Judgment:
There are a number of grounds in this appeal but the ground regarding which arguments were made most extensively is an additional ground. It is an important ground. If it is decided in favour of the assessee it would not be necessary to decide the other grounds. That ground is that the order passed by the ITO is barred by limitation. It arises in this way.
2. The assessment order has been passed on 24th Sept., 1984 under S.143(3) r/w S. 144B. The assessee had filed objections to the draft assessment order. The CIT (Central) had passed an order under S.125A(1) conferring concurrent jurisdiction over this case on the IAC from 1st Nov., 1978. The assessees contention is that since this concurrent jurisdiction had been conferred the provisions of S. 144B would not be applicable by virtue of sub-s. (7) thereof so that the extension of limitation period available under S. 153, Expln. 1(iv) was not available and that therefore, the normal period of limitation was applicable. Since, the assessment year is 1981-82 the limitation expired on 31st March, 1984. In order to appreciate the controversy it is necessary to set out the material parts of the relevant sections.
They are as follows : "125A(1). The Commissioner may be .......... order direct that all or any of the powers ..... conferred on ...... the ITO(s)..... shall be exercised ....... concurrently by the IAC.(2) Where under sub-s. (1) the IAC exercises concurrent jurisdiction with one or more ITO...... the ITO shall exercise the powers as the IAC may direct.
(4) Where an order is made under sub-s. (1) and the IAC exercises the powers of an ITO references in this Act or any rule made thereunder to the ITO shall be construed as references to the IAC and any provisions of this Act requiring approval or sanction of the IAC shall not apply." "144B(7). Nothing in this section shall apply to a case where the Dy.
Commissioner exercises the powers or performs the functions of an Assessing Officer in pursuance of an order made under S. ..............
125A." The question is whether the jurisdiction under S. 144B is ousted by sub-s. (7) thereof.
3. The learned counsel for the assessee has submitted that since the concurrent jurisdiction had been conferred on the IAC under S. 125A, the Dy. Commissioner had no jurisdiction under S. 144B. On the other hand, the learned Departmental Representative submitted that although concurrent jurisdiction had been so conferred, that jurisdiction was not exercised by the IAC and so S. 144B was fully applicable. Before, however, we enter upon consideration of this argument one point which was taken by the ld. Deptl. Representative may be considered at the outset. The learned. Departmental Representative pointed out that the assessee in this case had submitted to the jurisdiction under S. 144B by giving his objections to the draft order and that, therefore, now it was not open to the assessee to take this point regarding applicability of S. 144B relying upon Rai Bahadur Seth Teomal vs. CIT (1959) 36 ITR 9 (SC), Udaipur Distillery Co. vs. CIT (1973) 87 ITR 516 (Raj) and Seth Kanhaiyalal vs. CIT (1937) 5 ITR 739 (All). The learned counsel for the assessee submitted, and in our opinion rightly, that this was a point regarding jurisdiction and there was no question of the assessee waiving his right to object to it. In our opinion, jurisdiction is a matter of law, and if it is taken away by a statute the result is that there is no jurisdiction and the assessee cannot be said to have waived his right to take an objection regarding the absence of jurisdiction.
The decisions relied upon by the learned Departmental Representative are regarding the place of assessment and have no application here.
4. That brings us to the main point as above. The learned Departmental Representative submitted alternatively that this was only a procedural irregularity which could be cured relying upon M.P. State Mining Corpn.
vs. CIT (1988) 170 ITR 459 (MP), 151 ITR 229 (sic) and Joseph Kuruvila vs. CIT (1989) 179 ITR 139 (Ker). According to him, since this was only procedural irregularity the draft assessment order should be taken as a final order relying upon H. H. Maharaja Raja Pawer Dewas vs. CIT (1982) 138 ITR 518 (MP), Kimtee vs. CIT (1985) 151 ITR 73 (MP), Bal Erectors vs. CIT (1989) 180 ITR 625 (P&H) and S. Sewa Singh Gill vs. CIT (1962) 46 ITR 152 (Punj). The learned counsel for the assessee placed strong reliance upon the Tribunals decision in the case of Digvijay Woollen Mills Ltd. vs. ITO (1987) 61 CTR (Trib) (All) 33 where the earlier Special Bench decision in the case of Saraya Sugar Mills vs. ITO (1985) 23 TTJ (All) 196 (SB) : (1985) 13 ITD 163 (All) (SB) has been followed.
