1. The petitioner has challenged in this petition, the order dated March 5, 1980, passed by the Income-tax Officer, respondent No. 1, whereby he refused to accept the third revised return filed by the petitioner-assessee on the ground that he had already passed a draft assessment order on December 12, 1979, under section 143(3) read with section 144B of the Income-tax Act, 1961, and that the assessee was already heard by the Inspecting Assistant Commissioner with respect to the objections filed by the assessee against the said draft assessment order.

2. The petitioner-company had set up a mini-steel plant and commenced production in 1974. It went on making losses and, therefore, a petition was filed in this court for winding up the petitioner-company. In that proceeding, this court by an order dated February 3, 1976, approved the scheme of compromise and arrangement between different classes of creditors and the company. As a result thereof, there was a reduction of the liability of the petitioner to the tune of Rs. 29,36,811. The petitioner's accounting period, corresponding to the assessment year 1977-78, ended on September 30, 1976. It filed its return of income on June 30, 1977. A part of the reduced liability was shown as income under section 41(1) of the Act, but after carrying forward the business losses and expenses, the total income shown was nil. It is the case of the petitioner that it subsequently found some discrepancies in the return filed by it on June 30, 1977, and, therefore, it filed a revised return on February 20, 1979. This time, the income shown was Rs. 16,88,553. Again, the total income shown was nil. It then filed a second revised return on November 14, 1979, revising the amount shown as income under section 41(1). After hearing the petitioner, the Income-tax Officer passed a draft assessment order on December 12, 1979, under section 144B proposing variation in the income returned by the petitioner. A copy of the said order was served upon the petitioner and pursuant to the notice given to it, objections were filed by the petitioner on December 15, 1979. The hearing in respect of the objections was fixed before the Inspecting Assistant Commissioner, respondent No. 2, on January 11, 1980. According to the petitioner, it was brought to the notice of the petitioner that out of the sum of Rs. 17,06,835 mentioned in the first return filed under section 41(1), a sum of Rs. 16,75,998 was not covered by that section. Therefore, the petitioner filed a third revised return on February 11, 1980. According to that revised return, the amount offered for taxation under section 41(1) was reduced to Rs. 2,72,250. It appears that the said revised return was sent by the petitioner by post. The hearing before the Inspecting Assistant Commissioner, respondent No. 2, took place on February 21, 1980. It was the petitioner's case that at the said hearing, it had requested the Income-tax Officer and the Inspecting Assistant Commissioner to consider the third revised return as the final return of the petitioner, but neither of them was inclined to consider its request. On March 5, 1980, the Income-tax Officer wrote to the petitioner that as he had already passed a draft assessment order on December 12, 1979, and had served the same on the petitioner on December 13, 1979, and objections were filed by the petitioner against the draft assessment order, he was not in a position to take any action on the said revised return. In short, he refused to accept the third revised return filed by the petitioner. This refusal, as stated earlier, is the subject-matter of this petition.

3. What is contended by learned counsel for the petitioner is that the Income-tax Officer by not accepting the third revised return filed by the petitioner has erroneously refused to exercise the jurisdiction vested in him. He also submitted that it is the right of every assessee to submit a revised return at any time before the assessment is made if he discovers any omission or a wrong statement made in the earlier return. It was submitted that as no final assessment order was passed till the petitioner had submitted the third revised return, it was incumbent upon the Income-tax Officer to accept the same notwithstanding the fact that he had already passed a draft assessment order and had forwarded the same to the Inspecting Assistant Commissioner. Learned counsel drew our attention : to sections 139(5), 143, 144A, 144B and 153(1)(c) of the Act. Section 139(5) of the Act, as it stood at the relevant time, read as under :

"If any person having furnished a return under sub-section (1), or sub-section (2), discovers any omission or any wrong statement therein, he may furnish a revised return at any time before the assessment is made."

4. It is not necessary to reproduce section 143. Section 144B read as under :

"144B. (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 is prejudicial to the assessee and the amount of such variation 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 assessee.

(2) On receipt of the draft order, the assessee may forward his objections, if any, to such variation to the Income-tax Officer within seven days of the receipt by him of the draft order or within such further period not exceeding fifteen days as the Income-tax Officer may allow on an application made to him in this behalf.

