K. S. VEERANNAH CHETTIAR VS COMMISSIONER OF INCOME-TAX
2001 P T D 344
[238 I T R 853]
[Madras High Court (India)]
Before R. Jayasimha Babu and N. V. Balasubramanian, JJ
K. S. VEERANNAH CHETTIAR and another
versus
COMMISSIONER OF INCOME‑TAX
T. C. (R) Nos.945 and 946 of 1985 (References Nos. 476 and 477 of 1985), decided on 19/03/1998.
Income‑tax‑‑‑
‑‑‑‑Assessment‑‑‑Limitation‑‑‑Draft assessment order‑‑‑Variation of income due to inclusion of share of income from firm among partners in their individual assessments‑‑‑Period between date on which draft order was forwarded to assessee and date on which directions were given by Inspecting Assistant Commissioner was liable to be excluded‑‑‑Indian Income Tax Act, 1961, Ss. 144B(1) and 153, Expln. 1 (iv).
The assessees contended that the assessment made pursuant to the directions given by the Inspecting Assistant Commissioner was barred by limitation, and that the period between the date on which the draft order was forwarded to the assessee and the date on which directions were given by the Inspecting Assistant Commissioner was not liable to be excluded in computing the period of limitation in the assessee's case. It was submitted on behalf of the assessee that as the variation was consequent to the application of the statutory provisions providing for the inclusion of share of the income among the partners in their individual assessment the enlarged period of limitation under section 153, Explanation 1, clause (iv) of the Income Tax Act, 1961 was not available to the Revenue:
Held, that section 144B of the Act opens with the non obstante clause. Irrespective of the reasons for the variations if the variation proposed to be made exceeds the amount fixed by the Board under section 144B, the Income‑tax Officer is required to act in accordance with t]p requirement of section 144B. ‑Section 153 which deals with the time limit for completion of assessment and reassessment is clearly applicable to the assessment made after making a reference to the Inspecting Assistant Commissioner under section 144B. In a case where such reference is made as provided in Explanation 1(iv) the period specified therein is required to be excluded while computing the period of limitation. Therefore, the assessments. made were within the period of limitation and were valid.
P.P.S. Janarthana Raja for Subbaraya Aiyar, Padmanabhan and Ramamani for the Assessee.
C.V. Rajan for the Commissioner.
JUDGMENT
R. JAYASIMHA BABU, J.‑‑‑The common questions referred to us at the instance of the assessee, two partners of the firm, for the assessment year 1979‑80 are as under:
"(1) Whether the Appellate Tribunal was right in holding that the reference made to the Inspecting Assistant Commissioner in the circumstances of the case was strictly in compliance with and as required by the provisions of section 144B(1) of the Act?
(2) Whether the Appellate Tribunal was right in holding that the extended time limit under Explanation 1(iv) to section 153 was available for completion of the assessment and consequently the assessments completed in each case on April 18, 1982, were within time?"
The assessees are partners in the firm, Vee Co. Chemicals Corporation. For the assessment year 1979‑80, which is the assessment year in question in this reference, the partners showed their share of income from the firm as Rs.75,542. Substantial additions came to be made to that income by the Income‑tax Officer, aggregating to Rs.1,96,799. As the difference was over Rs.1 lakh, the Income‑tax Officer, in accordance with section 144E sent a draft order to the assessees and after receiving objections from the assessees, referred the same to the Inspecting Assistant Commissioner. Pursuant to the directions given by the Inspecting Assistant Commissioner, the assessment was completed on April 8, 1982.
The assessees contended that the assessment so made is barred by limitation, and that the period between the date on which the draft order was forwarded to the assessees and the date on which directions were given by the Inspecting Assistant Commissioner was not liable to be included in computing the period of limitation. That claim had been accepted by the Commissioner in appeal but was rejected by the Tribunal.
Before us, it was submitted by learned counsel for the assessee that 4 the variation was consequent to the application of the statutory provisions providing for the inclusion of share of the income among the partners in their individual assessments the enlarged period of limitation under section 153, Explanation 1 to clause (iv), was not available to the Revenue. This contention is not tenable and is liable to be rejected.
Section 144B of the Act opens with the non‑obstante clause. Irrespective of the reasons for the variation, if the variation proposed to be made exceeds the amount fixed by the Board under section 144B, the Income‑tax Officer is required to act in accordance with the requirement of section 144B. Section 153 which deals with the time limit for completion of assessment and reassessment is clearly applicable to the assessment made after making a reference to the Inspecting Assistant Commissioner under section 144B. In a case where such reference is made, as provided in explanation 1(iv) the period specified therein is required to be Excluded while computing the period of limitation. That is what has been done by the Income‑tax Officer. The order of assessment made by him for the assessment year 1979‑80 was made on April 8, 1982. The limitation for making assessment would have expired on March 31, 1982, had no reference been required to be made under section 144B. Section 144B being properly applicable to the case of the assessee, the order made in a valid assessment made within the period of limitation laid down in the Act.
Our answers to the questions referred to us, therefore, are in the affirmative against the assessee and in favour of the Revenue. The Revenue shall be entitled to costs in 'the sum of Rs.750 (rupees seven hundred and fifty only).
M.B.A./159/FC??????????
Reference answered.