NAHA ; SPINNING MILLS LTD. VS ASSISTANT COMMISSIONER OF INCOME-TAX
1999 P T D 3492
[230 I T R 717]
[Punjab and Haryana High Court (India)]
Before V. K. Bali and N. K. Agrawal, JJ
NAHA ; SPINNING MILLS LTD.
Versus
ASSISTANT COMMISSIONER OF INCOME-TAX
Civil Writ Petition No.9316 of 1994, decided on 22/01/1997.
(a) Income-tax---
----Assessment---Writ---Adjustment made under proviso to S.143(1)(a)-- Objection to adjustment raised in rectification proceedings in prior assessment year---Same procedure could be followed in relevant assessment year---Writ proceedings to quash adjustment was not valid---Indian Income Tax Act., 1961, Ss. 143 & 154---Constitution of India, Art.226.
(b) Income-tax---
----Writ---Existence of alternate remedy---Writ will not normally issue-- Constitution of India, Art.226.
The petitioner-company was engaged in the business of manufacturing and exporting woollen yarn, hosiery and cotton garments. A return of income was filed by the petitioner under section 139(1) of the Income Tax Act, 1961, before the due date (December 31, 1993) for the assessment year 1993-94 relevant to the accounting year ending March 31, 1993. Taxable income was declared at Rs.16,36,98,920 after claiming various allowances, deductions, depreciation, etc., under various provisions of the pct. Tax as due, as per the return, was paid on December 31, 1993. A' copy of the balance-sheet alongwith the report of the chartered accountant certifying' the deduction admissible under section 80-HHC of the Act was also filed alongwith the return. The Assessing Officer while making prima facie adjustments under the first proviso to section 143(l)(a), raised the taxable income from Rs. 16,36,98,920 (as claimed by the petitioner) to Rs_18,11,04,420. The deduction claimed by the assessee under section 80-HHC of the Act in respect of the profits from export business was Pro reduced from Rs.11,00,97,292 (as claimed) to Rs.9,29,16,897. On a writ petition to quash the intimation/order:
Held, dismissing the petition, that looking to the nature of the controversy, the plea of the respondents regarding the availability of the alternative remedy was accepted inasmuch as it was found to be appropriate, on the facts and in the circumstances of the case, that the assessee may explain the nature of deduction and the nature of the profits under controversy by moving a rectification application under section 154 of the Act. In the preceding assessment year, similar remedy was availed of and the assessee, after explaining the nature of the profits, succeeded in appeal before the Tribunal. It had also to be noticed that a notice under section 143(2) of the Act had already been issued to the assessee for the assessment year 1993-94 and that assessment under section 143(3) had thereafter, been made. If that was so, the assessee could challenge the order, if any, made in the regular assessment, reducing the claim under section 80-HHC of the Act.
[The assessee was advised to seek alternate remedy available under the Income-tax Act.]
God Granites v. Under Secretary, CBDT (1996) 218 ITR 298 (Kar.); Indo-Gulf Fertilizers and Chemicals Corporation Ltd. v. Union of India (1992) 195 ITR 485 (All); J.K.S. Employees' Welfare Fund v. ITO (1993) 199 ITR 765 (Raj.); Jindal Strips Ltd. v. State of Haryana (1996) ILR 1 P & H 323; (1996) 100 STC 457 (P & H); Kamal Textiles v. ITO (1991) 189 ITR 339 (MP); Kerala State Coir Corporation Ltd. v. Union of India (1994) 210 ITR 121 (Ker.); Khatau Junkar Ltd. v. K.S. Pathania (1992) 196 ITR 55 (Bom.); Mageshwari (S.) v. Asst. CIT (1993) 201 ITR 472 (Kar.); Mahalaskhmi Glass Works Ltd. v. Sunil Gupta, Asst. CIT (1993) 203 ITR 658 (Bom.); Modern Fibotex India Ltd. v. Deputy CIT (1995) 212 ITR 496 (Cal); S.R.F. Charitable Trust v. Union of India (1992) 193 ITR 95 (Delhi); Swaraj Mazda Ltd. v. Deputy CIT (1992) 105 CTR 109 (P & H) and Tanna Exports v. M.G. Kamat (1993) 202 ITR 219 (Bom.) ref.
