M/S. Shriram Honda Power Vs. Dy. Cit - Court Judgment

Excerpt:
this is an appeal filed by the assessee against the order dated 3/2/ 97 of commissioner (appeal)-xv, new delhi pertaining to 1990-91 assessment year."that on facts and circumstances of the case and in law the commissioner (appeal)xv, new delhi erred in upholding the order passed under section 154 charging additional tax of rs, 9,76,899.2. that on facts and circumstances of the case and in law the orders of the assessing officer commissioner (appeal) bad in law and void ab-initio." the relevant facts of the case are that the assessee filed its original return on 28.11.90. the date of sending first intimation without adjustment is 27.3.91. the date of filing revised return to revise the wdv on account of revised orders for earlier years under section 143(3) is 30.12.91 the date of issue of.....

Judgment:
This is an appeal filed by the assessee against the order dated 3/2/ 97 of Commissioner (Appeal)-XV, New Delhi pertaining to 1990-91 assessment year.

"That on facts and circumstances of the case and in law the Commissioner (Appeal)XV, New Delhi erred in upholding the order passed under section 154 charging additional tax of Rs, 9,76,899.

2. That on facts and circumstances of the case and in law the orders of the assessing officer Commissioner (Appeal) bad in law and void ab-initio." The relevant facts of the case are that the assessee filed its original return on 28.11.90. The date of sending first intimation without adjustment is 27.3.91. The date of filing revised return to revise the WDV on account of revised orders for earlier years under section 143(3) is 30.12.91 The date of issue of notice under section 143(2) is 5.8.92. The date of issuing revised intimation for adding Rs. 90,45,364 without charging additional tax in view of the decision of Delhi High Court in case of M/s. Modi Cement Ltd. is 15.3.93. The date of passing order under section 143(3) is 26.3.93. The assessing officer on 22/2/95 issued notice under section 154 of the Act seeking to rectify intimation under section 143(1A) dated 15.3.93 wherein a sum of Rs. 90,45,364 was disallowed on account of sales promotion. In view of the fact that no additional tax was charged in view of the decision of the Delhi High Court in the case of M/s. Modi Cement Ltd. The assessing officer issued rectification notice under section 154 in order to charge additional tax as a result of the amendment in 1993 in section 143(1A) with retrospective effect from 1.4.89 by the Finance Act, 1993. After considering the submissions of the assessee and rejecting the same, additional tax at the rate of 20 per cent on account of addition of Rs. 90,45,364 in revised intimation was calculated.

Against this action of charging additional tax to the tune of Rs. 9,76,899, various submissions were made on behalf of the assessee in appeal before the first appellate authority. Firstly, it was contended that the intimation dated 15.3.93 was not valid since it was issued after a notice under section 143(2) of the Act for which, reliance was placed upon Modern Fibotex India Ltd. () 212 ITR 496 (Cal) and Gujarat Poly AVX Electronics () 222 ITR 140 (Guj).

It was further contended that once a notice under section 143(2) has been issued, no notice could be issued under section 154 of the Act to amend the intimation. In support of the said contention, reliance was placed upon the decision of the Gujarat High Court in the case of Lakhanpal National Ltd. v. DCIT () 222 ITR 151. It was also contended that on the date when the second intimation was issued, the law did not permit the charging of additional tax. As such, retrospective amendment of the section does not entitle the assessing officer to amend the intimation which had correctly been issued as per the prevailing law.

It was also contended that the intimation was not signed and served on it and, as such, was not valid.

Finally, the contention was that the assessing officer was not justified in issuing the second intimation which was not permissible on the debatable issue as held by the Delhi High Court in the case of S.R.F. Charitable Trust.

