A Joint Commissioner/Additional Commissioner may:
(a) on his own motion; or
(b) on a reference being made to him by the Assessing Officer; or
(c) on the application of an assessee
call for and examine the
record of any proceeding in which an assessment is pending. Thereafter, if he
considers that:
(a) having regard to the nature of the case; or
(b) the amount involved; or
(c) for any other reason,
it is necessary or expedient so to do, he may issue such
directions as he thinks fit for the guidance of the Assessing Officer to enable
him to complete the assessment. Thus, Section 144A is
indeed an effective tool for seeking intervention of higher authorities on
interpretation and resolution of vexed issues arising during the course of
assessment.
Text of Section 144A
[1][Power of [2][Joint Commissioner] to issue directions in certain cases.
144A. [3][A [2][Joint Commissioner] may, on his own motion or
on a reference being made to him by the [4][Assessing] Officer or on the application of an assessee, call for and examine
the record of any proceeding in which an assessment is pending and, if he considers
that, having regard to the nature of the case or the amount involved or for any
other reason, it is necessary or expedient so to do, he may issue such
directions as he thinks fit for the guidance of the [4][Assessing] Officer to enable him to complete the assessment and such
directions shall be binding on the [4][Assessing] Officer :
PROVIDED that no directions which are prejudicial to the assessee shall be issued before an opportunity is given to the assessee to be heard.
Explanation. - For the purposes of this [5][section] no direction as to the lines on which an investigation connected with the assessment should be made, shall be deemed to be a direction prejudicial to the assessee.
[6][(2) ***]
KEY NOTE
1. Inserted by the Taxation
Laws (Amendment) Act, 1975, with effect from 01.01.1976.
2. Substituted for “Deputy Commissioner” by the Finance (No. 2) Act, 1998, with effect from 01.10.1998. Earlier “Deputy Commissioner” was substituted for “Inspecting Assistant Commissioner” by the Direct Tax Laws (Amendment) Act, 1987, with effect from 01.04.1988.
3. (1) omitted by the Direct Tax Laws (Amendment) Act, 1987, with effect from 01.04.1989.
4. Substituted for “Income-tax”, by
the Direct Tax Laws (Amendment) Act, 1987, with effect from 01.04.1988.
5. Substituted for ‘sub- section”
by the Direct Tax Laws (Amendment) Act, 1989, with effect from 01.0 4.1989.
6. Sub-section (2) omitted by the
Direct Tax Laws (Amendment) Act, 1987, with effect from 01.0 4.1989.
Prior to the omission, sub-
section (2) read as under:
“(2) The provisions of this section shall
be in addition to, and not in derogation of, the provisions contained in sub-
section (3) of section 119.”
Scope of the sections and procedure thereunder
Section 144A relates
to directions in regard to all types of income-tax assessments, As per
section 144A the Joint Commissioner/Additional Commissioner has empowered with the following powers:
(i) A Joint commissioner/Additional Commissioner may on his own or on the
application of assessee or reference made by the Assessing Officer may call for
the record to examine any matter related to any proceeding on which assessment
is pending
(ii) It is necessary then Joint
Commissioner/Additional
Commissioner may
issue directions for the guidance of assessing officer to complete the
assessment
(iii) The directions given by the
Joint Commissioner/Additional
Commissioner is
binding on the Assessing Officer
(iv) Direction is prejudicial
and can be issued only after giving an opportunity of being heard
(v) The assesse cannot file
appeal against the directions. Appeal can be filed against assessment orders.
(vi) The power of the Joint
Commissioner/Additional Commissioner to issue
pre-assessment directions to the Assessing Officer in
individual cases is in addition to the general power conferred on him by
section 119(3) to issue instructions which stood up to 01.04.1988.
Conditions to be satisfied before
invoking section 144A
The provisions of section 144A can only be evoked
if:
(b) the assessment proceedings as a
consequence of the notice are pending.
(c) Assessment includes reassessment
and hence direction under section 144A can be given even when any reassessment
is pending.
(d) No appeal can be filed against
the directors issued by Joint Commissioner/Additional Commissioner under
section 144A. The assessee can file an appeal to CIT (Appeal) against the
assessment order passed by Assessing Officer on the direction of Joint
Commissioner/Additional Commissioner.
