Raj R. Paper Merchant vs Commissioner of Income Tax

R.C. Lahoti, J.—This is a reference u/s 256 of the Income Tax Act, 1961, at the instance of the assessed arising out of the assessment year 1975-76 seeking opinion of the High Court on the following questions :

"(1) Whether, on the facts and in the circumstances of the case, the Inspecting Assistant Commissioner had jurisdiction to raise the gross profit rate to be applied on the estimated sales from 40 per cent. as proposed in the draft assessment order to 50 per cent. in a reference u/s 144B ?

(2) Whether the order of the Inspecting Assistant Commissioner can be treated as a consolidated order under sections 144B and 144A ?"

It is submitted by the senior standing counsel for the Revenue that even during the pendency of the reference u/s 144B power to give a direction u/s 144A could be exercised and Therefore the direction of the Inspecting Assistant Commissioner to the Income Tax Officer to apply the rate of 50 per cent. gross profit on the estimated sales can be sustained by reference to section 144A. He placed reliance on a Division Bench decision of the Karnataka High Court in Commissioner of Income Tax Vs. M.S.P. Exports Pvt. Ltd., , wherein it has been held that provisions of section 144A can be invoked while exercising the power u/s 144B, subject to the assessed being heard. We find ourselves in agreement with the view taken as above by the High Court of Karnataka. We are of the opinion that while dealing with a reference u/s 144B power to give directions u/s 144A can be exercised but subject to compliance with the requirement of the proviso, i.e., affording the assessed an opportunity of being heard, if the direction be prejudicial to the assessee.

That being the position, we answer both the questions in the affirmative but subject to compliance with the proviso as already discussed hereinabove. No order as to costs.