(3) If no objections are received within the period or the extended period aforesaid, or the assessee intimates to the Income-tax Officer the acceptance of the variation, the Income-tax Officer shall complete the assessment on the basis of the draft order.

(4) If any objections are received, the Income-tax Officer shall forward the draft order together with the objections to the Inspecting Assistant Commissioner and the Inspecting Assistant Commissioner shall, after considering the draft order and the objections and after going through (wherever necessary) the records relating to the draft order, issue, in respect of the matters covered by the objections, such directions as he thinks fit for the guidance of the Income-tax Officer to enable him to complete the assessment :

Provided that no directions which are prejudicial to the assessee shall be issued under this sub-section before an opportunity is given to the assessee to be heard.

(5) Every direction issued by the Inspecting Assistant Commissioner under sub-section (4) shall be binding on the Income-tax Officer.

(6) For the purposes of sub-section (1), the Board may, having regard to the proper and efficient management of the work of assessment, by order, fix, from time to time, such amount as it deems fit :

5. Provided that different amounts may be fixed for different areas :

Provided further that the amount fixed under this sub-section shall, in no case, be less than twenty-five thousand rupees.

(7) Nothing in this section shall apply to a case where an Inspecting Assistant Commissioner exercises the powers or performs the functions of an Income-tax Officer in pursuance of an order made under section 125 or section 125A."

6. Section 153 provides for the time-limit for completing assessment. It was relied upon by learned counsel for both the sides to show what will be the effect of filing a revised return within time. According to section 153(1)(c), an order of assessment has to be made before the expiry of one year from the date of filing of the return or a revised return under sub-section (4) or sub-section (5) of section 139 whichever is latest. Explanation I to that section had then provided that in computing the period of limitation for the purposes of that section, the period (not exceeding one hundred and eighty days) commencing from the date on which the Income-tax Officer forwarded the draft order under sub-section (1) of section 144b to the assessee and ending with the date on which the Income-tax Officer received the directions from the Inspecting Assistant Commissioner under sub-section (4) of that section, or, in a case where no objection to the draft order were received from the assessee, a period of thirty days had to be excluded.

7. It is in this context, that the words "at any time before the assessment is made" occurring in sub-section (S) of section 139 are required to be interpreted. What was contended on behalf of the petitioner was that the word "assessment" would mean determination of the total income or loss of the assessee and determination of the sum payable by the assessee as tax. So long as both these things are not completed by the Income-tax Officer, it cannot be said that he has made the assessment. It was submitted that when the Income-tax Officer passes a draft order of assessment, what he does is to disclose his tentative decision in respect of the total income of the assessee and the amount of tax payable by him. He submitted that the words "proposes to make any variation in the income or loss returned" and the words "a draft of the proposed order of assessment" occurring in sub-section (1) of section 144b clearly indicate that the order which the Income-tax Officer passes at that stage cannot be regarded as an assessment order as contemplated by section 143(3) of the Act. He further submitted that sub-section (3) of that section further makes it clear that if no objections are filed by the assessee or if he has accepted the variation, the Income-tax Officer has to complete the assessment on the basis of the draft order. Thus, assessment is to be completed only after the period mentioned in that sub-section is over or there is acceptance of the variation by the assessee. In cases where objections are filed, it was submitted that, as required by sub-section (4), the Income-tax Officer has to complete the assessment according to the directions given by the Inspecting Assistant Commissioner. Thus, the provisions made in section 144B clearly indicate that a draft order is not to be regarded as completion of the assessment. It was also submitted that because of the filing of a revised return, the Revenue will not suffer because the time to complete the assessment will get extended as mentioned in section 144.

8. It cannot be disputed that assessment cannot be said to be complete till the Income-tax Officer determines not only the total income of the assessee but also the amount of tax payable by him. The requirement of law is that the Income-tax Officer has to assess the total income or loss of the assessee and determine the sum payable by him or refundable to him on the basis of such assessment by an order in writing.