Considering the submissions made, the Commissioner (Appeal) rejected the contention of the assessee holding that since the assessee did not challenge the intimation itself, it remained valid and thus became final. The rectification thereof was, therefore, permissible. Taking note of the order of the Tribunal in the case of Kerala State Coir Corporation () 50 ITD 1 but not convinced with the funding therein, he rejected the claim of the assessee being of the view that the intimation issued after the issue of 143(2) notice was not illegal itself but could be so declared if challenged. He was of the view that in the absence of the challenge, the intimation became final and could be rectified. With regard to the submissions that no 154 notice could be issued after the issuance of 143(2) notice for which reliance has been placed upon Lakhanpal National Ltd., the Commissioner (Appeal) was of the view that the facts of the two cases are different as in that case, the intimation was issued after notice under section 143(2) whereas in the instant case, the revised intimation had been issued after the notice under section 143(2) and, in fact, notice under section 154 has been issued even after the finalisation of the assessment under section 143(3) of the Act. With regard to the submissions that the amendment will not be applicable retrospectively, he was of the view that it, was against the expressed intention of the legislature and, as such, rejected. The contention that the intimation was not signed and served upon, the assessee was rejected as he was of the view that alongwith 154 notice, the true copy of the intimation was sent and served upon the assessee. With regard to the last contention of the assessee that the issue was debatable and, as such, cannot be rectified, he was of the view that whether the adjustment made by way of addition of Rs. 90,45,364 in the second intimation was debatable or not could be decided only in appeal. Since the assessee has not appealed against the same, the issue cannot be raised in the appellate proceedings against the 154 order at a different point altogether.

Thus, being of the view that since the assessing officer in 154 order has merely amended the second intimation on account of the retrospective amendment in the Act which intimation has not been challenged by the assessee, the appeal of the assessee was rejected.

Still aggrieved, the assessee is in appeal before us.

Learned authorised representative Shri M.S. Syali, appearing on behalf of the assessee, invited our attention to the chronology of dates as recorded in the impugned order at page 2. Referring to the same, it was contended that there is no dispute over dates in the present case.

However, the grievance of the assessee is that after issuing notice under section 143(2), the revised intimation dated 15.3.93 would not stand in the eyes of law. For this, reliance was placed on Modern Fibotex () 212 ITR 496 (Cal) and Gujarat Poly AVX Electronics () 222 ITR 140 (Guj).Kiran Singh & Ors. v. Chaman Paswan & Ors. AIR 1954 SC 340, Sunder Dass v. Rom () Prakash () AIR 1977 SC 1201, Chiranjilal Shrilal Goenka v. Jasjit Singh & Ors.Urban Development Trust, Jodhpur v. Gokul Narain & Anr. JT () 1996 (4) SC 446, it was contended that even if the assessee did not challenge the said revised intimation dated 15.3.93 the assessee can raise the issue in the present proceedings. Referring to the facts of the case, it was argued that the assessee did not challenge the revised intimation in view of the fact that there was no demand against the assessee. Since the resultant figure was negative, the assessee did not challenge the same. However, once the revenue sought to rectify the intimation dated 15.3.93 under section 154 on account of the amendment in the Act, it was contended that the assessee has been put at a disadvantage and the decisions of the Apex Court relied upon it was argued permit such a challenge. Thus, in this background, relying upon the decisions of the Supreme Court cited above, it was contended that the assessee could not be barred from challenging the levy of additional tax.

Apart from relying upon the decisions cited before the Commissioner (Appeal), our attention was invited to DCIT v. Ashok Paper Mills Ltd. () 256 ITR 673 wherein the Division Bench of the Gauhati High Court in the case of DCIT v. Ashok Paper Mills Ltd. and Sati Oil Udyog Ltd. v.CIT 232 ITR 502 affirmed the decision of the Single Judge in the case of Sati Oil Udyog Ltd. Reliance was also placed upon CIT v. Hindustan Electro Graphites Ltd. () 243 ITR 48 for the proposition that additional penalty under section 143(1A) bore the imprint of the penalty.

It was contended that their Lordships of the Gauhati High Court have had an occasion to consider and explain the decision of the Apex Court rendered in the case of CIT v. J.K. Synthetics () 251 ITR 200 (SC) and Hindustan Electra Graphite () 243 ITR 48. Inviting attention to page 677, it was contended that their Lordships have held therein, if additional tax could be levied in such circumstances, it will be punishing the assessee for no fault of his which cannot be ever the intention of the legislature.

In this background, it was argued that if in the revised intimation dated 15.3.93 any demand had been created, then in such an eventuality, the assessee would definitely have challenged the same. However, in view of the fact that no tax was demanded, the assessee did not chose to challenge the same but simply because the assessee did not challenge it would not be correct to hold that now when the assessee is faced with a situation that additional tax is being demanded that he cannot challenge the same in collateral proceedings. Ultimately, reliance was placed upon the decision of the Delhi High Court in the case of CIT v.Punjab National Bank () 249 ITR 763 (Del).

