1. This appeal preferred by the assessee is directed against the order passed by the learned GIT under Section 263, dt. 17th March, 2005 for the asst. Yr. 2002-03.
2. Briefly stated, facts of the case are that the assessee is a company. The original return was filed on 28th Oct., 2002, which was revised by the assessee on 18th July, 2003 and again on 8th Aug., 2003.
According to the assessee, the assessee had not received any intimation under Section 143(1) in respect of original return filed on 28th Oct., 2002. However, the assessee did receive intimation under Section 143(1) of processing of second revised return dt. 30th June, 2004.
2.1 On examination of the assessment records, it was found by the learned GIT that more than one processing order under Section 143(1) of the IT Act have been passed by the AO for the impugned asst. yr.
2002-03. Therefore, a notice under Section 263 dt. 18th Feb., 2005 was issued to the assessee to show cause as to why the second processing order under Section 143(1), dt. 30th June, 2004 be not treated as ab initio illegal and void.
Even after issuance of intimation under Section 143(1), revised return can be validly filed and intimation under Section 143(1) can again be issued of processing of revised return even after the omission of Sub-section (1B) of Section 143 w.e.f. 1st June, 1999 as there is no change in Section 139(5) of the IT Act which provides for filing of the revised return before expiry of one year from the end of the relevant assessment year or before the completion of the assessment, whichever is earlier. It was further submitted by the assessee that processing of the return under Section 143(1) 'cannot be equated to the assessment and for this proposition, the reliance was placed on the following decisions :Elegant Chemicals Enterprises (P) Ltd. v. Asstt. CIT ;Mahanagar Telephone Nigam Ltd. v. Chairman CBDT ;Asstt. CIT v. Gujarat Bitumen Ltd. (2002) 76 TTJ (Ahd) 940 : (2002) 82 ITD 614 (Ahd); It was further submitted that intimation issued under Section 143(1) dt. 30th June, 2004 is not erroneous as the AO took one of the possible views as the intimation is not an assessment, therefore, revised return filed by the assessee after issuance of intimation can be subjected to processing again and for this proposition, the reliance was placed on following decisions : (vi) Jamnadas T. Mehta v. ITO (2002) 75 TTJ (Pune)(TM) 843 : (2002) 257 ITR 90 (Pune)(TM)(AT), and (vii) Malabar Industrial Co. Ltd. v. CIT (2000) 109 Taxman 66 (SC): (2000) 243 ITR 83 (SC) It was, therefore, prayed that the proceedings initiated under Section 263 be dropped.
2.3. However, the learned CIT did not accept the assessee's submissions and arguments and observed/held at pp. 2 and 3 of the order as under: As per scheme of the IT Act, CBDT in order to encourage voluntary compliance and to remove fears of visiting Income-tax Office of taxpayers, it was decided to accept almost 98 per cent of total returns filed as per the computation given by the assessee-company in his first return. In this process earlier records are also not considered and the AO is supposed to confine attention to the papers and documents filed along with the return. The Government of India deliberately accepted and adopted this procedure to instill faith in taxpayers although it has resulted in some loss of revenue in case all the returns were put in scrutiny.
Once the processing under Section 143(1) of the IT Act, 1961 is completed, the only method to disturb it is through issue of notice under Section 143(2) or 147 of the IT Act except in the case where there has been an apparent mistake of fact or law in the said order under Section 154 of the IT Act, 1961. In all the cases there is no question of acceptance of further revised returns which can only be done under scrutiny. This view finds support from Circular No. 670 of CBDT, dt. 26th Oct., 1993 and revised letter where claim of refunds under Section 119(2)(b) of the IT Act, 1961 even after approval by Chief CIT/CIT have to be issued after scrutiny and not under Section 143(1) of the IT Act. Therefore, as mentioned in the note under Section 263 only first processing dt. 31st March, 2003 shall be treated as legal and valid in the eye of law. Other processing orders under Section 143(1) passed by the AO shall stand cancelled.
3. Being aggrieved by the order of the learned CIT, the assessee is in appeal before us.
1. In the facts and circumstances of the case, learned CIT erred in passing order under Section 263 of the IT Act, 1961, cancelling intimation under Section 143(1)(a) dt. 30th June, 2004.
2. In the facts and circumstances of the case, learned CIT failed to appreciate that second revised return was validly filed and so second intimation under Section 143(1) processing the second revised return, being one of the prescribed courses for dealing with IT returns, was validly issued which cannot be subjected to cancellation by GIT in absence of any erroneous elements therein.
3. In the facts and circumstances of the case, the order under Section 263 passed by GIT is bad in law and without jurisdiction as view taken by learned AO in processing valid second revised return under Section 143(1) was one of the prescribed courses open to him, there being no statutory or other requirement to process same under Section 143(3) only and so intimation revised by GIT could not be termed erroneous in view of ITO adopting one of the possible views.
