M/S BANSAL WIRE PRODUCTS,LUDHI vs. C.I.T., LUDHIANA

The Income Tax Appellate Tribunal, Chandigarh has referred following question of law for opinion of this Court under Section 256(1) of the Income Tax Act, 1961 (for short, ‘the Act’), arising out of its order dated 22.10.1996 in ITA No.921/Chandi/96, relating to assessment year 1980-81:- “Whether on the facts and circumstances of the case, the ITAT was right in law in upholding the CIT(A)’s decision on debarring the assessee from pleading, during penalty proceedings, the invalidity of the assessment having become barred by time simply because such pleading was omitted by mistake, during the assessment proceedings?”

The Assessing Officer in the course of assessment invoked Section 144B of the Act for proposing addition beyond specified amount and after due approval completed the assessment. Penalty was also levied apart from making addition to the declared income. The assessment became final but on appeal against the levy of penalty, the assessee raised an objection that Section 144B of the Act was not applicable in view of concurrent juri iction being available with the Assessing Officer under section 125A(1) of the Act and thus, the period spent in proceedings under section 144B of the Act could not be excluded. If the said period is not excluded, the assessment was barred by limitation, the assessment order having been passed on 27.8.1983 which was beyond 31.3.1983. This plea was rejected. Apart from holding that plea raised by the assessee only in appeal against levy of penalty could not be considered, following finding of the Assistant Commission of Income Tax (ACIT) was affirmed:- “Further, according to section 144B(1), it was mandatory for the ITO to forward the draft assessment order to the IAC because difference between income returned and proposed to be assessed was more than Rs.1 lakh. It is pertinent to note that word ‘shall’ has been used in section 144B(1) of the IT Act and as such there was no option with the ITO except to forward the draft assessment order to the IAC for approval before finalizing the assessment.”

We have heard learned counsel for the parties and perused the record.

We find that the Tribunal decided the matter on merits against the assessee and though it was alternatively observed that the assessee could not be allowed to raise the said question, even after due consideration thereof, decision was taken against the assessee. If the decision of the Tribunal on merits was justified, even if the assessee was allowed to raise the issue of limitation for the first time in penalty proceedings, the assessee could not succeed as it has been held by the Tribunal that Section 144B of the Act was rightly invoked, the difference in proposed addition and assessed income being more than Rs.1 lac. Even though, we are of the opinion that the assessee could have raised the question for the first time in penalty proceedings, in view of finding on merits, the assessee could not succeed. The question is answered accordingly.

The reference is disposed of. (Adarsh Kumar Goel) Judge September 22, 2010 (Ajay Kumar Mittal) ‘gs’ Judge 3