| SooperKanoon Citation | sooperkanoon.com/74611 |
| Court | Income Tax Appellate Tribunal ITAT Hyderabad |
| Decided On | Jan-05-2006 |
| Judge | V Gandhi |
| Appellant | Panyam Cements and Mineral |
| Respondent | Joint Cit, (Assts.) S.R. - 3 |
2. The above controversy arose in the circumstances that assessing officer issued intimation under Section 143(1)(a) on 24-11-1998 when simultaneously on the same date he issued notice under Section 143(2) of the Income Tax Act.CIT v. Gujarat Electricity Board their Lordships after considering legislative intent behind the enactment of Section 143(1)(a) and Section 143(2) have observed as under: The Legislature therefore intended that where the summary proceeding under Sub-section (1) has been adopted, there should be scope available for the revenue either suo moto or at the instance of the assessee to make a regular assessment under Sub-section (2) of Section 143. The converse is not available: regular assessment proceedings having commenced under Section 143(2), there is no need for the proceedings under Section 143(1)(a).
2.2 On consideration of order sheet entries dated 24-11-1998 and the decision of the Apex Court, the learned Judicial Member held that intimation was issued subsequent to the decision of the assessing officer to commence regular assessment proceedings. Therefore, intimation was not issued in accordance with law. The intimation was accordingly cancelled as per the proposed order.
3. The learned Accountant Member did not agree with the above view. He has reproduced all the grounds raised by the assessee before the Commissioner (Appeals) as well as before the Tribunal in his proposed order and has held that the assessee did not take any specific ground for cancellation of intimation issued under Section 143(1)(a) of the Income Tax Act. At the same time he has observed that ground No. 11 can be construed to be such a ground. Ground No. 11 raised before the I.T.A.T. is as under: On the facts and in the circumstances of the case, the learned Commissioner of Income-tax (Appeals 1), Hyderabad is not justified in applying the provisions of Section 143(1)(a) of the Income Tax Act, 1961 against the Circular issued by the Central Board of Direct Taxes, after issuance of notice under Section 143(2) of the Act, he has to make assessment in accordance with law, ie., under Section 143(3) of the Act.
3.1 After observing that probably ground No. 11 above can be construed to challenge intimation under Section 143(1)(a), he has observed that all the other grounds of appeal taken by the appellant were also required to be disposed of although in the proposed order the learned Accountant Member considered and decided legality of intimation under Section 143(1)(a) only.
3.2 The learned Accountant Member in the proposed order has reproduced the order-sheet entries dated 24-11-1998 as under 7 As regards the ground decided by the Hon'ble Judicial Member, the facts as mentioned by him are as under: Intimation under Section 143(1)(a) processed on 24-11-1998 and on the same date, the notice was issued under Section 143(2) of the Act.
In para 6 of his order, it has been noted by him that an order sheet page No. 3, immediately after typing the manual calculations made at order sheet page 2, the assessing officer has mentioned 'issue notice under Section 143(2) immediately. 'The signature of assessing officer below the above noting bears the date of 24-11-1998.
Immediately below, the following noting is found.
1. 'Intimation under Section 143(1)(a) explanatory sheet and Challan for Rs. 70,93,351 put us please.' The notice under Section 143(2) put up please dated 27-5-1999 at 5 P.M.3.3 After consideration of above facts, the learned Accountant Member observed that both the intimation under Section 143(1)(a) and notice under Section 143(2) were signed on the same date. This is clear from para 4.1 of the order of the learned Commissioner (Appeals), whereas the assessee's claim is that intimation under Section 143(1)(a) was issued subsequent to issue of notice under Section 143(2) of the Act.
The department has claimed the opposite. There was no evidence produced by either party to substantiate the conclusion. However, in law there is a presumption that what is clear from record is taken as correct unless contrary is proved. As the entry of issue of intimation under Section 143(1)(a) is written prior to issue of notice under Section 143(2) in the order sheet it could be concluded that intimation was signed prior to signing of notice under Section 143(2) of the Act.
