Court rules Section 144B not applicable, assessment time-barred. Order of Tribunal set aside.

The court allowed the appeal, ruling that the invocation of Section 144B of the Income-tax Act was unjustified and the assessment was time-barred. The court emphasized that since there was no variation in the total income returned, Section 144B could not be invoked. Additionally, the court held that the assessment completed beyond the statutory deadline was indeed time-barred. The order of the Income-tax Appellate Tribunal was set aside.

---

---

Issues Involved:
1. Applicability of Section 144B of the Income-tax Act, 1961.
2. Whether the assessment was time-barred.

Issue-wise Detailed Analysis:

1. Applicability of Section 144B of the Income-tax Act, 1961:
The primary issue was whether the Tribunal was correct in holding that the provisions of Section 144B were applicable and the reference to the Inspecting Assistant Commissioner was in accordance with these provisions. The assessee filed a revised return showing "nil" income, withdrawing the depreciation initially claimed to benefit from the set-off of carry-forward business losses. The Department proposed a draft assessment order, thrusting depreciation not claimed by the assessee, and referred the matter to the Inspecting Assistant Commissioner under Section 144B(4), extending the time limit for completing the assessment.

The assessee argued that since there was no variation in the total income returned (both the original and revised returns showed "nil" income), Section 144B could not be invoked. The Tribunal, however, contended that the allowance of depreciation, which was withdrawn by the assessee, was prejudicial and justified the reference under Section 144B.

The court highlighted that the revised return was valid, and the depreciation could not be imposed if not claimed by the assessee, citing the Supreme Court's decision in Mahendra Mills' case [2000] 243 ITR 56 (SC). The court noted that any variation which is illegal or impermissible causes prejudice per se and cannot justify invoking Section 144B. The court also emphasized that the term "income or loss returned" refers to the total income or loss, not specific heads of income. Since both the assessee's revised return and the draft order showed "nil" income, Section 144B was inapplicable.

2. Whether the Assessment was Time-Barred:
The second issue was whether the assessment was time-barred. The assessee argued that the assessment for the year 1980-81 should have been completed by March 31, 1983, but was instead completed on August 24, 1983, making it time-barred. The Department contended that the reference to the Inspecting Assistant Commissioner under Section 144B extended the time limit.

The court concluded that since the invocation of Section 144B was impermissible, the extended time limit could not be applied. The assessment was indeed time-barred as it was completed beyond the statutory deadline.

Conclusion:
The court set aside the order of the Income-tax Appellate Tribunal and allowed the appeal, determining that the invocation of Section 144B was unjustified and the assessment was time-barred.

---