- (1.) In this reference under Section 256(1) of the Income-tax Act, 1961, for the assessment year 1975-76, the question which has been referred to this court is "whether the order of assessment is time-barred ?"
(2.) The facts are that the assessee submitted a return showing an income of Rs. 47,848. The said, income was arrived at as follows : JUDGEMENT_678_ITR188_1991Html1.htm
(3.) The Income-tax Officer, however, arrived at the total income at Rs. 2,34,199 and also proposed to disallow the loss of Rs. 1,77,303 shown under the head "Income, profits and gains of business or profession". The Income-tax Officer felt that the loss in business (on sale of shares) claimed by the assessee should come under the head "Short-term capital loss" and, accordingly, the provisions of Section 144B(1) of the Income-tax Act were attracted. The Income-tax Officer, therefore, submitted a draft assessment order 6n the assessee on March 18, 1978. In the normal course, the assessment would have been barred by limitation by March 31, 1978. The assessee, on April 5, 1978, stated that they were refraining from making any objection under Section 144B(2) of the Act. Accordingly, the Income-tax Officer completed the assessment under Section 144B(3), the assessment being completed on the basis of the draft order. The contention of the assessee is that Section 144B(1) can only be applied if the variation is made in the income or loss returned which is prejudicial to the assessee. In this case, the Income-tax Officer having allowed the loss under the head "Short-term capital loss" instead of "business loss", in effect, there was no prejudice to the assessee. Accordingly, it was contended that the assessment was barred by limitation. This contention, however, was not raised before the Income-tax Officer. This point was taken before the Commissioner of Income-tax (Appeals). The Commissioner of Income-tax (Appeals) noted the contention of the assessee as follows : "It is pointed out by the learned representative that the Income-tax Officer had sent a draft assessment order under Section 144B. The assessee pointed out that the order in no way was prejudicial to the assessee, because of the treatment of loss on purchase and sale of shares as 'short-term capital gain' by the Income-tax Officer instead of accepting the loss as a loss in share-dealing business. Moreover, the difference between the assessed income and the returned income did not exceed Rs. 1 lakh. So the Income-tax Officer should have completed the assessment within March 31, 1978." "I have carefully considered the objection raised by the learned representative and the submissions made by the Income-tax Officer. I find that the analysis made by the Income-tax Officer of the facts of the case was indeed pertinent to the issue. The decision of the Income-tax Officer was in fact prejudicial to the interests of the assessee, inasmuch as the claim of loss under the head "Business" amounting to more than rupees one lakh was not accepted by the Income-tax Officer. The Income-tax Officer was fully justified in sending a draft order to the assessee under Section 144B, whereafter the assessment was done within thirty days. So, the objection of the learned representative was meritless and is, accordingly, dismissed.";