Provisions of section 144A is come into play :
(i)
where the
Assessing Officer is in doubt as to how to decide a
particular issue and seeks the guidance of the Joint
Commissioner/Additional Commissioner, whether
it be on a point of law or of fact or principle of accounting;
(ii)
where the
Joint Commissioner/Additional Commissioner, on his own, feels that directions
ought to issue for the guidance of the Assessing Officer because of the
complexity of the matter or because of his apprehension that a proper and
lawful assessment may not be framed by the Assessing Officer; and
(iii) where the assessee approaches the
Joint Commissioner/Additional Commissioner with an application under section 144A(1)
because he fears that the Assessing Officer may proceed arbitrarily,
unreasonably or contrary to law to his prejudice. There is nothing that compels
the Assessing Officer to make a reference under section 144A and the section
does not even provide that if an application of the assessee under that section
is pending with the Joint Commissioner/ Additional Commissioner, the Assessing
Officer shall not proceed to finalize the assessment before receipt of the
directions of the Joint Commissioner/Additional Commissioner envisaged under
section 144A(1). Possibly, this is administratively capable of being ensured.
Direction once issued is binding on the Assessing Officer
A reading of section 144A very clearly shows that
the directions issued by the Joint Commissioner/Additional
Commissioner are binding on the Assessing Officer. The only two riders
provided in the powers of the Joint Commissioner/Additional Commissioner are :
(i ) to issue any directions, and if the directions are prejudicial to the
assessee, then opportunity be allowed to the assessee, and (ii) that no
directions can be issued on the lines on which an investigation should be
conducted.
In other words, Direction once issued is binding on the Assessing Officer. Where, however, any direction prejudicial to interest of the assessee is to be issued, it shall be only after the assessee has been given an opportunity of being heard. Any direction issued by the Joint Commissioner/Additional Commissioner in regard to the lines on which investigation may be made in an assessment, shall not be treated as a direction prejudicial to the assessee.
Opportunity of being heard
It is a pre condition of section 144A that the Joint Commissioner/Additional Commissioner’s
directions under section 144A will not issue without the assessee being given
an opportunity of being heard by him, if such directions are prejudicial to the
assessee. However, Direction as to the lines
on which an investigation connected with the assessment should be made, shall
not be deemed to be a direction prejudicial to the assessee.
CBDT Circular F. No. 225/402/2018/ITA.II, Dated 28.11.2018
Subject : Section 143, read with sections 144A & 139, of the Income-Tax Act, 1961 - Assessment - General - scope of enquiry in Limited Scrutiny cases selected under cass cycles 2017 and 2018 in context of information provided by any law-enforcement/intelligence/regulatory authority or agency
Under CASS cycles 2017 and 2018, some of the cases were selected for scrutiny as a ‘Limited Scrutiny’ case. In limited Scrutiny' cases, Assessing Officer cannot travel beyond the issue(s) for which the case was selected. The idea behind such a stipulation is to enforce checks and balances upon powers of an Assessing Officer to do fishing and roving enquiries in cases under ‘Limited Scrutiny’.
2. In this regard, several representations have been received in the Board from the field authorities that in several cases under ‘Limited Scrutiny’, information pointing out specific tax-evasion for the relevant year, given by any law-enforcement/intelligence/regulatory authority or agency is available with the concerned Assessing Officer, however, in view of the restrictive nature of enquiry/investigation which can be made in 'Limited Scrutiny' cases, the same presently cannot be acted upon.
3. The matter has been considered by the Board. In order to enable proper enquiry/investigation in pending 'Limited Scrutiny' cases which were selected through CASS cycles of 2017 and 2018, where credible material or information has been/is provided by any law-enforcement/intelligence/regulatory authority or agency regarding tax-evasion by an assessee, it has been decided by the Board that issues arising from such information can also be examined during the course of conduct of assessment proceedings in such ‘Limited Scrutiny’ cases with prior administrative approval of the concerned Pr. CIT/CIT.
