E.M. Narayanan Unni, Vice President -
(1.) IN this appeal, filed by the assessee, aground was raised at the time of hearing of the appeal before the Tribunal to the effect that the assessment made by the ITO under Section 143(3)/147 of the INcome-tax Act, 1961 ("the Act"), was illegal as he had submitted a draft assessment order under Section 144B to the I AC and completed the assessment in accordance with the directions issued by him. According to the assessee, the provisions of Section 144B are not applicable to an assessment made, pursuant to the provisions of Section 147. Considering the controversial nature of this contention, and the fact that certain Benches of the Tribunal have also accepted such a contention in certain cases, and also the far reaching importance of the decision on this issue, the Bench considered it desirable that the matter should be placed before a Special Bench of the Tribunal. On a reference being made by it under Section 255(3) of the Act, the President of the Tribunal has constituted this Special Bench to consider and decide the issue, whether the provisions of Section 144B would apply to a reassessment made in pursuance of the provisions of Section 147.
(2.) As the legal issue, as stated earlier, is of considerable importance, certain other assessees have also participated in the arguments before this Bench, through their, authorised representatives, as interveners, to assist the Bench in coming to a decision. On the request of the learned representative of the assessee, Shri R. Ganeshan, Shri N.K.P. Salve, the learned representative of the intervener Shakti Trading Co. Ltd., Bombay, was allowed to advance his arguments on this issue, first.
Shri Salve argued that Section 144B, in terms, applied only where an assessment is to be made under the provisions of Section 143(3) of the Act. That section did not make any mention of an assessment under Section 147. He pointed out that assessments under Section 143(3) and under Section 147 are conceptually and procedurally different from each other. An assessment under Section 143(3), according to Shri Salve, concerned itself only with disputed additions to income or disallowances of expenditure, whereas an assessment under Section 147 concerned itself with income which had escaped assessment. Thus, it was submitted, the area of dispute in these two types of assessments is different. He further pointed out that the conditions under which these two types of assessments could be made were also different. An assessment under Section 143(3), it was pointed out, was as a result of a return tiled under Section 139(1) or under Section 139(2) of the Act, whereas the assessment under Section 147 could be made only on the basis of a return filed in response to a notice issued under Section 148, consequent on the satisfaction of the ITO, that income has escaped assessment, etc. The pre-requisites for the issue of notices under Section 139(2) and under Section 148 are, it was submitted, also different. Another point which was stressed by Shri Salve, to bring home the difference and to show that an assessment under Section 147 is different and distinct from an assessment under Section 143(3), is that Section 246 of the Act provides for an appeal, separately, against an order under Section 143(3) and an order under Section 147. The rules of limitation applicable to assessments under Section 143(3) and Section 147 are also different.
(3.) SHRI Salve went on to argue that though Section 2(8) of the Act defines "assessment" as including reassessment, the said definition will not, automatically, make an assessment under Section 147 an assessment under Section 143(3). In this connection, he referred to the definition of "regular assessment." in Section 2(40) of the Act, according to which the term means "the assessment made under Section 143 or Section 144". This definition, according to SHRI Salve, gave a distinct character to an assessment made under Section 143 as against an assessment under Section 147, which is not regarded as a regular assessment. If an assessment under Section 147 is also to be regarded as an assessment under Section ,3(3) or under Section 144, the definition of "regular assessment" would also have included such an assessment. He went on to observe that Section 147, in itself, is an assessment section. It not only gives the ITO *.he jurisdiction to reopen an assessment but also provides the machinery for making the assessment. Though Section 148 of the Act stipulates that before making an assessment or reassessment or recomputation under Section 147, the ITO shall serve on the assessee a notice containing all or any of the requirements which may be included in a notice under Sub-section (2) of Section 139 and the provisions of this Act shall, so far as may be, apply accordingly as if the notice were a notice issued under that sub-section, SHRI Salve observed that a notice so issued did not become a notice under Section 139(2) and the assessment