TaxTMI 
TaxTMI 
1999 (6) TMI 31
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....on from the insurance company in respect of destruction of the ship ?" This reference pertains to the assessment year 1978-79. The material facts giving rise to reference of question No. 1 are as follows : The assessee, a private limited company, submitted its return of income for the assessment year 1978-79 with the Income-tax Officer under section 139 of the Income-tax Act, 1961 ("the Act"). In compliance with notice issued under section 143(2) of the Act, the assessee appeared before the Income-tax Officer and produced evidence in support of its return. After taking into account the relevant material available with him, the Income-tax Officer made an assessment of the total income of the assessee under section 143(3) of the Act. As the proposed variation in the income returned by the assessee exceeded the amount of Rs. 1,00,000, the Income-tax Officer forwarded a draft assessment order ("draft order"), to the assessee as required by section 144B of the Act. This was done on March 3, 1981. From the statement of case, it appears that no objection was filed by the assessee within seven days of the receipt of the draft order nor any application was made for extension of time f....
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....igh Court in Sudhir Sareen v. ITO [1981] 128 ITR 445, and submits that the Income-tax Officer can submit only one draft order to the assessee under section 144B of the Act and if the assessee does not forward any objection within seven days from the receipt of the draft order or extended period, the draft assessment order becomes final under section 143(3). We have considered the rival submissions of learned counsel for the parties. Section 144B of the Act, as it stood at the material time, reads as follows : "144B. Reference to Inspecting Assistant Commissioner in certain cases.---(1) Notwithstanding anything contained in this Act, where, in an assessment to be made under sub-section (3) of section 143, the Income-tax Officer proposes to make any variation in the income or loss returned which is prejudicial to the assessee and the amount of such variation exceeds the amount fixed by the Board under sub-section (6), the Income-tax Officer shall, in the first instance, forward a draft of the proposed order of assessment (hereafter in this section referred to as the draft order) to the assessee. (2) On receipt of the draft order, the assessee may forward his objections, if a....
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....on (2) of section 143 of the Act requiring him to attend his office or produce any evidence on which he may rely in support of his return. If the assessee appears and produces any evidence in support of his return, the Income-tax Officer, after taking into account all such material or evidence, by an order in writing, shall make the assessment of the total income or loss of the assessee. By the Taxation Laws (Amendment) Act, 1975, section 144B was inserted in the Act with effect from January 1, 1976, which provides that where the Income-tax Officer proposes to make any variation adverse to the assessee in the income or loss return and the amount of such variation exceeds a sum of Rs. 1,00,000, which was the amount fixed by the Board for that purpose, the Income-tax Officer shall in the first instance forward a draft of the proposed order of assessment to the assessee. On receipt of such a draft order, the assessee is entitled to file his objections, if any, to such variation within seven days of the receipt of the draft order or within such further period not exceeding fifteen days as the Income-tax Officer may allow on application made in this behalf. If no such objection is filed....
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....objections are received within the specified period, he shall complete the assessment on the basis of the draft order. That being so, we are of the clear opinion that it is not open to the Income-tax Officer to forward a second draft order to the assessee after the first draft order is communicated. In the present case, the assessee did not file any objection nor applied for extension of time for the same. It was, therefore, incumbent on the Income-tax Officer to complete the assessment in terms of the draft order as contemplated by section 144B(3) of the Act. Instead of doing so, he forwarded a second draft order after ten days of communication of the first draft order enhancing the variation by Rs. 13,76,350. This obviously, is beyond the powers conferred on him under section 143(3) read with section 144B of the Act. We are supported in our above conclusion by the ratio of the decision of the Supreme Court in Panchamahal Steel Ltd. v. U. A. Joshi, ITO [1997] 225 ITR 458, wherein the Supreme Court has held that the assessee is not entitled to file revised returns after the Income-tax Officer has made the draft order. It may be pertinent to mention that sub-section (5) of sec....