4. It is pertinent to mention that unlike CASS 2015 and 2016 cycles, where consideration of any additional issue lead to the conversion of case to 'Complete Scrutiny' as laid down in Instruction No. 5/2016 dated 14.07.16, the pending 'Limited Scrutiny' cases of CASS 2017 and 2018 cycles would not be taken up for 'Complete Scrutiny' as the present directive is only to facilitate consideration of those issues wherein specific information of tax-evasion has been furnished by any law-enforcement/ intelligence/ regulatory authority or agency. Therefore, in such ‘Limited Scrutiny’ cases, Assessing Officer shall not expand the scope of enquiry/investigation beyond the issue(s) on which the case was flagged for ‘Limited Scrutiny’ & issue arising from nature of information mentioned in para 2 and 3, above.
5. The following procedure shall be adopted while
examining the additional issue:
(i) The Assessing Officer shall duly
record the reasons for expanding the scope of 'Limited Scrutiny' to the extent
mentioned in para 2 and 3, above;
(ii) The same shall be placed before
the Pr. CIT/CIT concerned and upon his approval, further issue can be
considered during the assessment proceeding;
(iii) The Assessing Officer shall issue
an intimation to the assessee concerned that additional issue would also be
considered during the course of pending assessment proceeding;
(iv) To ensure proper monitoring in
these cases, provisions of section 144A of the Income-tax Act, 1961 may be
invoked in suitable cases. Further, to prevent fishing and roving enquiries in
these cases, it is desirable that these cases are invariably picked up for
Review/Inspection by the administrative authorities.
6. The above directive shall be applicable from the date of its issue and shall apply to the pending ‘Limited Scrutiny’ cases which were selected under the CASS 2017 and 2018 cycles. It is reiterated that the grounds mentioned in para 3 above are the only grounds on which a ‘Limited Scrutiny’ case of CASS 2017 and 2018 cycles can be expanded in its scope and that too only to the extent of the issues referred to by the law-enforcement/intelligence/regulatory authority or agency.
For past sometime the Board has been concerned about the need for improving general quality of scrutiny assessments on a sustainable basis. In this connection, reference is invited to Board's instruction No. 2/2006 dated 27.04.2006 which required monitoring of scrutiny assessments by Range Heads under the powers available to them under section 144A of Income-tax Act. Instructions have also been issued from time to time for strengthening the machinery for review of assessments and inspection of assessment charges. However, it is felt that there is significant scope for improving the quality of scrutiny system. The matter came up for discussion during 25th Annual Conference of Chief Commissioners of Income-tax held in August 2009. A presentation was made by CCIT Chandigarh outlining a scheme for improving quality assessments implemented in NWR Region. After taking into account various suggestions, it was decided to devise a similar scheme with appropriate flexibility for country-wide implementation.
2. Accordingly, it has now been decided that the
following scheme for improving quality of assessments shall be implemented from
calendar year 2010 onwards,—
(i) At
the beginning of each calendar year i.e., in the month of January, the Range
Head in consultation with the concerned Assessing Officer would identify at
least 5 pending time-barring assessment cases in respect of each Assessing
Officer of his Range for monitoring. These should normally include cases taken
up for scrutiny with the permission of CCIT. The selection should be done
jointly by the Range Head and the concerned Assessing Officer. Cases of PSUs
and loss-making concerns should normally not be identified for this purpose.
This exercise should also include those Ranges which are held as additional
charge by a Range Head in January.
(ii) The
Range Head would issue directions under section 144A in the identified cases
for the guidance of the Assessing Officer regarding the course of investigation
to enable him to complete these assessments in a proper manner. This should be
done at the earliest available opportunity so as to allow the Assessing Officer
to have sufficient time to complete the assessment proceedings. A copy of the
directions issued by the Range Head would also be endorsed to the CIT. The
Range Head should also monitor the subsequent developments in the assessment
proceedings in these cases.
(iii) On
completion of the assessment the Assessing Officer shall send a copy of the
assessment order to the Range Head and the CIT.
(iv) In the
event of a Range Head holding more than one Range the concerned CCIT may
appropriately relax the requirement for issue of directions under section 144A
in respect of the cases of the Range(s) held as additional charge.
