REPORTABLE IN SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION CIVIL APPEAL NO(S).2984/2008 COMMISSIONER OF INCOME TAX, GUJARAT CENTRAL APPELLANT(S) VERSUS SAURASTHRA CEMENT & CHEM. INDUSTRIES LTD RESPONDENT(S) WITH CIVIL APPEAL NO(S).4971/2016 (Arising out of SLP(C) No. 13766/2011) M/S. SARAYA SUGAR MILLS PVT. LTD. APPELLANT(S) VERSUS COMMISSIONER OF INCOME -A WARD, GORAKHPUR RESPONDENT(S) JUDGMENT A.K. SIKRI,J. Leave granted in SLP(C) No. 13766/2011. 2. Commissioner of Income Tax, Gujarat Central, Ahmedabad- appellant (hereinafter referred to as Revenue ), is aggrieved by judgment dated 20.01.2005 passed by High Court of Gujarat whereby High Court has dismissed appeal of Revenue affirming order of Income Tax Appellate Tribunal (hereinafter referred to as ITAT ) holding that assessment Page 1 2 order dated 01.09.1984 passed by Assessing Officer in respect of Assessment Year 1981-82 was time barred. We may mention at outset that in terms of Section 153 of Income Tax Act, 1961 (hereinafter referred to as Act ), time limit for completion of assessment to be made under Sections 143 or 144 of Act is at any time after expiry of two years from end of Assessment Year in which income is first assessable, where Assessment Year is commencing on or after 01.04.1969. On this reckoning, date by which assessment should have been carried out by Assessing Officer in respect of Assessment Year 1981-82 was 31.03.1984. assessment order was, however, passed on 01.09.1984. Revenue claimed that this assessment order was still within prescribed period of limitation because of reason that on 13.03.1984 draft assessment order was passed pertaining to aforesaid Assessment Year and forwarded to Inspecting Assistant Commissioner, Central Range-II, Ahmedabad (hereinafter referred to as IAC ) on 13.03.1984 (i.e. before 31.03.1984). IAC issued instructions under Section 144B of Act on 31.08.1984 and based on that Assessing Officer framed assessment on 01.09.1984 under Section 143(3) of Act read with Section 144B of Act. 3. position that was taken by Revenue was that period from 13.03.1984 to 31.03.1984, when matter was before IAC, had to be excluded while computing period of limitation of two years and once period is excluded assessment order was passed within period of limitation. Page 2 3 contention of respondent/assessee, on other hand, was that, by order dated 29.08.1983, Commissioner of Income Tax, Central, Ahmedabad (hereinafter referred to as CIT ) passed under Section 125A(1) of Act had assigned all powers and functions of Income Tax Officer, Central Circle, Jamnagar (hereinafter referred to as ITO ) to IAC. This order was passed specifically in case of respondent herein which became effective from 01.09.1983. It was their submission that once, by virtue of aforesaid order dated 29.08.1983 passed by CIT, IAC is conferred concurrent jurisdiction, along with ITO, empowering him to make assessment order in case of assessee, there was no question of forwarding draft assessment order by ITO to IAC and this unnecessary and superfluous exercise would not enure to advantage of Revenue giving it benefit of period from 13.03.1984 to 31.08.1984 while calculating period of limitation of two years provided under Section 153 of Act. In nutshell, submission was that conferment of powers of Assessing Officer upon IAC, he is in same position as ITO and draft assessment order could not be sent to him who was brought at par with ITO. 4. Assessing Officer was not amused by aforesaid contention of assessee and repelled same resulting in framing of assessment order dated 01.09.1984. However, ITAT found force in said submission of assessee and allowed appeal thereby setting aside assessment order. High Court, as pointed out above, has upheld this view of ITAT, resulting Page 3 4 in dismissal of appeal of appellant. 5. Before proceeding further, we may mention that in appeal arising out of SLP(C) No.13766/2011 which is preferred by assessee-M/s. Saraya Sugar Mills Pvt. Ltd., in same circumstances, on same question, Allahabad High Court has taken contrary view. High Court of Allahabad has found merit in stand taken by Revenue and excluded period during which draft assessment was forwarded to IAC till date of receiving instructions from IAC under Section 144B of Act. We are, thus, faced with two conflicting views and to decide as to which High Court has correctly decided issue of limitation. 