B.S. Gupta, Senior Advocate with Sanjay Bansal for Petitioner.
R.P. Sawhney, Senior Advocate with Rajesh Bindal for Respondents.
JUDGMENT
N.K. AGRAWAL, J.---This is a petition under Articles 226 and 227 of the Constitution, seeking the quashing of intimation/order, dated May 20, 1994, passed and issued by the Assistant Commissioner of Income-tax under section 143(1)(a) of the Income Tax Act, 1961 (for short "the Act"). A sum of Rs.1,35,59,265 by way of income-tax and a sum of Rs.18,01,469 by way of additional income-tax under section 143(1-A) of the Act, totalling Rs.1,53,60,734 were imposed on the petitioner-company for the assessment year 1993-94. The said amount of tax and additional tax was imposed by the Assessing Officer after making certain adjustments under the first proviso to section 143(1)(a), which are said to be not permissible in law.
The petitioner is a public limited company incorporated under the Companies Act, 1956, with its registered office at Ludhiana. The petitioner is engaged in the business of manufacturing and exporting woollen yarn, hosiery and cotton garments. A return of income was filed by the petitioner under section 139(1) of the Act before the due date (December 31, 1993), for the assessment year 1993-94 relevant to the accounting year ending March 31, 1993. Taxable income was declared at Rs.16,36,98,920 after claiming various allowances, deductions, depreciation, etc., under various provisions of the Act. Tax as due, as per the return, was paid on December 31, 1993. A copy of the balance-sheet alongwith the report of the chartered accountant certifying the deduction admissible under section 80-HHC of the Act was also filed alongwith the return.
The Assessing Officer, while making prima facie adjustments under the first proviso to section 143(1)(a), raised the taxable income from Rs.16,36,98,920. (as claimed by the petitioner), to Rs.18,11,04,420. Deduction claimed by the assessee under section 80-HHC of the Act in respect of the profits from export business was reduced from 11,00,97,292 (as claimed) to Rs.9,29,16,897.
The Assessing Officer, while reducing the deduction under section 80-HHC of the Act, looked into certain income shown by the assessee in its balance-sheet under the head "other income". Deduction under section 80-HHC was reduced on account :of exclusion of income from investments amounting to Rs.2,30,76,352 and portfolio income amounting to Rs.49,83,195 from business profits on which deduction under section 80-HHC had been calculated. Certain other disallowances were also made.
Shri B.S. Gupta, learned Senior Advocate appearing for the assessee, has argued that no substantial adjustments, which required investigation or evidence, are contemplated when such power is exercised under section 143(1)(a) of the Act withoutbearing the assessee. Prima facie adjustments, if any, contemplated only those mistakes which were not required to be established by any process of investigation. The plea put forward by Shri Gupta is that the term "prima facie" meant "on the face of it" or "apparent from record". He has also drawn our attention to Circular No.689, dated August 24, 1994, issued by the Central Board of Direct Taxes (reproduced in (1994) 209 ITR (St.) 75), whereby it has been clarified by the Board that prima facie disallowance may be made only in the case of an incorrect claim if such incorrect claim is apparent from the existence of other information in the return or the accompanying accounts or documents. Shri Gupta has contended that the Assessing Officer could not go behind the return or the documents annexed to it while disallowing a deduction. The Assessing Officer was required to follow the procedure prescribed in section 143(2) and to issue a notice to an assessee for regular assessment under section 143(3) of the Act in a case where he wanted to seek certain clarification or to make an investigation.
