Income Tax Appellate Tribunal - Indore
Income-Tax Officer vs Smt. Nankibai on 11 June, 1986
Equivalent citations: [1986]19ITD488(INDORE)
ORDER
Vimal Gandhi, Judicial Member
1. These are five appeals by the revenue against identical orders of the AAC dated 10-5-1983 by which he cancelled the assessments made by the ITO. The facts leading to these appeals are that the assessees were partners in firm Murlidhar Kanhayalal, Bhopal, and had shown share income from the firm in their returns for the assessment year 1980-81. The assessments were made under Section 143(1) of the Income-tax Act, 1961 ('the Act') on 14-1-1983. The assessees filed applications under Section 143(2)(a) objecting to the above assessments vide their applications filed in March 1983. Vide order dated 12-4-1983 the ITO held that the above objections are be misconceived, unmaintainable and untenable. The above order is described as order under Section 143(2)(a) and 143(3)(b) and, therefore, according to the assessee these orders were to be passed before 31-3-1983 as per limitation prescribed under Section 153 of the Act and, therefore, the orders passed on 12-4-1983 were barred by limitation. The AAC accepted the above contention of the assessee and annulled the order passed by the ITO. Hence, these appeals by the revenue.
2. The ground of appeal in all the five appeals is common as under :
On the facts and in the circumstances of the case, the learned AAC erred in cancelling the order passed by the ITO rejecting the application of the assessee filed in Form No. 6A.
3. Before us, Shri G.P. Gujrati, the learned departmental representative submitted that the orders passed by the ITO on 12-4-1983 cannot be said to be orders of assessment to which period of limitation as prescribed under Section 153 was applicable. The original order of assessment under Section 143(1) was passed on 14-1-1983 (AAC has written 13-1-1983) and the said order was well within the period of limitation prescribed under Section 153. In the order dated 12-4-1983 the ITO has simply rejected the application of the assessee under Section 143(2)(a) and the above cannot be said to be an order of assessment. He drew our attention to Clause (b) of Sub-section (3) of Section 143 and argued that fresh assessment order is to be passed only in a case where the ITO is of the opinion that the assessment made under Section 143(1) is incorrect, inadequate or incomplete in any material respect. Simple rejection of an application of the assessee on Form No. 6A cannot be said to be a fresh assessment. The period of limitation was not applicable to the rejection order passed by the ITO and, therefore, the AAC was wrong in annulling the above order dated 12-4-1983,
4. Shri B.M. Gupta, the learned counsel for the assessee, on the other hand, argued that the assessment order under Section 143(1) was wiped off as soon as application under Section 143(2)(a) is made by the assessee objecting to the above assessment and then the ITO has to complete a fresh assessment under Clause (b) of Section 143(3). The counsel further argued that this is what in fact the ITO has done as is clear from the title of the order which says 'it is an order under Section 143(2)(a) and 143(3)(b) of the Income-tax Act'. Shri Gupta referred to the provisions of Section 153 and said that it bars passing of any order of assessment after two years from the end of the assessment year in which the income was first assessable. The assessment year being 1980-81, all orders of assessment were required to be completed by 31-3-1983 and, thus, the order passed on 12-4-1983 was clearly barred by time. Shri Gupta relied upon the decisions of the Madhya Pradesh High Court in the cases of CIT v. Tej Kumar Sethi (HUF) [1983] 143 ITR 757, Gauri Shankerji Deity v. Union of India [1984] 145 ITR 67, ITO v. V. Ethirajulu Chettiar [1983] 5 ITD 53 (Mad.) and Raja Jagdambika Pratap Narain Singh v. CBDT [1975] 100 ITR 698 (SC). He also drew our attention to Clause (d) added in Section 153(1) by the Taxation Laws (Amendment) Act, 1984 with effect from 1-10-1984 providing for making of an assessment within six months from the end of the month in which application on Form No. 6A is made by the assessee. He drew our attention to the object and notes of the above amendment as contained in [1984] 150 ITR (St.) 11. He, thus, pleaded that the AAC was right in annulling the order dated 12-4-1983 holding it to be an assessment order passed beyond time.
