LAKHANPAL NATIONAL LIMITED VS DEPUTY COMMISSIONER OF INCOME-TAX (ASSESSMENT)
1998 P T D 2454
[222 I T R 151]
[Gujarat High Court (India)]
Before B. C. Patel and R.R. Jain, JJ
LAKHANPAL NATIONAL LIMITED and another
versus
DEPUTY COMMISSIONER OF INCOME-TAX (ASSESSMENT)
Special Civil Applications Nos. 1047 and 2178 of 1996, decided on 05/07/1996.
Income-tax---
----Assessment---Rectification of mistakes---Assessment procedure---Notice issued under S.143(2)---Assessment must be made under S.143(3)---Issue of notice under S.154(l)(b) after notice had been issued under S143121--- Notice under SA54(1)(b) was not valid---Indian Income Tax Act, 1961, Ss.143 & 154.
A perusal of sub-clause (i) of section 143(l)(a) of the Income Tax Act, 1961, makes it clear that adjustment can be made without prejudice to the provisions of subsection (2). Thus, the right to issue notice under section 143(2) of the Act is with the Assessing Officer even after making the adjustment. Section 154(1)(b) refers to amendment in the intimation sent by the authority under section 143(1) and powers are conferred to rectify any mistake which is apparent from the record and not otherwise. Thus, after rectifying the mistake, the order would remain an order under section 143(1)(a) of the Act, and in view of the language, it would be open to the Assessing Officer to issue notice under section 143(2) of the Act even thereafter to the assessee for snaking assessment under subsection (3) of section 143 and in that case, he will have to complete the assessment as laid down under subsection (3) of section 143 of the Act. However, after issuance of notice under section 143(2) of the Act, there is no question of issuing notice under section 154(1)(b) of the Act.
Gujarat Poly-AVX Electronics Ltd. v. Dy. CIT (Assessment) (1996) 222 ITR 140 (Guj.) ref.
J.P. Shah for Petitioners.
Shelat for M.R. Bhatt & Co. for Respondents.
JUDGMENT
B.C. PATEL, J.---The petitioners, by filing these petitions under Article 226 of the Constitution, have challenged the validity of the proceedings under section 154 of the Income Tax Act, 1961 (hereinafter referred to as "the Act"), pending assessment proceedings under section 143(3) of the Act. At the request of the learned Advocates, both these petitions are disposed of by this common judgment as the question raised is common.
The brief facts of the case are:
The petitioner-assessee in Special Civil Application No. 1047 of 1996 is a public limited company, and by filing this petition, has prayed for issue of a writ of certionrari or any other appropriate writ, order or direction quashing and setting aside the notice under section 154 of the Act at Annexure "C" to the petition, being invalid in law.
For the assessment year 1993-94, the petitioner-assessee filed a return of loss of Rs.5,93,17,235, alongwith computation of total income, a copy of which is annexed to the petition at Annexure "A". By order, dated March 31, 1994, the Assessing Officer passed an order under section 143(1)(a) of the Act, accepting the said loss, a copy of which is annexed to the petition at Annexure "B".
The Assessing Officer thereafter issued a notice under section 143 (2) of the Act on July 12, 1995, vide Annexure "D". Notice, dated July 12, 1995, under section 142(1) was also issued simultaneously, vide Annexure "E". Thereafter, proceedings commenced under section 143(3) of the Act. The proceedings were conducted on different dates. The evidence called for by the Assessing Officer was produced. Explanation in respect of certain points was also tendered and ultimately the assessment order has been passed under section 143(3) of the Act, for which there is no dispute. It appears that before completing the assessment under section 143(3) and after issuance of notice under section 143(2) for proceedings under section 143(3), notice, dated January 24, 1996, under section 154 came to be issued by the Assessing Officer, vide Annexure "C" calling upon the petitioner to file objections on or before February 5, 1996, with regard to royalty of Rs.44.92 lakhs as the said amount is disallowable under section 40(a)(i) of the Act. This notice is the subject-matter of Special Civil Application No. 1047 of 1996.
Special Civil Application No. 2178 of 1996: ???