(v) For
the purpose of this instruction, a quality assessment would be one in which
issues arising for consideration are clearly identified, investigation of basic
facts in respect of these issues is carried out, adequate opportunity to rebut
adverse evidence is given to the assessee, the rival evidence are suitably
analysed and evaluated in the light of correct interpretation of law, and these
efforts result in substantial addition to the returned income. The benchmark
for the quantum of addition to the returned income, which may qualify for being
a quality assessment, may be decided by the concerned CCIT depending upon the
potential of the given Range/Charge. Normally, this should not be less than Rs.
5 lakh excluding additions on account of recurring issues. It is expected that
the selected cases will meet the parameters for quality assessment.
(vi) As
regards the remaining scrutiny assessments, it is expected that 30 per cent of
assessments completed by the Range Head, 20 per cent of the remaining scrutiny
assessments completed by DC/ACIT and 10 per cent by ITOs will result in quality
assessments. These benchmarks can be reviewed once the scheme has been in
operation for sometime.
(vii) The
parameters for determining whether an assessment is a quality assessment should
be decided by the concerned Chief Commissioner in the light of the above and
should be widely circulated at the beginning of the calendar year i.e., in the
month of January of every year.
(viii) At the
end of the financial year, the data regarding assessments completed by
Assessing Officers of the CCIT Region shall be got evaluated by the concerned
CCIT in the month of next April according to the parameters decided earlier.
The overall results will be tabulated in the enclosed proforma and circulated
in the CCIT (CCA) Region for information. Separate performance ranking should
be done for Range Heads in respect of cases completed by them under section
143(3) out of the cases selected under Instruction 4 of 2007 dated 16.05.2007
(see below), and those monitored by them under this instruction.
(ix) CCITs
may also devise methods for commending good performance of Assessing Officers
in the area of quality assessments and reflecting the same in the annual
appraisals. Important cases involving large successful additions may be
reported to the Board in monthly D.O. letters. These can also be sent to DIT
(RSP & PR) for inclusion in the Annual Report of good assessment cases.
Performance Ranking of Assessing Officers
|
CIT |
Range |
Name of
the Assessing Officer |
No. of
assessments completed |
No. of quality assessments out of 2 |
|
|
1 |
2 |
3 |
4 |
5 |
6 |
Performance Rankings for Range Heads as Guides
|
CCIT |
CIT |
Range |
Name of the Addl./Joint CIT |
No. of cases in which guidance
given under section 144A |
No. of quality assessments out
of 2 |
|
1 |
2 |
3 |
4 |
5 |
6 |
MANAGEMENT OF SCRUTINY WORKLOAD
Kindly refer to above
2. Considering the increasing gap between workload and disposal of scrutiny assessments, it has been decided to entrust the Range Heads with the responsibility of making assessments in top revenue potential cases of the Range to be selected on the basis of returned income.
3. In this regard, targets for disposal of cases by the Range Heads are prescribed as under :—
|
S. No. |
Charge |
Minimum number of cases to be
disposed of per year |
|
1. |
Corporate |
20 |
|
2. |
Non-Corporate/Mixed/Salaries |
30 |
However, the CCITs, considering the local circumstances and other factors, may assign more cases to the Addl. CITs/Joint CITs.
4. It is hereby clarified that the above targets are not applicable to Central Ranges.
Section 144A does not empower JCIT to give a direction to Assessing Officer to complete assessment in a particular manner
Assessee incurred
expenditure towards procurement of raw materials from its Singapore subsidiary.
Dispute arose as to whether amounts paid by assessee to its subsidiary were
inflated so as to reduce profit and income tax liability of assessee. Assessing
Officer made a reference to Joint Commissioner under section 144A. Joint
Commissioner by an order directed Assessing Officer to disallow 2.5 per cent of
transacted amount under sections 40(A)(2)(a) and 37(1). Section 144A does not
empower Joint Commissioner to give a direction to an Assessing Officer to
complete assessment in a particular manner. Directions to be exercised by Joint
Commissioner under section 144(A) are merely intended to guide Assessing
Officer to complete assessment and only such directions are binding on an
Assessing Officer. Therefore, directions contained in impugned order passed by
Joint Commissioner were prejudicial to assessee and to complete assessment in a
particular manner, assessee should have been called for hearing by Joint
Commissioner. Since there was violation of section 144A, consequential assessment
order was to be set aside and matter was to be remanded back to Assessing
Officer for adjudication afresh. [Matter remanded] (Related Assessment year : 2016-17)
– [MRF Ltd. v. DCIT (2022) 445 ITR 103 : 140 taxmann.com 512 (Mad.)]