Shri B.S. Gupta, learned senior counsel for the assessee, has challenged the adjustment made by the Assessing Officer primarily with the plea that the Assessing Officer had no power to disallow a claim on the ground that there was no proof in support of the claim made by the assessee. Reliance has been placed on a decision of the Delhi High Court in S.R.F. Charitable Trust v. Union of India (1992) 193 ITR 95 a decision of the Rajasthan High Court in J.K.S. Employees' Welfare Fund v. ITO (1993) 199 ITR 765; and a decision of the Karntaka High Court in God Granites v. Under Secretary, CBDT (1996) 218 ITR 298. Two decisions of the Bombay High Court in Tanna Exports v. M.G. Kamat (1993) 202 ITR 219 and the other in Mahalakshmi Glass, Works Ltd. v. Sunil Gupta, Asst. CIT (1993) 203 ITR 658, have also been referred to in support of the plea that the Assessing Officer had no jurisdiction to reopen the account of the assessee to re-calculate the book profits or to recalculate the deduction under section 80-HHC of the Act.
Shri R.P. Sawhney, learned senior counsel for the respondents, has in reply asserted that the Assessing Officer has the powers to make any adjustments of the nature specified in any of the three clauses of the first proviso to section 143(1)(a). No opportunity of hearing is required to be given to the assessee while making such adjustments. Clause (iii) of the proviso permitted the Assessing Officer to make any adjustment in respect of "any loss carried forward, deduction, allowance or relief claimed in the return, which, on the basis of the information available in such return, accounts or documents, is prima facie, inadmissible". Shri Sawhney has vehemently argued that the deduction, which had been claimed by the assessee in his return under section 80-HHC, was actually not available to the extent on the basis of the information available from the balance-sheet of the company, which had been annexed to the return.
It has been pointed out by Shri Sawhney, learned senior counsel for the respondents, that the assessee had shown certain income under the head "Other income" in its balance-sheet as under:
| | | Rs. |
| (1) | Income from trade investments (dividend income) | 14,58,966 |
| (2) | Income from non-trade investments: | |
| (i) | Investment income | 2,30,76,352 |
| (ii) | Portfolio income | 49,83,195 |
| | Total | 2 80,59,547 |
The assessee has shown income from trade investments (dividend income) amounting to Rs.14,58,966 under the head "Income from other sources" in the statement of taxable income also filed alongwith the return. Income from non-trade investments and protfolio income were, however, not shown as "income from other sources" in the said statement. Shri Sawhney argued that if the income from trade investments was treated by the assessee himself as "income from other sources" in the computation of income, it was only natural that income from non-trade investment and, portfolio income should have been similarly shown and treated as "income from other sources" and not as business income. The Assessing Officer on the basis of these entries available in the balance-sheet and in the computation of income, made prima facie adjustments.
Shri R.P. Sawhney, learned senior counsel for the respondents, has challenged the contention of the assessee against the powers of the Assessing Officer under section 143(1)(a) of the Act, relying on a decision of the Madhya Pradesh High Court in Kamal Textiles v. ITO (1991) 189 1TR 339; that of the Kerala High Court in Kerala State Coir Corporation Ltd. v. Union of India (1994) 210 ITR 121; and that of the Calcutta High Court in Modern Fibotex India Ltd. v. Deputy CIT (1995) 212 ITR 496. It has been argued by Shri Sawhney that the jurisdiction of the Assessing Officer under section 143(1)(a) is limited not only to the obvious but also to that which is deductible from the return as filed without doubt or debate. This is clear from the language of the section and is supported by the authority as well as the circulars issued by the Central Board of Direct Taxes in this connection.