4. While upholding the action of the revenue, the learned Accountant Member further observed as under: However, the issue here is as to when the proceedings under Section 143(2) commenced and when the proceedings under Section 143(1)(a) was completed. If we go to the concerned Section we find that the word used in Section 143(1)(a) is 'sent' whereas the word used in Section 143(2) is 'served'. The issue as to when a particular procesding commences or concludeshas not been discussed in cases relating to validity of intimation under Section 143(1)(a) by any of the Courts or in the reported cases brought to the knowledge of the Bench by either of the parties. However, it appears that the Hon'ble Supreme Court in the case of Gujarat Electricity Board mentioned suprahas impliedly decided the issue. This is so, as the question referred to the Hon'ble Supreme Court was 'whether it is open to the revenue to issue intimation under Section 143(1)(a) of the Income Tax Act, after notice for regular assessment has been issued under Section 143(2) of the Income Tax Act, 1961. Thus, what is to be decided to apply the ratio of the Hon'ble Supreme Court decision mentionedsupra, is the issue of intimation or issue of notice and not the conclusion or commencement of proceeding as per Section 143(1)(a) or Section 143(2). In the present case, as the order sheet entry shows the entry for issue of intimation under Section 143(1)(a) prior to the entry for issuance of notice under Section 143(2), 1 hold that the intimation under Section 143(1)(a) was issued prior to the issue of the notice under Section 143(2). 1 draw support for the same from the Hyderabad'A'Bench decision mentionedsupra. I, therefore, hold that the intimation under Section 143(1)(a) was a valid intimation. This ground of the assessee, is therefore, rejected.
5. In the above background, the matter has been brought before me and I have heard the arguments of both the parties. The learned Counsel for the assessee Shri U.L.N. Sudhakar vehemently contended that notice under Section 143(2) was directed to be issued on 24-11-1998 much before the intimation was signed. Even the said notice was sent earlier to service of notice under Section 143(2). He drew my attention to the following entry in the order sheet which clearly showed the directions to levy additional tax under Section 143(1)(a) and directions to issue notices were signed by the assessing officer as under: 1. APGST payable : Instalments granted by the CTO cannot be considered as discharge of liability before the due date u/s unless it is a sales tax deferral scheme under the Sales Tax Act as per Boards Circular No. 496 dated 25-9-1987.
(B) Deduction U/s. 80HHC is not allowed as the assessee has not furnished disclaimer certificate 5.1 The learned Counsel further relied on the decision of the Hon'ble Calcutta High Court in the case of Indian Aluminium Co. Ltd v. Union of India . A reference to the decision of the Rajasthan High Court in the case of CIT v. Udaipur Distillery Co. Ltd. was also invited to contend that intimation issued was bad in law.
6. The learned Departmental Representative, on the other hand, drew my attention to the order sheet entries considered by the learned Accountant member in his proposed order and maintained that intimation under Section 143(1)(a) was issued prior to issue of notice under Section 143(2) of the Income Tax Act. The learned Departmental Representative further argued that the decision of the Hon'ble Calcutta High Court in the case of Indian Aluminium Co. Ltd. (supra) had no application as the affidavit filed on behalf of the revenue in that case, did not show that intimation was issued prior to the issue of notice under Section 143(2). The learned Departmental Representative therefore, said that intimation issued under Section 143(1)(a) was legal and could not be cancelled.
7. I have given careful thought to the rival submissions of the parties. Their Lordships of the Supreme Court in the case of CIT v.Gujarat Electricity Board have held that where scrutiny assessment under Sub-section (1) has been adopted there is scope to make regular assessment under Section 143(2) by the revenue, either suo moto or at the instance of the assessee. Where however regular assessment proceedings have been commenced under Section 143(2), there is no need for summary proceedings under Section 143(1)(a) of the Income Tax Act.
7.1 In a case where there is clear evidence that notice under Section 143(2) was issued prior to completion of proceedings under Section 143(1)(a), the proceedings under the above Section has to be held to be illegal and cancelled. There is no dispute on this proposition.