Disposal of application under section 144A does not warrant a detailed reasoning
Power of Joint Commissioner/Additional Commissioner
to issue pre-assessment directions to Income-tax Officer in
individual cases is in addition to general power conferred on him by section 119(3)
to issue instructions. An Officer exercising jurisdiction under section 144A has
to rely only on information that are available to give a sense of direction to
Assessing Officer. Disposal of application under section 144A does
not warrant a detailed reasoning. (Related Assessment year : 2019-20) – [Durai
Murugan Kathir Anand v. Addl. CIT (2022) 443 ITR 423 : 136 taxmann.com 70 (Mad.)]
Where reassessment notice was issued and assessee made application under section 144A seeking directions to file objections on reasons recorded in notice, direction by Additional Commissioner to make appropriate order would not mean that Assessing Officer could complete reassessment without deciding assessee’s objections
On receiving reasons recorded in notice issued
under section 148, assessee filed objections. Simultaneously,
assessee made application under section 144A seeking directions to
ensure that objections raised by assessee were promptly decided. Additional
Commissioner directed Assessing Officer to pass appropriate order. However,
Assessing Officer proceeded to conclude assessment under section 143(3),
read with section 147 and without disposing off objections of
assessee, Assessing Officer completed scrutiny assessment. Additional
Commissioner could not direct Assessing Officer to complete assessment without
deciding objections filed by assessee as he could not have by-passed law and
directed Assessing Officer to act contrary to law. Thus, Assessing Officer
should have decided objections prior to undertaking assessment under section 143(3).
[In favour of assessee]
(Related Assessment
year : 2011-12) - [Swadesh Trading Co. v. DCIT(C), Mangalore (2019) 111 taxmann.com 446 (Karn.)]
Assessment done pursuant to directions issued by Additional Commissioner under section 144A cannot be reopened; however, revisionary power under section 263 can be exercised
Directions issued by
Additional Commissioner under section 144A are not only to guide Assessing
Officer to enable him to complete assessment but such directions are also
binding on such officer. Where an assessment order passed pursuant to
directions given by Additional Commissioner under section 144A on an issue
attains finality, issuing notice for reopening of assessment on same issue
cannot be held as justified. However, revisionary power under section 263 can
be invoked in respect of an order passed under section 144A. [In favour of
assessee] (Related Assessment year : 2001-02) – [Amrit Sales Promotion (P)
Ltd. v. Union of India (2013) 353 ITR 68 : 216 Taxman 104 : 35 taxmann.com 53
(Cal.)]
In revision Commissioner is competent to examine legality and validity of directions issued by Deputy Commissioner under section 144A, on basis of which order of assessment has been passed by Assessing Officer
The assessee filed returns
for the assessment years 1984-85 to 1992-93. During the assessment proceedings,
the assessee moved an application under section144A before the Deputy
Commissioner for issuance of necessary directions. The Dy. Commissioner issued
such directions to the Assessing Officer and thereafter the Assessing Officer
passed the assessment orders against which matter was taken up under section 263.
On revision applications filed by the assessee, the Commissioner set aside the
order passed by the Assessing Officer. The appeals filed by the assessee
against the order of the Commissioner were dismissed by the Tribunal.
In the instant appeal, the assessee contended that in revision the Commissioner had no jurisdiction to examine the legality of the directions issued by the Deputy Commissioner under section 144A. The revenue raised a preliminary objection and submitted that against the order passed by the Commissioner separate appeals were filed by the assessee before the Tribunal which were dismissed and against the said order of dismissal of such appeals, only one appeal had been filed by the assessee which was not maintainable. The assessee submitted that since one order was passed by the Tribunal, in all the appeals, therefore, one appeal had been filed and that separate appeals required to be filed would have not served any useful purpose except to patronize the typist and wastage of stationery, and, thus, only one appeal had been filed.