The petitioner-assessee in this case is also a public limited company and it submitted its return, vide Annexure "A" alongwith a statement substantiating its claim of depreciation. The Assessing Officer accepted the view of the assessee and passed an order, dated August 18, 1994, under section 143(1)(a), vide Annexure "B" to the petition. Thereafter, on October 7, 1994, a notice was issued by the Assessing Officer under section 143(2) of the Act, vide Annexure "C" to the petition. It appears that notice under section 142(1) also came to be issued on July 10, 1995, vide Annexure "D". After the issuance of notice under section 143(2) of the Act, a notice under section 154 came to be issued on December 15, 1995, vide Annexure "E". The petitioner, by letter, dated December 20, 1995, at Annexure "F" pointed out that he has rightly claimed the depreciation and there is no question of rectification. However, the Assessing Officer, on January 29, 1996, vide Annexure "G" passed an order computing additional tax of Rs.69,86,500 under section 143(1-A) of the Act. Thereafter, a demand under section 156 of the Act was raised for Rs.52,45,035, vide Annexure "H". Thereafter, an assessment order is also passed on March 22, 1996, under section 143(3) of the Act in accordance with the procedure. In this petition, the petitioner has challenged the legality and validity of the notice, dated December 15, 1995, under section 154 of the Act at Annexure "E", order passed under section 154 of the Act at Annexure "G" and demand under section 156 of the Act at Annexure "H".
The petitioner has preferred an appeal against the said order. However, since in this and other matters a similar question of law is involved, they are heard together.
Mr. Shah, the learned advocate for the petitioner, submitted that in view of the language used in section 143(1)(a), sub-clauses (i) and (ii) of the Act, the Assessing Officer has to complete the assessment in the manner laid down in subsection (3) of section 143, after issuing a notice under section 143(2) of the Act.
As against this, Mr. Shelat, learned counsel for the respondent Revenue, submitted that by issuing a notice under section 154 irrespective of proceedings pending under section 143(3), the assessee can be called upon to file objections if there is a mistake apparent from the record and in view of clause (b) of subsection (1) of section 154, it is open for the Assessing Officer to amend the intimation sent by him under subsection (1) of section 143, and the Assessing Officer can enhance or reduce the amount A tax or refund granted by him under that section.
Sub-clause (i) of section 143(1)(a) of the Act reads as under:
"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 subsection (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."
Reading this provision, it is clear that adjustment can be made without prejudice to the provisions of subsection (2). Thus, the right to issue notice under section 143(2) of the Act is with the Assessee Officer even after making the adjustment. Section 154(1)(b) refers to amendment in the intimation sent by the authority under section 143(1) and the powers are conferred to rectify any mistake which is apparent from the record and not otherwise. Thus, after rectifying the mistake, the order would remain an order under section 143(1)(a) of the Act, and in view of the language, it would be open for the Assessing Officer to issue notice under section 143(2) of the Act even thereafter to the assessee for making assessment under subsection (3) of section 143 and in that case, he will have to complete the assessment as laid down under subsection (3) of section 143. We have taken the view that once notice is issued under section 143(2), the Assessing Officer has to complete the assessment under section 143(3) in our decision rendered in Special Civil Application No.425 of 1996---Gujarat Poly-AVX Electronics Ltd. v. Dy. CIT (Assessment) (1996) 222 ITR 140, decided by us on July 4/5th, 1996, and, therefore, we do not discuss in detail about the same in this judgment. If the Assessing Officer would have rectified the order with the aid of section 154(1)(b) of the Act, even then certainly he could have exercised the power under section 143(2) of the Act. Once having issued the notice under section 143(2), he has to complete the procedure of assessment as laid down under section 143(3) of the Act. In the instant case, the order of assessment is passed by the Assessing Officer and thus he has completed the assessment after scrutinising the evidence with proper application of mind. Therefore, in a case like this, after issuance of notice under section 143(2) of the Act, there is no question of issuing notice under section 154(1)(b) of the Act but the assessment is to be made under section 143(3) of the Act. Therefore, the impugned notices deserve to be quashed and set aside. .
Mr. Shah, the learned Advocate has raised the contention with regard to patently disallowable items under section 143(1)(a) of the Act. We do not enter into the discussion of allowability or disallowability which may be patent or otherwise in the instant cases as we think it is not necessary, and we keep this question open.
In the light of the above discussions, Special Civil Application No.1047 of 1996 is allowed. Notice at Annexure "C" to the petition issued by the Deputy Commissioner of Income-tax (Assessment), Special Range-2, Baroda, on January 24, 1996, under section 154 of the Act is quashed and set aside.
Similarly, Special Civil Application No.2178 of 1996 is also allowed. Notice dated December 15, 1995, under section 154 of the Act at Annexure "E", order passed under section 154 of the Act at Annexure "G" and demand under section 156 of the Act at Annexure "H" in Special Civil Application No.2178 of 1996 are quashed and set aside.
Rule in both these matters made absolute accordingly. No order as to costs.
M.B.A./1525/FC???????????????????????????????????????????????????????????????????????????????? Rule made absolute.