6. We have already stated, in detail, facts of Civil Appeal No. 2984 of 2008. Before we embark upon our detailed discussion on issue, we would like to place on record relevant provisions of Act which have bearing on issue. As mentioned above, Section 153 prescribes limitation of two years for making assessment under Section 143 or Section 144 of Act. Avoiding those portions of these Sections with which we are not concerned, material provisions are re-produced below: "153. Time-limit for completion of assessments and reassessments. - (1) No order of assessment shall be made under section 143 or section 144 at any time after - (a) expiry of - ... (iii) two years from end of assessment year Page 4 5 in which income was first assessable, where such assessment year is assessment year commencing on or after 1st day of April, 1969; or.... whichever is latest. . . . (3) provisions of sub-sections (1) and (2) shall not apply to following classes of assessments, reassessments and re-computations which may, subject to provisions of sub-section (2A), be completed at any time - ... (ii) where assessment, reassessment or re-computation is : made on assessee or any person in consequence of or to give effect to any finding or direction contained in order under section 250, 254, 260, 262, 263 or 264 or in order of any court in proceeding otherwise than by way of appeal or reference under this Act;... Explanation 1. - In computing period of limitation for purposes of this section - . . . (iv) period (not exceeding one hundred and eighty days) commencing from date on which Income-tax Officer forwards draft order under sub-section (1) of section 144B to assessee and ending with date on which Income-tax Officer receives directions from Inspecting Assistant Commissioner under sub-section (4) of that section, or, in case where no objections to draft order are received from assessee, period of thirty days, or (iva) period (not exceeding sixty days) commencing from date on which Income-tax Officer received declaration under sub-section (1) of section 158A and ending with date on which order under sub-section (3) of that section is made by him, or. . . . shall be excluded. . . ." 7. Section 123 of Act lays down jurisdiction of IAC and reads as under: "123. Jurisdiction of Inspecting Assistant Commissioners - (1) Inspecting Assistant Commissioners shall perform their functions in respect of such areas or of such persons or classes of persons or of such incomes or classes of income Page 5 6 or of such cases or classes of cases as Commissioner may direct. (2) Where any directions issued under sub-section (1) have assigned to two or more Inspecting Assistant Commissioners, same area or same persons or classes of persons or same incomes or classes of income or same cases or classes of cases, they shall have concurrent jurisdiction and shall perform such functions in relation to said area or persons or classes of persons or incomes or classes of income or cases or classes of cases as Commissioner may, by general or special order in writing, specify, for distribution and allocation of work to be performed. 8. Section 124, on other hand, deals with jurisdiction of Income Tax Officer and reads as under: 124. Jurisdiction of Income-tax Officers. - (1) Income-tax Officers shall perform their functions in respect of such areas or of such persons or classes of persons or of such incomes or classes of income or of such cases or classes of cases as Commissioner may direct. (2) Where any directions issued under sub-section (1) have assigned to two or more Income-tax Officers, same area or same persons or classes of persons or same incomes or classes of income or same cases or classes of cases, they shall have concurrent jurisdiction and shall perform their functions in relation to said area, or persons or classes of persons, or incomes or classes of income, or cases or classes of cases, in accordance with such general or special orders in writing as Commissioner or Inspecting Assistant Commissioner authorised by Commissioner in this behalf may make for purpose of facilitating performance of such functions. (3) Within limits of area assigned to him, Income-tax Officer shall have jurisdiction - (a) in respect of any person carrying on business or profession, if place at which he carries on his business or profession is situate within area, or where his business or profession is Page 6 7 carried on in more places than one, if principal place of his business or profession is situate within area, and (b) in respect of any other person residing within area. (4) Where question arises under this section as to whether Income-tax Officer has jurisdiction to assess any person, question shall be determined by Commissioner; or where question is one relating to areas within jurisdiction of different Commissioners, by Commissioners concerned or, if they are not in agreement, by Board. (5) No person shall be entitled to call in question jurisdiction of Income-tax Officer - (a) after expiry of one month from date on which he has made return under sub-section (1) of section 139 or after completion of assessment, whichever is earlier :- (b) where he has made no such return, after expiry of time allowed by notice under sub-section (2) of section 139 or under section 148 for making of return. (6) Subject to provisions of sub-section (5), where assessee calls in question jurisdiction of Income-tax Officer, then Income- tax Officer shall, if not satisfied with correctness of claim, refer matter for determination under sub-section (4) before assessment is made. (7) Notwithstanding anything contained in this section or in section 130A, every Income-tax Officer shall have all powers conferred by or under this Act on Income-tax Officer in respect of any income accruing or arising or received within area for which he is appointed. 