Held : It was true that by one order all the appeals filed by the assessee were disposed of, but judicial discipline requires to file separate appeal for separate accounting year. Even if the assessee was of the view that filing of one appeal would serve the purpose of the assessee it was expected from the assessee to obtain permission from the High Court to dispense with the assessee from filing separate appeals. In that case also, it was expected from the assessee to file separate sets of Court fee for each of the appeals. However, since the revenue had also not objected at the initial stage and the High Court was bound to decide the appeal on the merits because at least one appeal had been filed properly I, ignoring the technical objection raised by the revenue, the instant appeal was being disposed of on the merits. In view of the decision of the Madras High Court in CIT v. V.V.A. Shanmugam (1999) 236 ITR 878 (MP), and of the Supreme Court in T. N. Civil Supplies Corporation Ltd. v. CIT (2003) 260 ITR 82 : 129 Taxman 69 (SC), it was to be held that in revision the Commissioner was competent to examine the legality and the validity of the directions issued by the Deputy Commissioner under section 144A on the basis of which the order of assessment had been passed by the Assessing Officer. In view of this, the appeal stood dismissed. (Related Assessment years : 1984-85 to 1992-93) – [Daulatram Chhotwani v. CIT (2007) 293 ITR 123 : 211 CTR 411 (2008) 166 Taxman 259 (MP)]
After proceedings under section 144A get initiated, Additional Commissioner himself cannot act as Assessing Officer and pass an assessment order under his own signature
The Assistant Commissioner,
Range-6, Kanpur, holding jurisdiction over the assessee disallowed the
assessee’s claim under the head ‘Capital gains’ and a draft assessment order
was duly forwarded to the assessee along with a show-cause notice calling for
assessee’s objection/explanation. The assessee objecting to the said draft
filed a petition under section144A before the Additional Commissioner, who was
incharge of Range-6, Kanpur. The Additional Commissioner duly entertained the
petition and also granted hearing to the assessee. However, he did not issue
any directions under section 144A and instead, he himself acted as the
Assessing Officer and finalized the assessment by passing the assessment order
under section 143(3) under his own signature. On appeal, the Commissioner
(Appeals) rejected the contention of the assessee that the Additional
Commissioner did not have the authority to act as Assessing Officer and pass
the assessment order under section 143(3) under his own signature and confirmed
the assessment order passed by the Additional Commissioner. On second appeal :
The assessee’s case that the regular assessment order dated 10.02.2003 as passed by the Additional Commissioner, Range 6, Kanpur, was without jurisdiction also got full support from the scheme as envisaged in section 144A, which had been specifically invoked by it to seek instructions for the Assistant Commissioner, Range 6, Kanpur who had been conducting the assessment proceedings in the instant case all through and who had even issued a ‘draft’ assessment order.
It is evident from section 144A that after the machinery of section 144A is placed in motion, either at the initiative of the Joint Commissioner or on a reference being made by the Assessing Officer or on an application made by the assessee, such Additional Commissioner/Joint Commissioner is left only with two options, either he may take a view that no instructions need be given for the guidance of the Assessing Officer, or instructions need be given. In the latter case, if he is of the opinion that instruction adverse to the assessee need be given, he again owes a statutory duty to give the assessee an opportunity of being heard. Nowhere it is envisaged, even by implication that the Joint Commissioner can adopt a third course and intimate the assessee that he himself would be stepping into the authority of the Assessing Officer and finalize the ‘regular assessment order’ under his own signatures, as had been done in the instant case. That will be an act of ‘transgression of authority’ which cannot be permitted. Therefore, after the proceedings under section144A get initiated, the Joint Commissioner himself cannot act as Assessing Officer and pass an assessment order under his own signatures. Naturally, such a situation, presupposes existence of two separate and distinct ‘authorities’, one who gives instructions and two, who receives the directions and implements the same strictly as such directions are of binding nature.
