Express Newspapers Ltd. vs Commissioner of Income Tax

R. Jayasimha Babu, J.—For the assessment year 1970-71, the Assessing Officer made a draft order, in which, he treated the loss incurred

by the asses-see as normal business loss. That draft assessment order was approved by the Inspecting Assistant Commissioner u/s 144B of the

Income Tax Act, 1961. Thereafter, the Assessing Officer changed his view of the nature of the loss incurred by the assessee in his transaction

relating to shares and considered those losses to be speculative loss and capital loss. The modification so made by the Assessing Officer was not

pursuant to any direction given by the Inspecting Assistant Commissioner. The approval given by the Inspecting Assistant Commissioner was for

the treatment of the loss as business loss.

The assessee having taken the matter in appeal, the appellate authority agreed with the assessee that the Assessing Officer could not have

meddled with the draft assessment order after it received approval of the Inspecting Assistant Commissioner. He directed the Income Tax Officer

to treat the entire loss as business loss. The matter was then taken on appeal to the Tribunal by the Revenue. The Tribunal having set aside the

order of the Commissioner, the present reference has been brought before us by the assessee.

The Supreme Court in the case of Panchamahal Steel Ltd. Vs. U.A. Joshi, ITO and Another, held as under (page 462) :

A reading of Section 144B shows that once a draft order is made and the matter is referred to the Inspecting Assistant Commissioner on receiving

the objections of the assessee, the function of the Income Tax Officer practically comes to an end. Thereafter, the only remaining thing to do by

him is to pass a final order of assessment pursuant to and in accordance with the directions given by the Inspecting Assistant Commissioner. He

cannot vary or depart from the directions given by the Inspecting Assistant Commissioner.

Having regard to the effect of the order of approval given by the Inspecting Assistant Commissioner u/s 144B of the Act, it is clear that the

Assessing Officer is not to meddle with the draft assessment, except to the extent required for the purpose of complying with the directions, if any,

given by the Inspecting Assistant Commissioner. The Commissioner, whose order had rightly realised the import of Section 144B of the Act, and

had directed the Assessing Officer to treat the loss as business loss, as that was the way in which it was treated the draft assessment order to

which the Inspecting Assistant Commissioner had granted the approval. The Tribunal was in error in reversing that order of the Commissioner.

The question referred to us, viz.,

Whether, on the facts and in the circumstances of the case and having regard to the scheme of the Act, especially the provision of Section 144B

the Tribunal was right in setting aside the orders of the lower authorities and directing the Assessing Officer to do the assessment de novo ?

is, therefore, answered in favour of the assessee, and against the Revenue.