9. Likewise, Section 125 of Act prescribes powers of Commissioner with respect to specified areas, cases, persons etc. Section 125A of Act, to which we shall advert at later stage, discusses concurrent jurisdiction of IAC and ITO under certain circumstances. Further, Section 130A of Act deals with competency of ITO to perform any function or functions under Page 7 8 certain specified circumstances. Sections 131 to 136 provide for various powers of Income Tax Authorities with which we are not concerned in present case. important provisions directly relevant for controversy in issue are contained in Chapter XIV, namely, Sections 144A and 144B of Act. Section 144A authorises IAC to issue directions in certain cases and Sections 144B provides that in certain cases reference is to be made to IAC by ITO before framing final assessment order. Under Section 144A, IAC may, on his own motion or on reference being made to him by ITO or on application of assessee, call for and examine record of any proceedings in which assessment is pending and, if he considers that, having regard to nature of case or 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 guidance of ITO to enable him to complete assessment. Directions so issued are binding on ITO. 10. Section 144B of Act deals with situation where ITO intends to pass assessment order which is in variation to income or loss that is shown in return of assessee and amount of such variation exceeds amount that can be fixed by Board under sub-Section (6) thereof. In such situation, ITO is under obligation to first forward draft of proposed order of assessment to assessee who can file his objections within 7 days thereof and if objections are received, ITO is to forward draft order together with objections to IAC. IAC, after considering draft order and objections, Page 8 9 is empowered to issue such directions as he thinks fit for guidance of ITO to complete assessment. 11. From reading of Section 153, period (not exceeding 180 days) commencing from date on which ITO forwards draft order under sub-Section (1) of Section 144B to assessee and ending with date on which ITO receives directions from IAC under sub-Section (4) of Section 144B, is to be excluded while computing period of limitation. 12. There is no quarrel up to this stage. However, as pointed out in earlier portion of this judgment, as per assessee when IAC was vested/empowered with same powers as that of ITO, by specific order of CIT in respect of respondent/assessee itself and with conferring of said powers IAC and ITO had concerned jurisdiction over assessee, there was no reason to send draft assessment order by ITO to IAC. To appreciate this contention, we at this stage, reproduce provisions of Section 125A of Act under which concurrent powers can be assigned to IAC as well. 125A. Concurrent jurisdiction of Inspecting Assistant Commissioner and Income-tax Officer. - (1) Commissioner may, by general or special order in writing, direct that all or any of powers or functions conferred on, or assigned to, Income-tax Officer or Income-tax Officers by or under this Act in respect of any area, or persons or classes of persons, or incomes or classes of income, or cases or classes of cases, shall be exercised or performed concurrently by Inspecting Assistant Commissioner. Page 9 10 (2) Where under sub-section (1), Inspecting Assistant Commissioner exercises concurrent jurisdiction with one or more Income-tax Officers in respect of any area, or persons or classes of persons, or incomes or classes of income, or cases or classes of cases, Income-tax Officer or Income-tax Officers shall exercise powers and perform functions under this Act in relation-thereto as Inspecting Assistant Commissioner may direct. (3) Without prejudice to generality of provisions contained in sub-section (3) of section 119, every Income-tax Officer shall also observe and follow such instructions as may be issued to him for his guidance by Inspecting Assistant Commissioner within whose jurisdiction he performs his functions in relation to any particular proceeding or initiation of any proceeding under this Act : Provided that no instructions, which are prejudicial to assessee, shall be issued before opportunity is given to assessee to be heard. Explanation. - For purposes of this sub-section, no instruction as to lines on which investigation connected with assessment should be made shall be deemed to be instruction prejudicial to assessee. (4) Where order is made under sub-section (1) and Inspecting Assistant Commissioner exercises powers or performs functions of Income-tax Officer in relation to any area, or persons or classes of persons, or incomes or classes of income, or cases or classes of cases, references in this Act or in any rule made thereunder to Income-tax Officer shall be construed as references to Inspecting Assistant Commissioner and any provision of this Act requiring approval or sanction of Inspecting Assistant Commissioner shall not apply. 