Interestingly enough, section 144A gives an example, where the term ‘Joint Commissioner’ shall include ‘Additional Commissioner’ also. As it is, the ‘authority’ designated for the purposes of proceedings under section 144A is ‘Joint Commissioner’ which has been designated as an ‘Income tax authority’ by virtue of insertion of clause (cca) in section 116 of the Act with effect from 01.10.1998 only. Can it mean that after the said date, recourse to section 144A will not be permissible in such ‘ranges’ where the same are in the charge of the authority designated as ‘Additional Commissioner’. The answer would be in the negation as no such discrimination has been made in the statute. Therefore, to make the provisions of section144A effective and workable, one can fall back upon the interpretation clause of section 2(28C) where it has been mentioned that ‘Joint Commissioner’ includes ‘Additional Commissioner’ also. Such an interpretation clause shall not be applicable in the context of section 2(7A) where the term is qualified as “such Joint Commissioner....” This was an additional reason for the conclusion that the ‘Additional Commissioner, Range 6, Kanpur’ did not have the authority to exercise the powers and perform the functions of an Assessing Officer and the assessment order dated 10-2-2003 as passed by him in the instant case was bad-in-law. Therefore, the assessment order passed by the Additional Commissioner was wholly without jurisdiction and was liable to be quashed. (Related Assessment year : 2000-01) – [Microfin Securities (P) Ltd. v. Addl. CIT (2005) 94 TTJ 767 : 3 SOT 302 (ITAT Lucknow)]
There is no provision in Act under which Additional Commissioner can recall orders under section 144A - Power to set aside an order of the IAC or Deputy Commissioner is under section 263 and said power can only be exercised after giving opportunity of hearing to petitioner - Under section 144A, IAC has power to fix fair rental value of accommodation provided to employees
The allegation that the
petitioner was not given opportunity of hearing had not been denied in the
counter-affidavit. All that had been stated in the counter-affidavit was that
it was not necessary to give opportunity of hearing. That could not be agreed
with. The order issued by the Additional Commissioner had civil consequences.
It has been held by the Supreme Court in the case of State of Orissa v.
Binapani De AIR 1967 SC 1297, that any order which has civil consequences
will be invalid if it is passed without giving opportunity of hearing. Hence,
the petition deserved to be allowed on that ground alone. The contention that
the directions for fixing fair rental value of quarters and furniture, could
not be given under any provision of the Act was not correct. Under section 144A,
there is power in the Inspecting Commissioner to issue the said direction.
By the Direct Taxation Laws (Amendment) Act, 1987 the words ‘Inspecting Assistant Commissioner’ were substituted by the words ‘Deputy Commissioner’ from 01.04.1988. The order had been passed by the IAC who could validly pass the same under section 144A before 01.04.1988. The other order had been passed by the Deputy Commissioner and he was the relevant authority under section 144A after 01.04.1988.
Thus, all the orders were valid orders and had been passed by the competent authority. On the basis of those orders, the assessments of the petitioner and also all of its employees had been completed. Hence, it was wholly arbitrary on the part of the Additional Commissioner, to have suddenly recalled the above orders. There is no provision in the Act under which the Additional Commissioner, can recall the orders under section 144A. The Additional Commissioner does not sit in appeal under any provision of the Act against orders passed under section 144A. The only power to set aside an order of the IAC (or the Deputy Commissioner, as the case may be) is under section 263, but that power had not been exercised, and the power under section 263 can only be exercised after giving opportunity of hearing to the petitioner. Admittedly no such hearing was given. Hence, the impugned orders were wholly arbitrary, illegal, and without jurisdiction.
Even assuming that there was power vested in the Additional Commissioner to pass the impugned order, the said power could not be exercised arbitrarily. In the instant case even assuming that the Additional Commissioner had power to pass the impugned orders, the power had been exercised totally arbitrarily because to rake up issues settled about 15 years ago would only result in total confusion and unnecessary hardship and harassment not only to the petitioner but also to a large number of employees, apart from leading to uncertainty in the administration of tax laws which should be avoided. There is the rule of law, and not the rule of harassment of arbitrariness. The tax authorities should not harass persons in the manner it had been done in the instant case. The petition was allowed. The impugned order was to be quashed. (Related Assessment years : 1982-83 to 1996-97) – [Sir Shadi Lal Enterprises Ltd. v. Addl. CIT (2003) 264 ITR 403 : 185 CTR 146 : (2004) 134 Taxman 131 (All.)]