Learned Departmental Representative placed reliance upon the impugned order. It was his contention that in view of the fact that the assessee has not challenged the revised intimation dated 15.3.93, the revenue cannot be barred from rectifying the said intimation. As such, heavy reliance was placed upon the impugned order. No response was made to the case law relied upon on behalf of the assessee.

We have heard the rival submissions and perused the material available on record and taken into consideration the decisions relied upon.

Before proceeding to deal with the arguments advanced before us, we are of the view that it would be pertinent to reproduce the relevant dates which are as under: Date of filing revised return (to revise the WDV on account of revised orders for earlier years under section 143(3)) Date of issuing revised intimation (for adding Rs. 90,45,364 without charging additional tax in view of the decision of Delhi High Court in case of M/s. Modi Cement Ltd.) Date, of passing order under section 154 (for charging additional tax on the addition of Rs. 90,45,364/ on account of the amendment of Section 143(1A) which permitted charging the additional tax retrospectively with effect from 1.4.89) To recapitulate, before us, arguments have been advanced on behalf of the assessee for the proposition that after having issued notice under section 143(2), the assessing officer could not make adjustments under section 143(1A). For this proposition, reliance has been placed upon Modern Fibotex () 212 ITR 512 and Gujarat Poly AVX Electronics () 222 ITR 147. Apart from that, the Delhi High Court i.e. the jurisdictional High Court in the case of CIT v. Punjab National Bank - 249 ITR 763 has also been relied upon.

It is seen that the decisions of the Calcutta High Court and Gujarat High Court; namely, Modern Fibotex and Gujarat Poly AVX Electronics have been referred by the assessee even before the Commissioner (Appeal). Thus, if we were to decide the validity of issuance of 143(1)(a) notice under section 143(2), then it is a settled issue that the decisions of the Calcutta and Gujarat High Courts would have decided the issue in favour of the assessee. However, the facts in the case at hand are a little different. Here, the first intimation has been issued prior to the issuance of 143(2) and before the issue of 143(2) notice in fact the assessee has filed revised return on 30.12.91 to revise, the written down value on account of revised orders for earlier years under section 143(3). After the issue of 143(2) notice, the assessing officer has issued revised intimation on 15.3.93. When this action of the assessing officer is viewed in the light of the pronouncement of law as discussed above, there is no dispute as far as we are concerned that the said revised intimation had it been challenged by the assessee would have been struck down for want of jurisdiction. This would have been so on account of the fact that the assessing officer after having exercised his jurisdiction to issue 143(2) notice cannot make prima facie adjustments under section 143(1)(a), Having thus observed in the facts before us, we are faced with a peculiar situation where the revised intimation dated 15.3.93 for adding Rs. 50,45,364 has not been challenged by the assessee. It has been argued before us that the assessee has chosen not to challenge this in view of the fact that no demand was created on behalf of the assessee. A perusal of the order passed under section 154 bears out this fact Paragraph 1 of the same reads as under: "During the course of processing intimation slip under section 143(1)(a) dated 15-3-1993, a sum of Rs. 90,45,364 was disallowed on account of sales promotion. No additional tax was charged due to the fact that after working this disallowance, the resultant figure was negative. Therefore, keeping in view the decision of Delhi High Court in the case of M/s. Modi Cement Ltd., no additional tax was charged on the disallowance." It has been emphasized and in fact the issue revolves around the fact that the revised intimation dated 15.3.93 has been issued without charging additional tax on account of the decision of the Delhi High Court in the case of M/s. Modi Cement Ltd. 193 ITR 91 (Del). Now, at this stage, in view of the amendment in section 143(1A) of the Act which has permitted charging of the additional tax retrospectively with effect from 1.4.89, on this addition of Rs. 90,45,364 made by way of revised intimation, additional tax has been levied in 154 proceedings rectifying the revised intimation on 13.9.95. Before us, reliance has been placed upon certain decisions of the Supreme Court, namely, Kiran Singh & Ors v. Chaman Paswan & Ors.Sunder Dass v. Rom PrakashChiranjilal Shrilal Goenka v. Jasjit Singh & Ors.

