COMMISSIONER OF INCOME-TAX, VS SMT. RANIRAJ KAUR, 1998 PTD-MADHYA-PRADESH-HIGH-COURT-INDIA 3113 (1996)

Income-tax---

----Revision---Assessment under S.143(1)---Objection to assessment order by assessee under S.143(2)---Commissioner meanwhile exercising power under S.263 and setting aside assessment order---Tribunal setting aside order of Commissioner under S.263---Justified---Indian Income Tax Act, 1961, Ss. 143 & 263.

The assessment of the assessee was completed by the Income-tax Officer on March 31, 1983, and the order was served on the assessee on February 10, 1984. The assessee made an application in Form No.6-A in accordance with rule 14-B of the Income Tax Rules, 1962, objecting to the said assessment under section 143(2) of the Income Tax Act, 1961. Finding the order to be prejudicial to the interests of the Revenue, the Commissioner exercising his power under section 263 set aside the order. His order was challenged in appeal by the assessee before the Tribunal and the Tribunal set aside the order. On a reference by the Revenue:

Held, that on the assessee's objecting to the assessment, the assessment made by the Income-tax Officer under section 143(1) became inchoate. It was an inconclusive assessment because the objection had been filed within the period prescribed under section 143(2) of the Income Tax Act. When the order was inchoate or incomplete the Commissioner had no jurisdiction under section 263 to interfere with the order because the order had not attained finality. It would attain finality after hearing the assessee on an application moved under section 143(2) of the Income Tax Act. The Tribunal was justified in setting aside the order under section 263 of the Commissioner of Income-tax.

Abhay Sapre for the Commissioner.

B.L. Nema for the Assessee.

JUDGMENT

This is a reference under section 256(1) of the Income Tax Act, 1961 (hereinafter referred to as the "I.T.A. Act"), at the instance of the Revenue and the following question of law has been referred by the Tribunal for answer of this Court, which reads as under:

"Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that the Commissioner had not jurisdiction to revise the assessment order under section 143(1) of the Income Tax Act, 1961?"

The year of assessment involved is 1980-81, the previous year ending March 31, 1980. The assessment of income of the assessee was completed by the Income-tax Officer on March 31, .1983. The said assessment order was served upon the assessee on February 10, 1984, i.e., to say about 10 months after the passing of the assessment order. The assessee made an application on February 13, 1984, in Form No.6-A in accordance with rule 14-B of the Income Tax Rules, objecting to the said assessment under section 143(2)(a) of the Act. It is pointed out that under section 153 of the Act, the period of limitation has been prescribed for completion of assessment. At the same time, the assessee had a right under section 143(2)(a) to make an application within one month from the date of service of the notice of demand to the Income-tax Officer objecting to the assessment. The Commissioner of Income-tax found the said assessment order to be erroneous and prejudicial to the interests of the Revenue. Therefore, he exercised his power under section 263 of the Act and set aside the order of the assessment with a direction to the Income-tax Officer for de novo assessment. The order of the Commissioner of Income-tax, dated March 19, 1985, was challenged in appeal by the assessee before the Tribunal and the. Tribunal took the view that under-section 143(2)(a), the assessee had a right to object to the assessment, therefore, the assessment made by the Income-tax Officer under section 143(1) of the Act was not final and the Commissioner had no jurisdiction under section 263 of the Act to revise that assessment order, which was not final. Hence, the order of the Commissioner was set aside by the Tribunal. Thereafter, the Revenue moved the Tribunal for making a reference and, accordingly, the aforesaid question of law has been referred by the Tribunal for answer of this Court.

We have heard learned counsel' for the parties and perused the record. It is true that under section 143(1) of the Act, the assessment has to be made by the Assessing Officer within a period of two years from the end of the assessment year in which the income was first assessable. In the present case, the assessment was made within two years, but the order of assessment was served on the assessee on February 10, 1984, and under section 143(2)(a) the assessee moved an application on February 13, 1984, in Form No.6-A. Therefore, the order of assessment loses its finality because under clause (b) of subsection (3) of the section 143 of the Act says that "in a case where an assessment has been made under subsection (1), if either such assessment had been objected to by the assessee by an application under clause (a) of subsection (2) or the Assessing Officer is of opinion that such assessment is incorrect, inadequate or incomplete in any material respect, the Assessing Officer shall, by an order in writing, make a fresh assessment of 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". The Explanation further says that for the purposes of the section the assessment under subsection (1) shall be deemed to be incorrect, inadequate or incomplete in a material respect. Therefore when the assessment was objected to by the assessee the so-called assessment made by the Income-tax Officer under section 143(1) became inchoate. It was an assessment which was inconclusive because the objection has been filed within the period prescribed under subsection (2)(a) of section 143 of the Act by the assessee and, therefore, that rendered the assessment order and recovery inchoate. Therefore, when the order was inchoate or incomplete in that respect, the Commissioner under section 263 of the Act had no jurisdiction to interfere with that order because that order had not attained finality. It would only attain finality under section 143(2)(b) of the Act. In this context, the period of limitation of two years prescribed under section 153 will not operate against the Assessing Officer as he had already made the assessment within the period prescribed. He will be taking the exercise of assessment again because of the statutory right conferred on the assessee under section 143(2)(a) of the Act. Therefore, the Commissioner could not have revised the inchoate order and the Commissioner can revise the final order only and the final order is yet to be passed by the Assessing Officer under section 143(3)(b) of the Act. In this view of the matter, the view taken by the Tribunal appears to be justified. Hence, this reference is answered against the Revenue and in favour of the assessee.

M.B.A./1579/FCReference answered.