7.2 In the present case, the proposed order of the learned Accountant Member has also recorded that there is no clear evidence that notice under Section 143(2) was issued after intimation proceedings were concluded. In my considered opinion it is not possible to hold even on minute examination of the order sheet entry dated 24-11-1998 as to whether proceedings under Section 143(1)(a) were completed before notice under Section 143(2) was issued or vice versa Both actions appear to have been taken simultaneously by the assessing officer on 24-11-1998. It is evident that he had decided to commence regular proceedings and decided/ directed to issue notice under Section 143(2) of Income Tax Act which is dated 24-11-1998 before proceedings under Section 143(1)(a) stood completed. The question referred also talks of 'simultaneous notice'.
7.3 In order to resolve above controversy, we must take in to account the following provisions of the Income Tax Act.
143(1)(a) Where a return has been made under Section 139, or in response to a notice under Sub-section (1) of Section 142, (i) If any tax or interest is found due on the basis of such return, after adjustment of any tax deducted at source, any advance tax paid and any amount paid otherwise by way of tax or interest, then, without prejudice to the provisions of Sub-section (2), an intimation shall be sent to the assessee specifying the sum so payable, and such intimation shall be deemed to be a notice of demand issued under Section 156 and all the provisions of this Act shall apply accordingly; and (ii) if any refund is due on the basis of such return, it shall be granted to the assessee: Provided that in computing the tax or interest payable by, or refundable to the assessee the following adjustments shall be made in the income or loss declared in the return.
(1A) (a) Where as a result of the adjustments made under the first proviso to Clause (a) of Sub-section (I),- (ii) the loss declared by such person in the return is reduced or is converted into income, the assessing officer shall,- (A) in a case where the increase in income under Sub-clause (i) of this clause has increased the total income of such person, further increase the amount of tax payable under Sub-section (1) by an additional income-tax calculated at the rate of twenty per cent, on the difference between the tax on the total income so increased and the tax that would have been chargeable had such total income been reduced by the amount of adjustments and specify the Additional income-tax in the intimation to be sent under Sub-clause (i) of Clause (a) of Sub-section (1); (B) in a case where the loss so declared is reduced under Sub-clause (ii) of this clause or the aforesaid adjustments have the effect of converting that loss into income, calculate a sum (hereinafter referred to as 'additional incorne-tax') equal to twenty per cent of the tax that would have been chargeable on the amount of the adjustments as if it had been the total income of such person and specify the additional income-tax so calculated in the intimation to be sent under Sub-clause (i) of Clause (a) of Sub-section (1); (C) Where any refund is due under Sub-section (1), reduce the amount of such refund by an amount equivalent to the additional income- tax calculated under Sub-clause (A) or Sub-clause (B), as the case may be....
(2) Where a return has been made under Section 139, or in response to a notice under Sub-section (1) of Section 142, the assessing officer shall, if he considers it necessary or expedient to ensure that the assessee has not understated the income or has not computed excessive loss or has not underpaid the tax in any manner, serve on the assessee a notice requiring him, on a date to be specified therein, either to attend his office or to produce, or cause to be produced there, any evidence on which the assessee may rely in support of the return: that no notice under this sub-section shall be served on the assessee after the expiry of twelve months from the end of the month in which the return is furnished.
(3) On the day specified in the notice issued under Sub-section (2), or as soon afterwards as may be, after hearing such evidence as the assessee may produce and such other evidence as the assessing officer may require on specified points, and after taking into account all relevarlt material which he has gathered, the assessing officer shall, by an order in writing, make an assessment of the total income or loss of the assessee, and determine the sum payable by him on the basis of such assessment.