4. The order under Section 263 appealed against was passed by learned CIT without considering our written arguments supporting, Inter alia, validity of second revised return filed, after issue of intimation under Section 143(1) and order of learned AO being not erroneous and thus suffers from non-application of mind and arbitrariness on the part of learned CIT. 5. In the facts and circumstances of the case, the learned CIT erred in placing reliance on CBDT Circular No. 670, dt. 26th Oct., 1993 which was not relevant to the issue involved, being related to belated claims for refunds in some cases.
5. The assessee vide letter dt. 19th Sept., 2005 has taken additional ground of appeal which reads as under : Whereas first intimation under Section 143(1) dt. 31st March, 2003 was not an effective intimation as it was never sent to the appellant-company, learned GIT erred in restoring the first intimation under Section 143(1) dt. 31st March, 2003 by cancelling second intimation under, Section 143(1) dt. 30th June, 2004 by exercising his revisionary power under Section 263 of IT Act, 1961.
6. Further the assessee vide letter dt. 21st Sept., 2005 has taken one more additional ground of appeal. The consolidated additional grounds of appeal are as below - : 1. Whereas first intimation under Section 143(1), dt. 31st March, 2003 was not an effective intimation as it was never sent to the appellant-company, learned CIT erred in restoring the first intimation under Section 143(1) dt. 31st March, 2003 by cancelling second intimation under Section 143(1) dt. 30th June, 2004 by exercising his revisionary power under Section 263 of IT Act, 1961.
2. Whereas intimation under Section 143(1) is not an order and Whereas intimation under Section 143(1) cannot be treated to have been passed in a proceeding by the AO. In the circumstances, the intimation under Section 143(1), dt. 30th-June, 2004 was not amenable to revision under Section 263 by GIT and learned GIT erred in cancelling it acting under Section 263.
7. At the time of hearing, the learned counsel for the assessee submits that in view of the decision of Hon'ble apex Court in National Thermal Power Co. Ltd. v. CIT the additional ground taken by the assessee be admitted.
8. On the other hand, the learned Departmental Representative strongly opposed the admission of the additional grounds taken by the assessee.
9. We have carefully considered the rival submissions of the parties and perused the material available on record. We find that the additional grounds of appeal taken by the assessee are legal grounds and the relevant facts are already on record, therefore, following the ratio of the decision of Hon'ble Supreme Court in the case of National Thermal Power Co. Ltd. v. CIT (supra), the additional grounds taken by the assessee are admitted.
10. The learned counsel for the assessee while arguing all the grounds of appeal as common ground strongly relied on the written submission filed before the learned CIT. He further submits that after filing of the original return on 28th Oct., 2002 the assessee did not receive any intimation under Section 143(1) dt. 31st March, 2003 as mentioned by the learned CIT in the notice under Section 263 and in the order passed under Section 263. He further submits that there is no error in the action of the AO in processing the revised return filed by the assessee under Section 139(5) of the IT Act, therefore, the order passed by the learned CIT be cancelled. The learned counsel for the assessee apart from placing reliance on the decisions cited before the learned CIT further placed reliance on the decision of Hon'ble Gujarat High Court in S.R. Koshti v. CIT and the decision of Hon'ble Calcutta High Court in Hffltop Holdings India Ltd. v. CIT and Ors.
. He, therefore, submits that the order passed by the learned CIT be vacated.
11. On the other hand, the learned Departmental Representative strongly supported the order passed by the learned CIT in cancelling the second processing under Section 143(1) dt. 30th June, 2004. She, therefore, submits that the order passed by the learned CIT be upheld.12. We have carefully considered the rival submissions of the parties and perused the material available on record. We find that it has been held by the Hon'ble Calcutta High Court in Hilltop Holdings India Ltd. v. CIT (supra) that in order to attract Section 263, the following four conditions need be satisfied viz., (1) there should be a proceeding; (2) there should be an order passed by the AO in such proceeding; (3) such order should be erroneous; and (4) and such order should be prejudicial to the Revenue. It has been further held that absence of one of the conditions would be sufficient to detract Section 263. We further find that there is no dispute that the original return filed by the assessee on 28th Oct., 2002 was within the due date as provided under Section 139(1) of the IT Act. We further find that the assessee has filed revised returns on 18th July, 2003 and again on 8th Aug., 2003 under Section 139(5) of the IT Act. It is not the case of the Revenue that the original return filed by the assessee is not in accordance with the provision of Section 139(1) of the IT Act or the revised returns filed by the assessee are beyond the period of limitation provided under Section 139(5) of the IT Act or the revised returns filed by the assessee are no return in the eye of law.
