Draft Assessment Approval Limits Assessing Officer Changes After Section 144B Approval, De Novo Assessment Set Aside

Once a draft assessment order is approved under section 144B of the Income-tax Act, the Assessing Officer must complete the final assessment in conformity with that approval and any binding directions, and cannot independently vary the approved treatment of the loss. The lower appellate authority correctly held that the assessment could not be altered after approval, while the Tribunal erred in directing a de novo assessment. The issue was answered in favour of the assessee and against the Revenue.

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Issues: Whether, after a draft assessment order is approved under section 144B of the Income-tax Act, 1961, the Assessing Officer can alter the assessment beyond the directions of the Inspecting Assistant Commissioner and whether the Tribunal was right in directing a de novo assessment.

Analysis: Once a draft order is referred for approval under section 144B and the Inspecting Assistant Commissioner grants approval, the Assessing Officer's power is confined to passing the final assessment in accordance with that approval and any directions issued. The Assessing Officer cannot independently vary or depart from the approved treatment of the loss. The lower appellate authority correctly held that the assessment could not be meddled with after approval, and the Tribunal erred in reversing that view and directing a fresh assessment de novo.

Conclusion: The question is answered in favour of the assessee and against the Revenue.

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