In the case of Digvijay Woollen Mills (supra) the Tribunal found that not only was the power under S. 125A conferred on the IAC, but it was also exercised by him. It, therefore, held that S. 144B was not applicable. In the case of Sraya Sugar Mills (supra) although the Special Bench has observed that once the concurrent jurisdiction is conferred on the IAC under S. 125A he was deemed to have exercised the power vested in him, the Tribunal has also noted that the IAC had in fact exercised the powers and performed the functions of the ITO in terms of S. 125A. Therefore, the observation by the Special Bench that the IAC must be deemed to have exercised the concurrent jurisdiction once it is conferred on him is purely obiter. At page 170 of the report the Special Bench has observed in this connection as follows : "In any event the discussion on the aspect of the matter appears to us to be of academic nature in as much as on going through the facts on record, we find that the IAC, Allahabad, had, as a matter of fact, exercised the powers and performed the function conferred on him under S. 125A." Thus, the Tribunal itself has regarded this point as academic and we are justified in holding the observations to be obiter. Moreover, since the Tribunal in the case of Digvijay Woollen Mills (supra) has considered the said Special Bench decision, it must be held that the present legal position is that S. 144B would be inapplicable only if the IAC in fact exercises concurrent jurisdiction conferred on him under S. 125A. The headnote in the report of Digvijay Woollen Mills Ltd. (supra) decision in the CTR states as follows : "Held, once order under S. 125A was passed giving the IAC concurrent jurisdiction, the provisions of S. 144B of the Act would not be applicable in the instant case by virtue of sub-s. (7) of that section." As shown above, the Tribunal has not held this and nowhere in the Tribunals order is there any observation as above. Further, sub-s. (4) of S. 125A clearly speaks about the exercise of powers or performance of functions of an ITO which clearly shows that the powers must be exercised. Again, S. 144B(7) speaks about the Dy. Commissioner exercising the powers and not only that, it speaks about the exercise of powers in pursuance of an order under S. 125A. This clearly shows that the exercise of the powers is necessary and that this exercise of the powers is a separate act because it is in pursuance of the order under S. 125A. The learned counsel for the assessee has submitted that S. 125A(2) makes merely conferment of the powers because according to him, the word "exercise" means mere holding of the powers, i.e., a mere capacity to exercise those powers. The assessees contention would lead to a very unreasonable result. If S. 144B would become inapplicable merely because concurrent jurisdiction had been conferred on the IAC but not exercised by him then neither the power under S. 144B would be exercised nor the concurrent jurisdiction would be exercised. The case would then not get the benefit of consideration by higher authority which is the purpose both of Ss. 125A and 144B. The whole purpose of S.144B(7) is to avoid a clash and overlapping of orders or exercise of functions by two separate authorities and that can happen only if actually the function is exercised and not merely by the conferment of powers to exercise them. We are unable to accept this contention for the above reasons. The assessees counsel also relied upon two decisions of the Tribunal (a) Hansa Agencies Pvt. Ltd. (1985) 18 TLR 997 and (b) Smt. Shampyari Angrish (1985) 19 TLR 737 but in both those cases the IAC had in fact exercised the powers conferred on him under S. 125A.5. The learned counsel for the assessee also submitted that the section could not be so interpreted as to either extend or reduce the period of limitation depending merely on the fancy and whim of the IAC to exercise the concurrent jurisdiction or not to exercise it. We do not find anything extraordinary in this position. It is the result of reading of the sections and of the case law which has been considered above. The assessee knows that if the power is exercised there would be a certain period of limitation and if it is not exercised there would be another period of limitation. It is not as if he is taken by surprise. This position from the beginning is knowable and is indeed known to him. The argument put forward by the assessees counsel does not improve the position of the assessee. If it is accepted it would mean that the period of limitation would depend upon the conferment of the power and not upon the exercise of that power. In both cases it would depend upon the decision by the relevant authorities either to confer that power or to exercise it as the case may be. The degree of predictability or, as the learned counsel put it, the whim and fancy would in both cases remain the same. Further, cl. (iv) of Expln. 1 in S. 153 speaks of exclusion of a certain period for the purpose of limitation, not that it gives a longer period of limitation as such.
That is only the result. Exclusion of a certain period had to be made in order to make S. 144B workable. Therefore, we hold that S. 144B was applicable and the assessment is not barred by limitation.
6. We have, therefore, to deal with the other grounds. The first ground is that (a) the Commissioner erred in confirming the disallowance of payment of interest of Rs. 3,12,488, i.e., Rs. 1,76,501 under S. 215 plus Rs. 65,340 and (b) the Commissioner erred in rejecting the contention of the assessee that the interest payments are allowable deduction either under S. 36, 37 or 80VV of the Act. This ground is rejected in view of the following decisions : 7. The second ground is that the Commissioner (A) erred in not considering the ground of appeal for interest payment of Rs. 3,600 to M/s. Kaushal Textiles. This grievance is correct. Therefore, for this purpose it is restored to Commissioner (A). This ground is allowed for statistical purposes.
The CIT(A) erred in not considering this additional ground of appeal raised in writing on 28th Aug., 1987 claiming these machinery repairs, etc., which have been disallowed by ITO in asst. yr. 1982-83 as pertaining to this year." The learned counsel for the assessee stated that this ground can be decided here because in the Commissioners order for asst. yr. 1982-83 it has been stated as follows : "In the second ground of appeal, the appellant had claimed a total expense of Rs. 16,050 which pertained to asst. yrs. 1977-78 and 1981-82. Since the expenses pertained to the earlier years the same cannot be allowed this year." He also invited our attention to the copies of the bills which have been filed trying to prove the actual expenditure. These copies are not fully legible and it is, therefore, desirable that proper scrutiny be made. Therefore, on this point, the matter is restored to the Commissioner for deciding this ground. This ground is also allowed for statistical purposes.
9. In the result, the appeal is partly allowed for statistical purposes.