12. From aforesaid sections, it is apparent: (i) Under section 123 of Act, Inspecting Assistant Commissioners have jurisdiction in respect of such areas or of such persons or classes of persons or of such incomes or classes of income or of such cases or classes of cases as per direction of Commissioner. Where there are two Page 10 11 or more Inspecting Assistant Commissioners, they are having concurrent jurisdiction and are required to exercise their powers and perform their functions as per order in writing made by Commissioner specifying for distribution and allocation of work to be performed. (ii) Similarly, under section 124(1), Income-tax Officers are also required to perform their functions as per direction of Commissioner. If there are two or more Income-tax Officers, they are having concurrent jurisdiction and are required to perform their functions as per general or special orders in writing made by Commissioner or Inspecting Assistant Commissioner authorised by Commissioner in this behalf. Sub-section (3) provides that within limits of area assigned to him, Income-tax Officer shall have jurisdiction in respect of any person carrying on business or profession, if place at which he carries on his business or profession is situate within area, or where his business or profession is carried on in more places than one, if principal place of his business or profession is situate within area and in respect of any other person residing within area. Sub-section (4) provides as to who shall decide dispute arising with regard to jurisdiction of Income-tax Officer to assess any person. Sub-section (5) provides that no person shall be entitled to call in question jurisdiction of Income-tax Officer beyond time-limit prescribed therein; (iii) In section 125, exception is carved out with regard to jurisdiction of Income-tax Officer which provides that Commissioner may by general or special order in writing direct that powers conferred on Income-tax Officer by or under Act shall, in respect of any specified case or class of cases or of any specified person or class of persons, be exercised by Inspecting Assistant Commissioner. By order of Commissioner under section 125(1)(a), Income-tax Officer is divested of his jurisdiction to deal with specified case or class of cases or specified person or persons. Hence, even though Income-tax Officer is having jurisdiction in respect of any specified case or person, Commissioner is empowered to direct that said powers shall be exercised by Inspecting Assistant Commissioner. Where such order is made Page 11 12 under section 125(2)(a), any provision of Act requiring approval or sanction of Inspecting Assistant Commissioner will not be applicable. (iv) Section 125A carves out further exception with regard to jurisdiction of Income-tax Officer. It does not oust jurisdiction of Income Tax Officer but confers concurrent jurisdiction on Inspecting Assistant Commissioner. It provides that Commissioner may, be general or special order in writing, direct that all or any of powers or functions conferred on, or assigned to, Income-tax Officer or Income-tax Officers by or under this Act in respect of any are, or persons of classes of persons, or incomes or classes of income, or cases or classes of cases, shall be exercised or performed concurrently by Inspecting Assistant Commissioner. Sub-section (2) of section 125A also empowers Inspecting Assistant Commissioner to issue direction to Income-tax Officer and Income-tax Officer is required to exercise his powers and perform his functions under Act as per said direction. Sub-section (3) thereto clarifies that Income-tax Officer is also required to observe and follow such instructions as may be issued to him for his guidance by Inspecting Assistant Commissioner within whose jurisdiction he performs his functions in relation to any particular proceedings or initiation of any proceeding under Act. proviso clarifies that no instructions which are prejudicial to assessee shall be issued before opportunity is given to assessee to be heard. 