cited supra and Urban Development Trust, Jodhpur v. Gokul Narain & Anr.

cited supra. A perusal of these judgments shows that their Lordships in these various judgments have opined that a decree passed by a court without jurisdiction is a nullity and its invalidity can be set up whenever and wherever it is sought to be enforced or relied upon and even at the stage of execution and even in collateral proceedings. It has been argued before us that a defect of jurisdiction strikes at the very authority of the court and such a defect cannot' be cured. On the basis of these decisions, it has been argued that even if the assessee has not challenged the revised intimation dated 15.3.93 which has been rectified under section 154 on 13.9.95, then or account of the decisions of the Gujarat High Court and Calcutta High Court in the cases of Gujarat Poly AVX Electronics and Modern Fibotex, the assessee in 154 proceedings could challenge the same since today, the assessee is aggrieved by that intimation. The case of the revenue, on the other hand, has been that the assessee having chosen not to challenge the revised intimation is debarred from challenging the same in 154 proceedings when the assessing officer is levying additional tax as per law.

Before dealing with the decisions relied upon by the assessee in order to justify the maintainability of the challenge to revised intimation in 154 proceedings, we would like to digress for a moment and pause here to examine the fact that after having issued notice under section 143(2) on 5.8.92, the assessing officer issued revised intimation dated 15.3.93 and passed the assessment order under section 143(3) on 26.3.93. We have already observed earlier that the conscious decision of the assessing officer to issue notice under section 143(2) is a statement to the effect that the issue requires verification, examination and participation on behalf of the assessee to justify its claim and the issue on account of the very nature of its subject matter cannot be decided by the assessing officer unilaterally in 143(1)(a) proceedings. Examined in this light, it is seen that the assessing officer after issuing notice under section 143(2) has proceeded to make assessment under section 143(3). A copy of the said order has been placed before us. Although in the course of the hearing nothing was addressed thereon, however, a perusal of the same shows that in paragraph 1 of the same, the assessing officer observes that the original return of income was revised on account of the earlier years orders which necessitated the revised computation of depreciation. The following observation is have been made by the assessing officer "Original return of income was filed on 28-12-90 declaring a loss of Rs. 3,52,24,904. The return was revised on 30-12-91 declaring the loss of Rs. 3,37,73,805. The reason for revising the return was stated to be that since Income-tax return for assessment year 89-90 was revised due to revised computation of depreciation which resulted in change in written down value of the fixed assets as on 1-4-89 of depreciation for assessment year 90-91 has been recomputed and, therefore, in the revised return the assessable loss has been recomputed." Thereafter, it is seen that from pages 2 to 8 vide paragraphs 4 to 18, the assessing officer in 143(3) proceedings deals 'with the claim of the assessee of Rs. 90,45,364. The assessing officer in paragraph 18, in fact, not only made an addition of Rs. 90,45,364 as a revenue income but has also chosen to make an addition of Rs. 61,62,856 and thus made a total addition of Rs. 1,52,08,220/which includes Rs. 90,45,364 added in the revised intimation observing as under:- "18. By all these arguments given above it is proved that the total receipts in the relevant previous years to the extent of Rs. 1,52,08,220 is revenue in nature. Out of this total receipt as discussed earlier only Rs. 90,45,364 has been shown and the balance of Rs. 61,62,856 is reflected as part of current liabilities. Even though the assessee has not shown the balance of Rs. 61,62,856 as income, the accounting treatment becomes irrelevant in view of the nature of the receipt.