Shri Sawhney has also argued that an alternative remedy was available to the assessee and, therefore, there is no justification to invoke the jurisdiction of this Court under Articles 226 and 227 of the Constitution. In the preceding assessment year also, a similar adjustment was made and the assessee in that year moved an application under section 154 of the Act. That application was rejected by the Assessing Officer but in appeal, the assessee succeeded in getting the required relief from the Tribunal. It is, therefore, argued that the assessee can approach the Assessing Officer under section 154 of the Act, seeking rectification of the disallowance made under section 80-HHC. It is also pointed out that assessment under section 143(3) of the Act has subsequently been made for the assessment year 1993-94 after issuing notice to the assessee under section 143(2) on July 12, 1994. Though the notice was issued on July 12, 1994, the assessee filed the present writ petition on July 16, 1994. It is, therefore, contended by Shri Sawliney that the assessee cannot only move an application under section 154.of the Act but could also point out the mistakes, allegedly committed by the Assessing Officer while making adjustments under section 143(1)(a) of the Act, during the regular assessment proceeding.
In Jindal Strips Limited though Shri Sham Lal Gupta v. State of Haryana (1996) 100 STC 457; ILR (1996) 1 P & H 323, a matter had arisen before this Court in a writ petition in a case where an assessment order in a sales tax matter had been assailed. The question of alternative remedy was examined and, after quashing the assessment order the matter was referred back for rehearing. Shri Sawltney has argued that, here also, even though the assessee might defend his right to invoke the jurisdiction of this Court under Article 226 of the Constitution, he may be asked to clarify the position before the Assessing Officer by moving a rectification application.
A similar matter was earlier examined by this Curt in Civil Writ Petition No.3525 of 1990 Swaraj Mazda Ltd.. v. Deputy CIT (1992) 105 CTR 109) and, vide order, dated June 4, 1990, the assessee was directed to seek the alternative remedy by moving a rectification application under section 154 of the Act. In that case, the provisions of section 143(1)(a) of the Act were challenged on the ground that those were ultra vires the Constitution inasmuch as no notice was required to be issued before adjustments were made by the Assessing Officer in the allowances and deductions claimed by the assessee. The plea of the assessee was rejected.
Shri B.S. Gupta, learned senior counsel for the assessee, has, in rejoinder urged that, even if an alternative remedy .was available, the assessee was not debarred from invoking the jurisdiction of this Court under Article 226 of the Constitution inasmuch as the applicability of section 143(1)(a) in the given situation has been challenged and thereby the jurisdiction of the Assessing Officer is under attack. Reliance has been placed on a decision of the Allahabad High Court in Indo-Gulf Fertilizers and Chemicals Corporation; Ltd. v. Union of India (1992) 195 ITR 485; on, a decision of the Bombay High Court in Khatau Junkar Ltd. v. K.S. Pathania (1992) 196 ITR 55; and on a decision of the Karnataka High Court in S. Mageshwari v. Asst. CIT (199j) 201 ITR 472.
Looking to the nature of the controversy, - the plea of the respondents regarding the availability of the alternative remedy is accepted inasmuch as it is found to be appropriate, on the facts and in the circumstances of the case, that the assessee may explain the nature of deduction and the nature of the profits under controversy by moving a rectification application under section 154 of the Act. In the preceding assessment year, similar remedy was availed of and tote assessee, after explaining the nature of the profits, succeeded in appeal before the Tribunal. It has also to be noticed that a notice under section 143(2) of the Act has already been issued to the assessee for the assessment year 1993-94 and it appears that assessment under section 143(3) has, thereafter, been made. If that was so, the assessee can challenge the order, if any, made in the regular assessment, reducing the claim under section 80-HHC of the Act. The view taken by this Court in Swaraj Mazda's case, (1992) 105 CTR 109, in similar circumstances, supports it. We, therefore, do not think appropriate to enter into a discussion on the merits of the applicability of section 143(1)(a) of the Act and the jurisdiction of the Assessing Officer to make adjustments thereunder. The assessee is advised to seek alternative remedy available under the Act.
In the result, the writ petition is dismissed. No costs
M.B.A./3127/FC Petition dismissed