13. In S.R. Koshti v. CIT (supra), relied on by the learned counsel for the assessee, the assessee furnished return of income on 31st July, 2001 for the asst. yr. 2001-02. There appears to be some dispute between the assessee and the respondent, i.e., CIT as to whether the aforesaid return of income was or was not processed under the provisions of Section 143(1) of the Act. It is the stand of the respondents, as averred in the affidavit-in-reply, that the return of income was processed on 28th March, 2002 and refund order had been issued which was encashed by the petitioner/assessee through his bank account. The revised return of income came to be filed on 24th Sept., 2002 claiming exemption of Rs. 5 lakhs from the compensation under Section 10(10C). The AO framed an order under Section 154 of the Act rectifying the mistake apparent on the record and granting credit for the prepaid taxes to the tune of Rs. 3,18,195. The AO also directed grant of interest under Section 244A of the Act. The order was made on 27th March, 2003. Subsequently, the learned CIT took action under Section 263 to revise the order made under Section 154 of the Act. It was held by the learned CIT that the order dt. 27th March, 2003 made under Section 154 of the Act was erroneous and prejudicial to the interest of the Revenue and as such cancelled the same. As a result, the order under Section 143(1) of the Act accepting the returned income at Rs. 9,98,182 was held to prevail on the basis of the original return of income dt. 31st July, 2001. In the meantime, the assessee preferred an application under Section 264 of the IT Act which was rejected by the learned CIT vide order dt. 29th March, 2004 by holding that the petition was beyond the period of one year from the date of the processing of the order under Section 143(1) of the IT Act and hence, the delay was not condoned. He also referred to the order made by him under Section 263 of the Act for the purpose of denying the relief by holding that the revised return filed on 24th Sept., 2002 was an invalid return, being a return filed put of time and hence, non est at law. On a writ petition against the orders under Sections 263 and 264 it has been held at p. 167 (short notes) as under: Held, that even if for the sake of argument, it was accepted that an intimation was also forwarded along with the refund order, it was admittedly issued only on 13th May, 2002. In the circumstances, there being no order of assessment as envisaged under the provisions of the Act, a revised return under Section 139(5) could have been submitted by the petitioner on or before 31st March, 2003, and, in fact, was so submitted on 24th Sept., 2002. The revised return was filed within the period of limitation and was hence valid. The AO was not only right in law, but was fully justified in passing the order under Section 154 of the Act after entertaining the revised return which was filed within the time-limit statutorily prescribed.
Therefore, also, the respondent could not have assumed jurisdiction under Section 263. The CIT had not stated that the petitioner was not entitled to the relief under Section 10(10C). In fact, the said position was undisputed. The AO himself had passed an order under Section 154 of the Act granting such relief. In such circumstances, the order under Section 264 could not be sustained. The orders under Sections 263 and 264 had to be quashed and the order under Section 154 would prevail.
14. In Hilltop Holdings India Ltd. (supra), relied on by the learned counsel for the -assessee, it has been held vide para 28 appearing at pp. 512 and 513 as under: Mr. Shorne, however, contended that the intimation is not an order of assessment; still, however, it is an order for the purpose of Section 263. Inasmuch as, while issuing intimation, the AO does not merely discharge a ministerial act since it involves a process to determine the liability to pay tax or refund of the excess tax paid or to accept the self-assessment as submitted, which involves application of mind and taking a decision. There cannot be any liability to pay or refund unless there is a direction or order to that effect. Therefore, though not an assessment order, an intimation is nevertheless an order. Since it was not an order of assessment, therefore, the assessee is entitled to file a revised return under Section 139(5) even after issue of intimation as was held in Kalyanpur Cement Ltd. v. Jt. CIT . But this proposition cannot be reconciled with the Explanation to Section 143, which allows the assessee to prefer an appeal under Section 246 and seek a revision under Section 264 confining the characteristics of the intimation as a deemed order only for the limited purpose for which the fiction was created through the enactment of the Explanation. Even if an intimation could be treated to be an order, even then the question remains as to whether it would be an order revisable under Section 263.
15. In Kalyanpur Cement Ltd. v. Jt. CIT it has been held at p. 54 as under: Section 139(5) permits furnishing of revised return within the relevant assessment year or before the completion of the assessment whichever is earlier provided he has furnished a return either under Section 139(1) or in pursuance of the notice issued under Section 142(1). In the present case, the assessee had filed the return under Section 139(1). Therefore, he is eligible to file a revised return under Sub-section (5) within or before the end of the relevant assessment year or before the completion of the assessment, whichever is earlier.
16. Respectfully following on the above decisions, we are of the view that the revised returns filed by the assessee under Sub-section (5) of Section 139 are valid returns in the eye of law.
