High Court of Madras
Case Law Search
M/s. K.S. Venkataraman & Co v. The Commissioner of Income-tax - T.C. No.794 OF 1990  RD-TN 423 (2 July 2002)
IN THE HIGH COURT OF JUDICATURE AT MADRAS
The Honourable Mr. Justice V.S. SIRPURKAR
The Honourable Mr. Justice N.V. BALASUBRAMANIAN
T.C. No.794 OF 1990
M/s. K.S. Venkataraman & Co.
Pvt. Ltd., Madras :: Applicant -Vs-
The Commissioner of Income-tax
Tamilnadu II, Madras :: Respondent Tax Reference under Sec.256(1) of the I.T. Act referred by the Income Tax Appellate Tribunal ‘B’ Bench, Madras in R.A. No.448/Mds/1989 in I.T.A. No.1821/Mds./1986 Assessment Year 1978-79
For Applicant :: Mr. Philip George
For Respondent :: Mr. T.C.A. Ramanujam
Sr. Standing Counsel
V.S. SIRPURKAR, J.
The question referred at the instance of the assessee as per the directions of this Court under Sec.256(1) of the Income-tax Act is as follows:
“Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the assessment made in the case was not barred by limitation?”
Following facts will highlight the controversy.
2. The assessee is a company and filed the return of income for the assessment year 1978-79, admitting a total income of Rs.4,03,800/-. The return is dated 19-7-1978. However, on 21-6-1980, the assessee wrote a letter to the Income Tax Officer stating that a sum of Rs.31 ,061/- was wrongly included in the total income shown in the return and that it was liable to be ignored and, therefore, the assessment officer was requested to complete the assessment excluding the figure of Rs.31,061. The total income shown in the return then would come to Rs.3,73,739/-. The assessment officer computed the assessee’s income and came to the conclusion that the assessee’s income would come to Rs.4,77,000/-. The difference then being more than Rs.1,00,000/-. The Income Tax Officer prepared a draft assessment order under Sec.14 4B of the Income-tax Act and sent the same to the Inspecting Assistant Commissioner after obtaining the draft objections from the assessee. After the directions were given by the Inspecting Assistant Commissioner, the assessment was completed on 19-5-1981.
2.1. This assessment was appealed against before the Commissioner of Income-tax (Appeals) on the ground that the assessment made on 19-5-1981 was barred by limitation. The plea raised was that the returned income was Rs.4,03,800/- while the total income determined by him as per the draft order amounted only to Rs.4,77,710/- and, therefore, the addition to the total income which was to the prejudice of the assessee was only Rs.73,910/- which was less than Rs.1,00,000/- and, therefore, the Income Tax Officer could not have referred the matter to the Inspecting Assistant Commissioner under Sec.144B and the resultant action was without jurisdiction and, therefore, the advantage of the extended limitation due the time taken in pursuing the matter to the Inspecting Assistant Commissioner and obtaining the directions could not be taken by the Department and the assessment made on 19-5-19 81 would be beyond the last date of the completion of the assessment which should have been 31-3-1981. The Commissioner of Income-tax ( Appeals) dismissed the appeal and held that the income returned was the final income offered by the assessee for assessment and for that the subsequent letter of the assessee was very relevant because it had the effect of lessening the original returned amount of Rs.4,03,800/- to Rs.3,72,739/-. The Commissioner of Income-tax (Appeals) came to the conclusion that the Income Tax Officer would be entitled to the extended time limit particularly under Sec.153 read with clause (4) of Explanation 1. On the further appeal, the Tribunal also confirmed this order and that is how the reference came to be made before us.
3. Learned counsel for the assessee argues that the Tribunal was wrong in interpreting the words in Sec.144B of the Act which are to the effect “to make any variation in the income or loss returned which is prejudicial to the assessee”. He tries to argue that the subsequent letters dated 21-6-1980 and 1-12-1980 had to be ignored and a strict interpretation of the words in Sec.144B should have been adhered to by the Tribunal and we should also take the same course. The contention is that the amount offered in the return alone would be liable to be taken into consideration particularly because of the words “ income or loss returned”. In short, the contention is that the returned income is the income which is shown in the proforma return alone. In our view, such argument is wholly incorrect.
4. When we see the specific language of Sec.144B of the Act, the whole idea is that when the assessing officer proposes to vary the returned income or loss in a substantial manner – in this case by more than Rs.1,00,000/- he has to make a reference by making a draft order inviting the objections of the assesee thereupon and refer that draft order for directions to the Inspecting Assistant Commissioner. The underlying concept in the section is that when the claim made of the income by the assessee has to be varied substantially then it is incumbent upon the Income Tax Officer to take steps under Sec.144B. It is only under the light of this interpretation that the words “income or loss returned” would have to be read. Merely because, the section uses the words income or loss returned, it would not be only the amount which appears in the proforma return but it would be in fact the income claimed by the assessee for a particular year. In this case, if the assessee had specifically written the letters to the Income Tax Officer that the income of Rs.31,061/- should be ignored and should be deducted out of the returned income of Rs.4,03,800/-, the amount returned would be not Rs.4,03,800 but the amount would be Rs.3,72,739 /-. The assessee cannot be allowed to change its stand altogether because it would be bound by its own letters. In our view, therefore, the plea raised by the assessee that the action under Sec.144B could not have been taken is wholly incorrect. If the action could be taken under Sec.144B validly, as has happened in this case, the time taken for the issuance of the directions by the Inspecting Assistant Commissioner would have to be necessarily ignored. The Tribunal has correctly returned that finding. Fortunately, there was no dispute before the Tribunal and even before us that if this period is omitted, the assessment order is within time. Since we are in agreement with the Tribunal that the action under Sec.144B was rightly taken, there can be no doubt that the Income Tax Officer would be entitled to get the time in obtaining the order by the Inspecting Assistant Commissioner and that period has to be ignored for the purpose of limitation. We are, therefore, of the clear opinion that the Tribunal was absolutely right in treating the assessment order to be within time. We, therefore, answer the reference against the assessee and in favour of the Revenue. No costs. Index:Yes
(V.S.S., J.) (N.V.B., J.)
/ TRUE COPY /
Sub Asst. Registrar (Stat./C.S.)
1. The Assistant Registrar
Income-tax Appellate Tribunal
Besant Nagar, Chennai
2. The Secretary, Central Board of Revenue, New Delhi 3. The Income-tax Officer, Company Circle II(4), Madras 4. Inspecting Assistant Commissioner of
Income-tax, Assessment II, Madras-6
5. The Commissioner of Income-tax, Tamil Nadu II, Madras V.S. SIRPURKAR, J.
N.V. BALASUBRAMANIAN, J.
T.C.No.794 OF 1990
Double Click on any word for its dictionary meaning or to get reference material on it.