Law:

Section:

Section 144B of the Income-tax Act, 1961 - Draft assessment order - Reference to IAC - Assessment year 1975-76 - ITO proposed to disallow loss shown under head ' income, profits and gains of business or profession' - ITO felt that said loss should come under head 'short term capital loss' and accordingly, submitted a draft assessment order on 18-3-1978 on assessee under section 144B(1) - Since assessee refrained from making any objection under section 144B(2), ITO completed assessment under section 144B(3) within thirty days on basis of said draft order - Assessee challenged said assessment as barred by limitation as in normal course assessment would have been barred by 31-3-1978 - Whether since loss claimed under head 'business' was not accepted by ITO, although he ultimately computed it as short term capital loss and disallowed part of loss claimed, Tribunal was justified in holding that there was a variation and, accordingly, ITO exercised his jurisdiction properly under section 144B(1) - Held, yes - Whether, therefore, assessment was not barred by limitation - Held, yes FACTS While completing the assessment, the ITO proposed to disallow the loss shown under the had 'Income, profits and gains of business or profession'. The ITO 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), were attracted. The ITO, therefore, submitted a draft assessment order on the assessee on 18-3-1978. In the normal course, the assessment would have been barred by limitation by 31-3-1978. The assessee, on 5-4-1978, stated that they were refraining from making any objection under section 144B(2). Accordingly, the ITO completed the assessment under section 144B(3), the assessment being completed on the basis of the draft order. On appeal, the assessee contended that the assessment was barred by limitation. The Commissioner (Appeals) held that the decision of the ITO was prejudicial to the interests of the assessee, inasmuch as the claim of loss under the had 'Business' amounting to more than rupees one lakh was not accepted by ITO. The ITO was fully…

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