(4) Where a regular assessment under Sub-section (3) of this section or Section 144 is made,- (a) any tax or interest paid by the assessee under Sub-section (1) shall be deemed to have been paid towards such regular assessment; (b) if no refund is due on regular assessment or the amount refunded under Sub-section (1) exceeds the amount refundable on regular assessment, the whole or the excess amount so refunded shall be deemed to be tax payable by the assessee and the provisions of this Act shall apply accordingly (Emphasis supplied) 7.4 Above statutory provisions make it clear that assessing officer is permitted to make 'adjustments' without prejudice to the provisions of Sub-section (2). After adjustments the assessing officer can send intimation to the assessee. It is further clear that after making adjustments and,, after sending intimation, the assessing officer can send notice under Sub-section (2) to the assessee. The question before us is whether the assessing officer can simultaneously exercise powers under Section 143(1)(a) and 143(2) of the Income Tax Act. It is to be seen that exercise of power under Section 143(1) is not made permissible after the commencement of proceeding under Section 143(2) of the Act. The same issue came before the Calcutta High Court in the case of Indian Aluminium Co. Lid. (supra) and their Lordships held as under: Sub-section (2) of Section 143 authorized the assessing officer in a case referred to in Sub-section (1) if the assessing officer considered it necessary nor expedient to ensure that the assessee has not understated the income or has not computed excessive loss or has not under paid the tax in any manner, he shall serve on the assessee a notice requiring him on a date to be specified therein either to attend his office or to produce or cause to be produced there, any evidence on which the assessee may rely in respect of the return. Therefore, whereas by virtue of Sub-section (1) of Section 143 of the Act the assessing officer was authorized to issue an intimation to the assessee when the assessing officer found on the basis of the return submitted that any tax or interest is due but has not been paid; Sub-section (2) of Section 143 of the Act authorized the assessing officer to issue a notice to the assessee when the assessing officer considered it necessary or expedient to ensure that the assessee has not understated the income or has not computed the excessive loss or has not underpaid the tax in any manner. When steps are taken under subsection (1) or Section 143 of the Act upon issuance of the intimation, the matter stands concluded insofar as the assessing officer is concerned. When, however, steps are taken under Sub-section (2) of Section 143, the assessing officer starts his work to ensure that the assessee had not paid less tax. Sub-section (3) of Section 143 authorized the assessing officer to come to his findings by making an assessment, in order to show that he has discharged his obligation in terms of Sub-section (2) of Section 143 of the Act. Therefore, the power exercisable under Sub-section (1) of Section 143 stands on a different footing from the power exercisable under Sub-section (2) of Section 143 of the Act. It is possible that, after the power has been exercised under Sub-section (1) of Section 143, it may occur to the assessing officer that, while issuing the intimation or while issuing the refund, certain things escaped his attention and, accordingly, he has not been able to ensure that the assessee has not underpaid tax and, accordingly, he may thereupon take steps under Sub-section (2) of Section 143 of the Act, it is however, not possible to comprehend that the self-same assessing officer could exercise power under Sub-section (1) of Section 143 of the Act simultaneously with exercise of power under Sub-section (2) of Section 143 of the Act.
In the instant case, there is no dispute that the intimation under Sub-section (1) of Section 143 of the Act was issued on the same date, when the notice under Sub-section (2) of Section 143 of the Act was issued. In the affidavit-in-opposition filed by the IT department, it has not been stated that in point of fact, the intimation under Sub-section 143 was issued at an earlier point of time on the same date and subsequent thereto it came to the knowledge of the assessing officer that for some reason or the other he has not been able to ensure that the assessee has not underpaid the tax. The conclusion would be, therefore, that the intimation under Sub-section (1) and notice under Sub-section (2) were issued simultaneously. When steps are taken under Sub-section (2) of Section 143, it is commonly known as regular steps to make regular assessment. The same stand culminated upon making of an assessment order of the total income. Once that order is made, Section 156 of the Act obliges the assessing officer to issue a demand. Section 220 then requires the assessee to pay the same within 30 days from the date of receipt of the demand and in default to pay interest at the rate of one and half per cent per month. The assessee is required to pay the amount mentioned in the intimation and in default of payment within 30 days from the date of receipt of the intimation, is obliged to pay interest but at the same time the assessment has not reached finality, for steps have been initiated under Sub-section (2) to ascertain actual tax liability. This is, however, not comprehensible without a just reason in support thereof. The affidavit-inopposition does not give any such just reason. The assessing officer, who has been authorized to do either ofthese acts, has done both of them on the same date. As aforesaid, one of his actions concludes the matter and the other commences the assessment of the liability.