The nature of the receipt has been discussed above elaborately is revenue receipt. Therefore, the entire amount of Rs. 1,52,08,220 will be added as assessee's income of the year under consideration The fact the assessee could not utilize the entire amount as advertisement and publicity expenses during the year and, therefore, carried it over to the current liabilities will not mean that only Rs. 90,45,364 which has been utilized during the year will be taxable. Since the financial assistance received in this year is of revenue nature, the entire amount has to be treated so." Thus, it is seen that this amount of Rs. 90,45,364 which the assessing officer after issue of notice under section 143(2) has added in the revised intimation by way of a prima facie adjustment which we are of the view was not maintainable on account of the fact that apart from the fact that this addition by virtue of its very nature could not have been prima facie added was also not capable of being added even on account of the fact that it was attempted after 143(2) notice and, in fact, a perusal of the assessment order under section 143(3) bears out that after a discussion of various case law and examining the nature of the amount, an addition of this amount has been made in 143(3) proceedings. We have also taken note of the arguments on behalf of the assessee which are supported by documentary evidence as in fact recorded in 154 order that as a result of this addition of Rs. 90 lakhs odd in 143(1)(a) adjustment, the resultant figure was still negative on account of which, it has been argued that the assessee has not challenged the revised 143(1)(a) intimation. Having given our utmost consideration to the decisions of the Apex Court relied upon by the assessee, we are unable to agree with the view of the tax authorities and hold that in the peculiar facts of the case, the assessee cannot be barred from challenging the jurisdiction of the assessing officer in issuing a revised intimation dated 15.3.93.

We would like to observe here that there is no dispute over the issue that section 143(1A) was mended by the legislature by Finance Act, 1993 with retrospective effect from 1.4.89. Accordingly, at the time of passing order under section 154, the assessing officer was within his right to charge additional tax on the addition of Rs, 90,45,364 which resulted by the revised intimation dated 15.3.93 since this revised intimation dated 15/3/9,3 had not been challenged on behalf of the assessee. Thus, rectification under section 154 at that point of time on the strength of the amendment in the law and on account of the revised intimation standing unchallenged was not bad in law and, as such, the assessing officer was very much within his jurisdiction and, in fact, was required to make the necessary rectification. However, once the assessee on the strength of the decisions of different High Courts chose to challenge the 154 rectification order on the ground that the revised intimation dated 15.3.93 was not maintainable, then the first appellate authority was not correct in coming to the conclusion that the assessee could not challenge the same on the peculiar facts of the present case. Since it is seen as we have observed earlier that the amount has been added in 143(3) proceedings after due deliberation which too completed much before the issuing of notice under section 154.

It may be pertinent to consider the judgment of the Gauhati High Court in the case of Sati Oil Udyog () 232 ITR 502 wherein it has been held that the amendment in sub-section (1A) of section 143 is constitutionally valid but the retrospective operation given to the provision therein is ultra vires the Constitution. It is seen that the said Single Bench decision of the Gauhati High Court has been affirmed by the Division Bench in DCIT v. Ashok Paper. Mills Ltd. 256 ITR 673 wherein the judgment of the Supreme Court in the case of CIT v. J.K.Synthetics () 251 ITR 200 (SC) has been explained and CIT v. Hindustan Electro Graphites Ltd. () 243 ITR 48 (SC) and Pannalal Binjraj v. UOI () 31 ITR 565 (SC) had been relied upon. Their Lordships therein have observed that when additional tax has the imprint of penalty, the revenue cannot be heard to say that the levy of additional tax is automatic under section 143(1A) of the Act. They were of the view that if additional tax can be levied in such circumstances, it will be punishing the assessee for no default of his which cannot be ever the intention of the legislature. In fact, we are moved to quote the following observation of the Constitution Bench of the Supreme Court in the case of Pannalal Binjraj v. UOI () 31 ITR 565 (SC) at page 597 which has been quoted by heir Lordships of the Gauhati High Court in the case of DCIT v. Ashok Paper Mills Ltd. () 256 ITR 673 at page 677:- "A humane and considerate administration of the relevant provisions of the Income Tax Act would go a long way in allaying the apprehensions of the assessees and if that is done in the true spirit, no assessee will be in a position to charge the revenue with administering the provisions of the Act with "an evil eye and unequal hand"." It may also be pertinent to mention here that the judgment of the jurisdictional High Court in the case of CIT v. Punjab National Bank have in unambiguous terms frowned upon the action of the tax authorities to proceed in 154 proceedings against 143(1)(a) intimation after notice under section 143(2) has been issued and 143(3) proceedings are pending. It is seen that in the present facts of the case, 143(3) proceedings also have been concluded.

Thus, rectification of 143(1)(a) intimation in the circumstances cannot be upheld.Thus, after having carefully analyzed the peculiar facts of the case and the position of law, we are of the view that the assessee deserves to succeed on account of the reasons given hereinabove. Accordingly, the grounds raised by the assessee are allowed and the levy of additional tax of Rs. 9,76,899 is directed to be quashed.