Exclusion of time under section 144B in assessment limitations clarified by Tribunal.

The Tribunal held that time taken under section 144B should be excluded in computing the limitation for assessments made in compliance with appellate orders. It emphasized that assessments following appellate directions must adhere to the procedure under section 144B, as mandated by the power to make fresh assessments under section 143(3). The Tribunal rejected the argument against invoking section 144B in such cases, stating that the ITO must comply with the prescribed procedure once the original assessment is set aside. Consequently, the Tribunal reversed the Commissioner (Appeals) orders and directed fresh disposal on merits in accordance with the law.

---

---

Issues:
- Interpretation of section 144B of the Income-tax Act, 1961 in relation to assessments made in compliance with appellate orders.
- Application of Explanation I to section 153 for exclusion of time taken under section 144B in computing the period of limitation for assessments.

Analysis:
The judgment involves appeals by the revenue against the Commissioner (Appeals) order, which held that assessments made in compliance with appellate orders were barred by limitation as section 144B of the Income-tax Act, 1961 could not be invoked in such cases. The assessee, an individual deriving income from properties and money-lending business, had original assessments made in 1974, 1976, and 1977. The Commissioner (Appeals) set aside the assessments for all four years directing fresh assessments by the ITO after due enquiries. The ITO made draft assessments invoking section 144B, which the assessee objected to, leading to the IAC directing the ITO to proceed with the additions as proposed. The assessee contended that section 144B could not be invoked in compliance with appellate directions, leading to the issue of limitation for assessments made under such circumstances.

The main contention in the appeals was whether the time taken under section 144B should be excluded in computing the period of limitation for assessments made in compliance with appellate orders. The revenue argued that Explanation I to section 153 mandated the exclusion of time taken under section 144B, while the assessee argued against the applicability of section 144B in such cases. The Tribunal held that assessments made in compliance with appellate directions must follow the procedure under section 144B, as the power to make fresh assessments under section 143(3) necessitates adherence to the procedure set forth in section 144B. The Tribunal rejected the assessee's argument that the ITO should not seek further directions from the IAC under section 144B, emphasizing that once the original assessment is set aside, the ITO must function under section 143(3) and comply with the prescribed procedure.

The Tribunal further noted that the ITO's powers for fresh assessments must align with section 143(3) and that the procedure under section 144B prevails, considering the non obstante clause of the latter. Citing a previous judgment by the Madras High Court, the Tribunal emphasized that fresh assessments must be made within the framework of the Act, and the procedure under section 144B is imperative. Therefore, the time taken for following the procedure under section 144B had to be excluded in computing the limitation for assessments made in compliance with appellate orders. Consequently, the Tribunal reversed the Commissioner (Appeals) orders and allowed the appeals, directing fresh disposal on merits in accordance with law.

---