8. The facts considered by their Lordships of the Calcutta High Court are quite similar to the facts involved in the case before me and therefore, the aforesaid decision is held to be fully applicable to the facts of the case.
9. The decision of Hon'ble Gujarat High Court in the case of Gujarat Poly AVX Electronics Ltd. v. Dy. CIT which was affirmed by their Lordships of Supreme Court in the case of CIT v.Gujarat Electricity Board also support the same view that simultaneous proceedings both under Section 143(1) and 143(2) are not permitted. On a reference to provision of Sub-section (2) of Section 143, it is seen that before ministerial act of issuance and service of notice under the above section are carried, the assessing officer has to form an opinion that "it is necessary or expedient to ensure that the assessee has not understated the income or has not computed excessive loss or has not underpaid the tax in any manner". In fact the assessing officer's power to issue notice are conditioned on the formation of opinion on above lines. This is clear from use of word, "if". Further once opinion as above is formed, the assessing officer has to issue notice as on account use of word "shall" in the sub-section. He has further to complete assessment as per Sub-section (3) which provides that, the assessing officer shall by an order in writing, make an assessment of the total income or loss of the assessee and determine the sum payable by him on the basis of such assessment.
9.1 It is therefore clear that when on facts and in the circumstances of this case the assessing officer had already considered it necessary or expedient to ensure that the assessee should be called upon to produce evidence in support of return filed by the assessee, then the assessee could only be visited with regular demand based on regular assessment under Section 143(3) of the Income Tax Act. The assessee could not be made to pay additional tax simultaneously under Sub-section (1A) of Section 143 of the Income Tax Act. Such treatment is not envisaged when assessing officer has already decided to call upon, the assessee to produce evidence in support of return. These reasons given by the Hon'ble Gujarat High Court also support the claim that two proceedings: one under Section 143(1)(a) and second under Section 143(2) cannot be commenced or carried on simultaneously.
9.2 In the present case it is not clear whether assessing officer signed intimation issued under Section 143(1)(a) of the Income Tax Act or signed and issued notice under Section 143(2) of the Income Tax Act.
The notice under Section 143(2) of Income Tax Act was served on the assessee earlier than intimation issued under Section 143(1)( a). At the same time it is reasonable to held on facts that both the proceedings were simultaneously taken by the Assessing Officer on 24-11-1998. As per decisions of the Hon'ble Gujarat High Court and the Hon'ble Calcutta High Court such action is not permissible. Accordingly proceedings under Section 143(1)(a) have to be held to be without jurisdiction. The revenue authorities can carry proceedings under Section 143(3) of the Income Tax Act.
10. The learned Departmental Representative tried to distinguish the aforesaid decision in the case of Indian Aluminium Co. Ltd. (supra) by saying that in that case the revenue did not file affidavit to show that initimation was signed earlier to commencement of the regular assessment proceedings. This is not correct. The affidavit was to be filed to show that intimation was issued and subsequent thereto it came to the knowledge of the assessing officer that for some reasons or the other he has not been able to ensure that the assessee has not underpaid the tax. In the present case, as observed even by the learned Accountant Member, there is no clear evidence as to which of the two actions was taken and completed first by the assessing officer. There is clear evidence that proceedings under both the Sub-sections were taken simultaneously. Having regard to the fact that the proceedings under Section 143(2) stood initiated, there was no legal justification on the part of the assessing officer to issue intimation. Intimation made is held to be contrary to the scheme of Income Tax Act and is liable to be cancelled. I agree with the view of the learned Judicial Member.
12. The matter should now be placed before the regular Bench for disposal in accordance with law.