completed by the application of the provisions of the Act, so far as they may be applicable, did not become an assessment under Section 143(3) or 144. He referred to various provisions in the Income-tax Act such as Section 152(2), Section 246(1)(e), etc., of the Act, where an "order of assessment, reassessment or recomputation under Section 147" is referred to and submitted that this would show that the Legislature had clearly intended that assessments or reassessments made in accordance with the provisions of Section 147 should be regarded as distinct and separate from assessments made under Section 143(3) or 144. He also pointed out that the Indian Income-tax Act, 1922 ("the 1922 Act") did not provide for a separate appeal against assessment or reassessment under Section 34 of that Act. It was by judicial decisions, that it was clarified that the term "assessment" would include reassessment also and, consequently, an appeal against an assessment or reassessment under Section 34 would also lie under Section 30 of the 1922 Act, even though it was not specifically enumerated in that section, among the appealable orders. However, SHRI Salve pointed out, a specific provision for appeal against an order of assessment, reassessment or recomputation under Section 147 has been provided in Section 246(1)(e). This, according to him, would show that the scheme of Section 34 of the 1922 Act, and of Section 147 of the 1961 Act, are different.- He submitted that there was even a difference in the language used in the two sections. Section 34 provided that the ITO may, within the time limited in that section, serve on the assessee a notice containing all or any of the requirements which may be included in a notice under Sub-section (2) of Section 22 and may proceed to assess or reassess such income, profits or gains or recompute the loss or depreciation* allowance, etc., etc. Section 147, on the other hand, provides that the ITO may, subject to the provisions of Sections 148 to 153 assess or reassess such income or recompute the loss or the depreciation allowance, etc., etc. SHRI Salve drew our attention to the difference in the words used, namely, "proceed to assess or reassess" and "assess or reassess" as used in the 1922 Act and the 1961 Act. In the light of this difference in phraseology, he contended that an assessment or reassessment in pursuance of the provisions of Section 147 is only an assessment under Section 147 and not an assessment under Section 143(3). He further stated that even if there are defaults committed by an assessee in the matter of filing of return or complying with notices under Section 142(1) or' 143(2), in the course of such proceedings, such defaults could not result in an ex parte assessment under Section 144, as the assessment could be completed only under Section 147. The fact that the Commissioner's powers of revision under Section 263 did not extend to an assessment made under Section 147 was also referred to by SHRI Salve as indicative of the difference in the nature of the two assessments. He also referred to the wording of Sub-section (2) of Section 33B of the 1922 Act, which lays down that no order of revision could be passed by the Commissioner to revise an order of reassessment made under the provisions of Section 34. The corresponding provision in Section 263(2) lays down that no order of revision shall be passed by the Commissioner to revise an order of reassessment made under Section 147. According to him, this difference in the wording is quite significant and could not be lost sight of. In order to further bring out the difference between the assessments under Section 143(3) or Section 144 and assessments or reassessments under Section 147, he referred to the decision of the Punjab and Haryana High Court in Smt. Kamla Vati v. CIT  111 ITR 248, according to which only assessments made under Section 143(3) or Section 144 could be described as a regular assessment and an assessment made under Section 147 could not be so regarded. We may, at once, point out that a contrary decision has been given by the Calcutta High Court in Kashiram Tea Industries Ltd. v. ITO  132 ITR 783. Reference was also made to the decision of the Calcutta High Court in Surajmal Ganeshram v. CIT  120 ITR 715, which only points out that for purposes of appeal, an assessment or reassessment under Section 147 is treated in a separate category distinct from assessments made under other sections or provisions, inasmuch as, there is a separate provision for appeal against an order under Section 147. However, the High Court went on to point out that in an assessment under Section 147, the same procedure or machinery for making assessment under Section 143 or 144 is to be followed. It will be seen that this observation of the High Court would negative SHRI Salve's contention that Section 147 provides the jurisdiction as well as the machinery for making the assessment under Section 147 and that it is a self-contained provision.;