passed by the Assessing Officer on September 26, 1979. Thus, the order is passed beyond the period of limitation, prescribed under section 153(1)(a) road with clause (iv) of Explanation 1. It is therefore, barred by limitation.

Learned standing counsel for the Revenue relied on the judgment of the Supreme Court in Goodyear India Ltd. v. State of Haryana (1991) 188 ITR 402 to press his contention that the construction of the provision should be purposive. This is a general proposition and we have no quarrel with the said proposition. The purpose of the abovesaid provision is not only to give a fair and reasonable opportunity to the assessee to object to the draft order but also to prescribe a time schedule within which the exercise under section 144-B should be completed. By construing the provisions of section 153(1)(a) read with section 144-B, if the period of limitation is applied strictly, it cannot be said that the purpose of the legislation would be defeated. In our view, the proper application of the principle of limitation would alone be a purposive construction of the provision.

From the above discussion, it follows that the first question would have to be answered in the affirmative that is in favour of the assessee and against the Revenue; the second question is also answered in the affirmative, that is in favour of the assessee and against the Revenue and the third question is answered in the negative-, that is against the Revenue and in favour of the assessee.

The reference is accordingly answered

M.B.A./1790/FCReference answered.