Draft assessment procedure under section 144B triggers limitation exclusion and keeps the assessment within time.

Section 144B's draft assessment procedure is attracted whenever the proposed variation exceeds the prescribed limit, regardless of the source or nature of the addition, and the Assessing Officer must follow that procedure. Where a reference is made under section 144B, the time spent in that process is excluded under Explanation 1(iv) to section 153 when computing limitation. On that basis, an assessment completed after the ordinary limitation period remained within time because the statutory exclusion applied, rendering the assessments valid and timely.

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Issues: (i) whether the reference to the Inspecting Assistant Commissioner complied with section 144B(1) of the Income-tax Act, 1961; (ii) whether the extended time limit under Explanation 1(iv) to section 153 of the Income-tax Act, 1961 was available, with the result that the assessments were within time.

Issue (i): Whether the reference to the Inspecting Assistant Commissioner complied with section 144B(1) of the Income-tax Act, 1961.

Analysis: Section 144B operates through a non-obstante clause and requires the Income-tax Officer to follow the statutory procedure whenever the proposed variation exceeds the prescribed limit. The requirement is attracted irrespective of the source or nature of the addition.

Conclusion: The reference was in compliance with section 144B(1) and was valid.

Issue (ii): Whether the extended time limit under Explanation 1(iv) to section 153 of the Income-tax Act, 1961 was available, with the result that the assessments were within time.

Analysis: Where a reference is made under section 144B, the period specified in Explanation 1(iv) to section 153 is excluded in computing limitation. On that basis, the assessment completed on 8 April 1982 was within the permissible period, even though the ordinary limitation would otherwise have expired on 31 March 1982.

Conclusion: The exclusion operated and the assessments were within time.

Final Conclusion: The statutory procedure under section 144B applied and the time spent in that procedure was excluded for limitation purposes, so the assessments were held to be valid and in time.

Ratio Decidendi: When a draft assessment procedure under section 144B is properly attracted, the exclusion period under section 153 Explanation 1(iv) must be applied in computing limitation, regardless of the reason for the proposed variation.

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