9. There is also no dispute that when the Income-tax Officer passes a draft order, it cannot be said that he has passed the final and effective order on the basis of which any demand can be made. However, what we have to consider is whether in the context of the filing of a revised return, the Income-tax Officer can be said to have made an assessment or not when he makes a draft order. As indicated above, "assessment" means determination of the total income or loss of the assessee and the sum payable by him as tax. Therefore, it can be said that when the total income or loss of the assessee is determined and when the sum payable by him by way of tax is also determined the Income-tax Officer has made the assessment. In a case where the Income-tax Officer makes a draft order, what happens is that he determines the income or loss of the assessee and also the amount of tax payable by him. But that order passed by him does not become effective and he is required to make a reference to the Inspecting Assistant Commissioner for his scrutiny and directions. But here also, he is required to follow that course if the assessee files objections against the draft order. If no objections are filed, then the Income-tax Officer has to complete the assessment on the basis of the draft order. What is required to be noted is that under such circumstances, the Income-tax Officer has to complete the assessment on the basis of the draft order and no change is contemplated at that stage in the assessment order. Thus, the Income-tax Officer has to complete the assessment on the basis of the draft order and without taking into consideration anything else at that stage. If objections are filed by the assessee against the draft order, then only, he is required to forward the draft order together with the objections to the Inspecting Assistant Commissioner and the income-tax Officer has to complete the assessment after receiving direction in that behalf and in accordance with law. Thus, what the Income-tax Officer is required to do in such cases is to modify the order in terms of the directions that may be given by the Inspecting Assistant Commissioner. This requirement of making a reference to the Inspecting Assistant Commissioner does not detract from the nature of the act which the Income-tax Officer performs when he passes the draft order. Even while passing a draft order, what he does is to determine the income or loss of the assessee and the amount of tax payable by him. Thus, all the requirements of making a valid assessment order stand complied with at that stage and if this be the position, then, it would not be proper to concede the right of filing a revised return in favour of the assessee after that stage. The words used in sub-section (5) of section 139 are "at any time before the assessment is made" and not "at any time before the final order of assessment is made". Though the whole process of assessment may not be complete in order to enable the taxing authorities to proceed further with recovery of tax, it can be said that when the Income-tax Officer passes a draft order, he does make the assessment of the total income or loss of the assessee and the amount of tax payable by him. Merely because such an order is subjected to further scrutiny before it can be given effect for further action it cannot be said that the Income-tax Officer has not made the assessment till such scrutiny is over.

10. If the contention of the petitioner that till the assessment is finalised within the period of limitation the assessee is within his right to submit a revised return, is accepted, then, that may lead to an unreasonable delay in finalising the assessment. If the words "at any time before the assessment is finalised" are construed to mean "till a final and effective order of assessment is made", the assessee bent upon delaying the assessment may go on filing revised returns and that may prevent the Income-tax Officer from completing the assessment for a very long time. Moreover, if such a right is conceded, it would set at naught the steps taken by the Income-tax Officer under section 144B of the Act. If after the draft order is served upon the assessee or when objections are received and because of that the Income-tax Officer refers the matter to the Inspecting Assistant Commissioner and the assessee is permitted to file a revised return, then, that would set at naught at all the steps taken by the Income-tax Officer under section 144B as, thereafter; he will have to consider the fresh revised return and make the assessment on the basis of the fresh return. That may also lead to a situation where he would be obliged to take one view on the basis of the fresh revised return; whereas there may be a direction by the Inspecting Assistant Commissioner to take a different view in view of the reference already made on the basis of the previous return. Therefore, if the assessee is permitted to file a revised return even after the Income-tax Officer makes a draft order under section 144B, that would lead to uncertainty and delay in finalising the assessment. Section 144B is now omitted with effect from April 1, 1989.

11. For all these reasons, we are of the view that once a draft order is made by the Income-tax Officer under section 144B of the Act, the assessee cannot, thereafter, file a revised return. We are coming to this conclusion without going into the question as to whether the Income-tax Officer can issue more than one order. We, therefore, do not think it fit to deal with the two decisions cited by learned counsel for the petitioner in this behalf. Learned counsel had relied upon the decision of the Delhi High Court in the case of Sudhir Sareen v. ITO [1981] 128 ITR 445 and of the Madras High Court in the case of B. Nagi Reddy v. CIT [1993] 199 ITR 451.

12. In the result, this petition fails. Rule is discharged with no order as to costs. Interim relief stands vacated.