13. Thrust of counsel for assessee was on sub-Section (4) of Section 125A with submission that on conferment of concurrent jurisdiction, provisions of Act requiring approval and sanction of IAC are not applied and, therefore, provisions of Section 144B seize to apply and should not have been invoked by ITO in instant case. It was also argued that High Court in impugned judgment has rightly discussed that with passing of specific order dated 29.08.1983 by CIT Page 12 13 directing that all powers and functions assigned to ITO, Central Circle, Jamnagar are thereby available to IAC, Central Range II, Ahmedabad, IAC, Central Range II, Ahmedabad was brought at par with ITO, insofar as it pertains to assessment of assessee herein and he did not remain Officer higher in status than ITO insofar as assessment of assesse is concerned and for this reason also no such reference to IAC was called for. 14. These arguments are without any force and result which respondent/assessee wants does not flow from reading of Section 125A of Act. bare reading of sub-Section(4) of Section 125A of Act provides that where- (a) order is made under sub-section (1), and (b) Inspecting Assistant Commissioner exercises powers or performs functions of Income-tax Officer in relation to any area, or persons or classes of persons, or incomes or classes of income, or cases or classes of cases, - (i) references in this Act or in any rule made thereunder to Income-tax Officer shall be construed as references to Inspecting Assistant Commissioner, and (ii) any provision of this Act requiring approval or sanction of Inspecting Assistant Commissioner will not be applicable. Page 13 14 15. Hence, provision of Act requiring approval or sanction of Inspecting Assistant Commissioner will not be applicable only in those cases where both aforementioned conditions (a) and (b) are satisfied. It would mean that, even though order is made under section 125A(1) empowering Inspecting Assistant Commissioner to perform functions of Income-tax Officer, yet if he has not exercised power or performed function of Income-tax Officer, provisions requiring approval or sanction of Inspecting Assistant Commissioner will be applicable. Sub-section (4) nowhere provides that, if some directions by Inspecting Assistant Commissioner are issued as provided under sub-section (2), then provisions requiring approval or sanction of Inspecting Assistant Commissioner will not be applicable. 16. In instant case, we find that it is not IAC who exercises powers or performs functions of ITO, even when such power was conferred upon him, concurrently with ITO. significant feature of Section 125A of Act is that even when IAC is given same powers and functions which are to be performed by ITO in relation to any area or classes or person or income or classes of income or cases or classes of cases, on conferment of such powers, ITO does not stand denuded of those powers. With conferment of such powers on IAC gives him concurrent jurisdiction which means that both, ITO as well as Page 14 15 IAC, are empowered to exercise those functions including passing assessment order. It is still open to ITO to assume jurisdiction and pass order in case IAC does not exercise those powers in respect of assessment year. Provisions of Section 144B would not apply only if IAC exercises powers or performs functions of ITO. What is important is actual exercise of powers and not merely conferment of powers that are borne out from bare reading of sub-Section (4) of Section 125B. 17. position becomes abundantly clear when we read Section 144B, particularly, sub-Section (7) thereof, though for sake of clarity we reproduce hereunder entire provision: (7) Nothing in this section shall apply to case where Inspecting Assistant Commissioner exercises powers or performs functions of income-tax Officer in pursuance of order made under section 125 or section 125A." 18. Sub-Section (7), in no uncertain terms, mentions that Section 144B will not apply only in that case where IAC exercises powers or performs functions of ITO in pursuance of order made under Section 125 or Section 125A. 19. In instant case, as already noted above, no such power was exercised or function of ITO was performed by IAC. We would like to point out here that High Court of Gujarat while dismissing appeal of Revenue failed to take into account earlier judgment of Co-ordinate Bench of High Court in Page 15 16 CIT vs. Shree Digvijay Woollen Mills Ltd. [1995] 212 ITR 310], which has taken view that we have expressed above. We agree with view taken in CIT vs. Shree Digvijay Woollen Mills Ltd. thereby allowing Civil Appeal No. 2984 of 2008 and setting aside impugned judgment. 20. For these reasons, Civil Appeal arising out of SLP(C)No.13766/2011 filed by assesee against judgment of Allahabad High Court is dismissed affirming view in said case which is reported as Commissioner of Income tax vs. Saraya Sugar Mills P. Ltd. [2011] 336 ITR 572 (All). 21. Revenue shall be entitled to costs in both appeals. ......................J. [A.K. SIKRI] ......................J. [ROHINTON FALI NARIMAN] NEW DELHI; MAY 02, 2016. Page 16 Commissioner of Income-tax, Gujarat Central v. Saurasthra Cement & Chem. Industries Ltd