ORDER
Arijit Pasayat, C.J.
1. At the instance of Revenue, following question has been referred for opinion of this Court by the Income Tax Appellate Tribunal, Delhi Bench 'C', Delhi ( in short, 'the Tribunal') under Section 256(1) of the Income Tax Act, 1961 ( in short, the 'Act'):-
'Whether, on the facts and in the circumstances of the case, the Tribunal was correct in law in holding that the provisions of Section 144B(1) are not applicable in the present case even though the income proposed by the I.T.O. to be taxed exceeded by over Rs.1 lac the income returned by the assessed?'
Dispute relates to the assessment year 1976-77.
2. Factual position, as indicated in the Statement of the Case, is as follows:-
assessed is an individual, who derived income from two house properties, from proprietorship business run in the name of M/s. S.R. Associates and share income from a partnership firm M/s United Traders Return of income for the assessment year was filed on 11.07.1976. assessed declared his total income to be Rs.51,930/-. A sum of Rs.29,013/- was declared to be his share income from the above-said partnership. During assessment, Income Tax Officer ( in short, 'I.T.O.') received intimation from the Officer assessing the said partnership firm that share income as allocated to assessed came to Rs.1,10,426/-, and thus, share income, as declared by assessed, was to be enhanced by Rs.81,473/-. While computing income from house properties and proprietory business, I.T.O. was of the view that the declared income of Rs.22,917/- from the aforesaid two sources deserve to be raised to Rs.1,02,830/-. That involved an addition of Rs.79,913/-. According to I.T.O., both the variations, namely, Rs.81,473/- in respect of share income and Rs.79,913/- from two other sources were relevant for the purpose of working out the variations in terms of Section 144B(1) of the Act, as the total came to Rs.1,61,386/-, i.e., a figure exceeding Rs. 1 lac and he took recourse to Section 144B of the Act and forwarded to assessed a draft assessment order. assessed filed objections, which in turn was forwarded by I.T.O. to Inspecting Assistant Commissioner ( in short 'I.A.C.'). On receipt of I.A.C.'s directions assessment was completed by order dated 22.09.1979. assessed preferred an appeal before the Commissioner of Income Tax (Appeals) ( in short C.I.T. (A)). It was assessed's stand that Section 144B of the Act had no application to the facts of the case and, thereforee, assessment made on 22.09.1979 was time-barred. In other words, assessed's stand was that the benefit of clause (iv) of Explanationn -- 1 below Section 153(3) had no application. Though C.I.T. (A) granted relief on certain other heads, he did not accept assessed's stand about non-applicability of Section 144B of the Act. Matter was carried in further appeal before the Tribunal by assessed. The stand, as taken before C.I.T. (A), was reiterated before the Tribunal Accepting assessed's stand that for working out the variation in terms of Section 144B(1) in share income was not relevant, Tribunal allowed the appeal. It was noted that assessed had no scope to raise any objection so far as variation in share income is concerned and thereforee, the basic requirement of Section 144B was absent.
3. On being moved for reference, the question, as set out above, has been referred for opinion of this Court.
4. We have heard learned counsel for Revenue. There is no appearance on behalf of assessed in spite of notice. According to learned counsel for Revenue, though so far as share income is concerned, appeal is not provided in the statute, yet there was no scope for taking the stand that the variation is immaterial for the purpose of Section 144B of the Act. Strong reliance is placed on a decision of the Punjab and Haryana High Court in Commissioner of Income Tax v. Satya Narian . In the said case, the Punjab and Haryana High Court observed that there was no legal bar in Section 144B(1) of the Act against estimating share income of a partner. The non obstante clause therein enabled the Assessing Officer to proceed to determine a partner's share in total income, even though there were other provisions available in the Act for amending share income of the partner in future.
5. In order to appreciate the submission made by learned counsel for Revenue, it would be proper to quote Section 144B(1) of the Act, as it would at the relevant point of time
'144B Reference to Inspecting Assistant Commissioner in certain cases
(1) Notwithstanding anything contained in this Act, where, in an assessment to be made under sub-section (3) of section 143, the Income Tax Officer proposes to make any variation in the income or loss returned which exceeds the amount fixed by the Board under sub-section (6), the Income Tax Officer shall, in the first instance, forward a draft of the proposed order of assessment (hereafter in this section referred to as the draft order) to the assessed.'
The provision was inserted by Taxation Laws (Amendment) Act, 1975 with effect from 1st January, 1976. The amount fixed by the Board under sub-section (6) is Rs. 1 lac.
6. It is to be noted that so far as share income of assessed is concerned, the determination is done by the Assessing Officer of the firm wherein he is a partner. On determination of share income, same is intimated to the Assessing Officer, of the partner if the Officer assessing the partnership is not the Assessing Officer of the partner. In the present case, the Assessing Officer of the firm was different from assessed's Assessing Officer. We are not in agreement with the view expressed by the Punjab and Haryana High Court in Satya Narain's case (supra) that there is no bar for the Income Tax Officer to estimate the share income of a partner. In fact, the share income of a partner is determined, as indicated above, in the firm's assessment. It would be also relevant to refer to Section 246 of the Act which deals with appealable orders. A partner is not entitled under Section 246 to prefer an appeal. In fact, Section 247 of the Act, which was omitted by the Finance Act, 1992, w.e.f. 04.04.1993, at the relevant time provided that where the partners of a firm are individually assessable on their shares in the total income of the firm, any such partner may appeal to the Appellate Assistant Commissioner or as the case may be, the Commissioner (Appeals) against any order of the Income Tax Officer determining the amount of the total income or loss of the firm or the apportionment thereof between several partners, but he cannot agitate such matters in any appeal preferred against an order of assessment determining his own total income or loss. That being the position, the question of estimating share income of a partner without the firm's income being assessed, does not arise. Section 144B deals with variation, which is prejudicial to assessed. As the language of the provision makes it clear, the variation provisions are applicable only in a case where the variation is prejudicial to the assessed. In a case where share income is determined, assessed does not get a statutory forum for questioning the same, except to the extent provided by assailing the determination of total income/loss in the firm's case. Results of appeal in firms' case have only consequential effect in the firm's case. thereforee, the intimation about share income cannot be said to be prejudicial to a partner for the purpose of a variation, which is the sine qua non for the application of Section 144B of the Act. Two essential ingredients for application of Section 144B of the Act are (a) there must be variation of income or loss of the prescribed amount and (b) such variation is prejudicial to the assessed. Both the conditions must exist and not merely one of them. Variation means the act of varying, change in the form. Vary means to change or later. So far as share income of a partner is concerned, the variation of the same is not done by the officer assessing the partner. As noted above, the determination is done by the officer assessing the firm. On receipt of intimation of such determination, the officer assessing the partner includes the same in the total income of the partner. Such inclusion cannot be equated with variation. Additionally, the question of prejudice does not arise in view of the analysis made above.
7. Above being the position, the Tribunal was justified in its conclusion. Accordingly, our answer to the question referred is in the affirmative, in favor of assessed and against Revenue.
8. This ITR stands disposed of.