An order passed by ITO in accordance with directions given by IAC under section 144A or under section 144B is amenable to jurisdiction of Commissioner under section 263
While completing the
assessment for the assessment year 1971-72 the IAC, to whom the ITO had under
section144A referred the matter for guidance, had permitted that the cost of
improvements borne by the assessee was permitted deduction while computing the
capital gains. The Commissioner acting under section 263 thought that the
aforesaid deduction in the computation of capital gains was erroneous and
prejudicial to interests of Revenue. The assessee contended that Commissioner
had no jurisdiction to interfere with an order of assessment made on the
directions given to the ITO under section144A. The Commissioner overruled that objection
and directed the ITO to make a fresh assessment according to law after
disallowing the deduction in question. On appeal, the Tribunal held that the
provisions of section 263 could not be invoked by the Commissioner to revise
the order that emerged from the ITO on the binding directions of the IAC given
statutorily under section 144A(1). Accordingly, the Tribunal cancelled the
order of the Commissioner. On reference:
The Gauhati High Court in Tarajan Tea Company (P) Ltd. v. CIT (1994) 205 ITR 45 (Gau.) following various decisions held that the order passed by the ITO as per the direction given by the IAC under section 144B of the Act is amenable to the jurisdiction exercised by the Commissioner under section 263 of the Act.
In view of that, the Tribunal was not correct in coming to the conclusion that the Commissioner had got no jurisdiction under section 263 to interfere with the order passed by the ITO as per the direction given by the IAC under section 144A. The Tribunal though dealt with the question relating to jurisdiction it did not deal with the appeal on the merits. Inasmuch as it was held that the order passed by the Tribunal with regard to the jurisdiction clause under section 263 was unsustainable, the matter had to go back to the Tribunal for the purpose of disposing of the appeal on the merits. [In favour of the Revenue] (Related Assessment year : 1971-72) – [CIT v. V.V.A. Shanmugam (1999) 236 ITR 878 : (1998) 147 CTR 463 (Mad.)]
While dealing with a reference under section 144B, power to give directions under section144A can be exercised by IAC but subject to compliance with requirement of proviso i.e., affording assessee an opportunity of being heard, if direction be prejudical to assessee
It is submitted by the
senior standing counsel for the Revenue that even during the pendency of the
reference under section 144B power to give a direction under section 144A could
be exercised and therefore the direction of the Inspecting Assistant
Commissioner to the Income-tax Officer to apply the rate of 50 per cent. gross
profit on the estimated sales can be sustained by reference to section144A. He
placed reliance on a Division Bench decision of the Karnataka High Court in CIT
v. M.S.P. Exports (P) Ltd. (1992) 196 ITR 762 (Karn.), wherein it has been
held that provisions of section 144A can be invoked while exercising the power
under section 144B, subject to the assessee being heard. We find ourselves in
agreement with the view taken as above by the High Court of Karnataka. We are
of the opinion that while dealing with a reference under section 144B power to
give directions under section 144A can be exercised but subject to compliance
with the requirement of the proviso, i.e., affording the assessee an
opportunity of being heard, if the direction be prejudicial to the assessee. [In
favour of the revenue] (Related Assessment year : 1975-76) – [Raj R. Paper Merchant v.
CIT (1998) 229 ITR 650 (Del.)]
Notices were issued under sections 142(1) and 143(2) and order was made under section 144A in pursuant to directions issued by appellate authority – High Court should not interfere with impugned order at stage of writ petition
The appellate authority set aside
the assessment with the directions that proper enquiries may be made and the
assessee may be confronted with the material intended to be relied upon before
arriving at any adverse finding to the interest of the assessee and, therefore,
the assessment may be framed afresh as per the provisions of law. In pursuant
to these directions the assessing authority issued notices under sections
142(1) and 143(2) and passed an order under section 144A. On writ, the
petitioner-assessee prayed to set aside the order under section 144A and also
the notices under sections 143(2) and 142(1). The Court need not interfere with the order
under section144A at this stage of writ petition and it would be open to the
petitioner to raise all these contentions not only before the assessing
authority but also before the appropriate higher forums. The writ petition was
summarily rejected. [In favour of the revenue] (Related Assessment year : 1989-90)
– [Jain & Jayans Forms (P) Ltd. v. ACIT (1995) 215 ITR 419 (P&H)]
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