17. In Hilltop Holdings India Ltd. (supra), their Lordships of the Hon'ble Calcutta High Court after holding that the decision in CIT v.Rajkumar Dipchand Phade and CIT v. Anderson Marine & Sons (P) Ltd. in which it has been held that an intimation is an order of assessment, could not persuade us to agree with the reasoning given therein for the purpose of holding an intimation to be an order with the meaning of Section 263, have further held vide para 33 appearing at p. 515 as under: Conclusion : As discussed above, by no stretch of imagination an intimation/ acknowledgement under Section 143(1)(a) can be treated as an order except as contemplated in the Explanation to Section 143 thereof in view of the fiction created thereunder. The legislature had made a distinction between an order and an intimation. The intention of the legislature was clear in creating the fiction through the Explanation to Section 143 treating an intimation/acknowledgement to be an order within the confined meaning of Sections 246 and 264 alone. The provisions of Section 154(1) empowering the AO to rectify an intimation would not lend support to hold an intimation or an acknowledgement as an order.
This is so particularly because of the scope of Section 143(1)(a) having been confined only to the extent enumerated in Clauses (i), (ii) and (iii) of the first proviso to Section 143(1)(a). The fiction is self-explanatory to limit itself to construe an intimation as a deemed order by reason of the fiction only to the extent of Sections 246 and 264 and an order amenable to Section 264 is outside the purview of Section 263. Therefore, so long the Explanation to Section 143 remains operative, an intimation/acknowledgement cannot be treated to be an order for the purpose of exercising power under Section 263. Therefore, the initiation of the proceeding under Section 263 is wholly without jurisdiction and a nullity and void and cannot be sustained.
18. In the case of S.R. Koshti (supra) it has also been held at p. 171 as under : On a plain reading of the said Explanation, which was omitted by the Finance Act, 1999, w.e.f. 1st June, 1999, it becomes clear that even for the limited period when the legislature wanted the intimation to be deemed to be an order, it was for a limited purpose, namely, for the purposes of appeal under Section 246 of the Act and revision at the instance of an assessee under Section 264 of the Act. Thus, even when the said Explanation was on the statute book, the power to invoke the provision of Section 263 of the Act could not be exercised in the circumstances. For the year under consideration, admittedly, the said Explanation is not on the statute book. The respondent, therefore, could not have, in the circumstances, treated the intimation as an order for the purposes of non-suiting the petitioner by treating intimation dt. 28th March, 2002, as being an order of assessment and thus, denying the petitioner a statutory right to file a revised return within the period of limitation. The revised return is filed within the period of limitation and is hence valid. In these circumstances, the finding recorded by the respondent in the impugned order under Section 263 of the Act that the revised return was non est in law, cannot be sustained and is accordingly held to be bad in law.
19. The CBDT, Circular No. 670, dt. 26th Oct., 1993, relied on by the learned CIT reads as under: 1. I am directed to forward herewith the order contained in F. No. 225/208/93/ITA-II, dt. 12th Oct., 1993, passed by the CBDT in exercise of the powers conferred on it under Section 119(2)(b) of the IT Act. By virtue of this order, the AO can admit belated refund claims under Section 237 of the IT Act in cases where refunds may arise as a result of tax deducted/collected at source and advance tax payments where the amount of such refund does not exceed Rs. 1 lakh for any assessment year.
(i) where the refund does not exceed Rs. 10,000 for any assessment year the AO shall obtain the prior approval of the CIT before entertaining a belated refund claim; and (ii) where the refund exceeds Rs. 10,000 but does not exceed Rs. 1,00,000 for any assessment year the AO shall obtain the prior approval of Chief CIT or Dy. CIT before entertaining a belated refund claim.
3. The Chief CIT/Dy. CIT/CIT, as the case may be, shall ensure that the conditions laid down under Board's order under Section 119(2)(b) referred to above are fulfilled.
4. Where a Chief CIT/Director General of IT/CIT/Director of IT finds that the four conditions laid down in the order under Section 119(2)(b) dt. 12th Oct., 1993 are satisfied but still it is not a case of genuine hardship, he should refer the belated refund application to the Board for final decision.
5. This order is effective from 1st Nov., 1993 and will apply to all claims of refund pending as on that date and also in respect of all refund claims filed on or after that date.
From the fair reading of the above circular, we find that the same is with regard to the consideration of belated refunds which is not an issue before us, therefore, the circular relied upon by the learned CIT does not support the Revenue's case, hence not applicable.
20. Having regard to the facts of the case and the situation in law as discussed above, we are of the view that the initiation of proceeding under Section 263 is wholly without jurisdiction, a nullity, void and cannot be sustained and accordingly the order passed by the learned CIT is directed to be cancelled. The grounds taken by the assessee are, therefore, allowed.