5. We have heard the parties and examined the record produced before us. The only point required to be determined in these appeals is whether the order dated 12-4-1983 can be said to be an assessment order hit by the period of limitation as provided under Section 153. At this stage, we deem it necessary to set out the material provisions of Section 143. The relevant provisions of Section 143 with which we are concerned are as follows :
(1) ** ** ** (2) Where a return has been made under Section 139, and-
(a) an assessment having been made under Sub-section (1), the assessee makes within one month from the date of service of the notice of demand issued in consequence of such assessment, an application to the Income-tax Officer objecting to the assessment, or
(b) ** ** ** the Income-tax Officer shall serve on the assessee a notice requiring him, on a date to be therein specified, either to attend at the Income-tax Officer's office or to produce, or to cause to be there produced, any evidence on which the assessee may rely in support of the return :
** ** ** (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 Income-tax Officer may require on specified points, and after taking into account and all relevant material which he has gathered,-
(a) ** ** **
(b) in a case where an assessment has been made under Sub-section (1), if either such assessment has been objected to by the assessee by an application under Clause (a) of Sub-section (2) or the Income-tax Officer is of opinion that such assessment is incorrect, inadequate or incomplete in any material respect, the Income-tax 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.
Clause (iii) of Sub-section (1) of Section 153 which is applicable in this case reads as under :
(1) No order of assessment shall be made under Section 143 or Section 144 at any time after-
(i) and (ii) ** ** **
(iii) two years from the end of the assessment year in which the income was first assessable, where such assessment year is an assessment year commencing on or after the 1st day of April, 1969 ;
The above Clause (in) of Sub-section (1) of Section 153 bars making of any order of assessment under Section 143 after two years from the end of the assessment year in which income was first assessable. We are, thus, required to determine whether the order dated 12-4-1983 is an order of assessment under Section 143. The ITO has described the above order to be an order under Section 143(2)(a) and 143(3)(a) but the above title may not be conclusive in holding the above order to be an order under Section 143. However, as is evident from the relevant provisions of Section 143 quoted above, when the assessee files an application under Section 143(2)(a) objecting to an assessment made under Section 143(1), it is mandatory for the ITO to issue a notice in terms of Section 143(2). The said provision has used the words 'Income-tax Officer shall serve a notice on the assessee'. After the issue of notice, the ITO is required to make a fresh assessment of total income in terms of Clause (b) of Sub-section (3) of Section 143. In every case where objection is raised by the assessee under Section 143(2)(a), it is mandatory for the ITO to make a fresh assessment. The above assessment made has to be treated as an order of assessment under Section 143 to which provisions of Section 153 are made applicable. The contention of the learned departmental representative that fresh assessment is to be made only where an order of assessment made under Section 143 in the opinion of the ITO is incorrect, inadequate or incomplete in any material respect is misconceived. The above is made applicable only to the cases where notice under Section 143(2)(b) is issued by the ITO with previous approval of the IAC and not to the cases where the assessments made are objected to by the assessee. As observed earlier, in such cases it is mandatory for the ITO to make a fresh assessment under Section 143 to which period of limitation of two years as prescribed under Section 153 is applicable.
6. Our above view is further supported by the amendment brought about in Section 153(1) inserting Clause (d) in the above provision with effect from 1-10-1984. In the explanatory notes given along with the provision, it is stated as under :
Amendment of Section 153 of the Income-tax Act relating to time limit for completion of assessments in certain cases-
18.1 Under Section 153(1) of the Income-tax Act, an order of assessment cannot, ordinarily, be made after the expiry of two years from the end of the assessment year in which the income was first assessable or the expiry of one year from the date of the filing of a return or a revised return, whichever is later. This provision has resulted in a practical difficulty in cases where an order of assessment is made by the Income-tax Officer under Section 143(1) of the Act without requiring the presence of the assessee or the production by him of any evidence in support of the return filed by him. In such cases, the assessee is entitled under Section 143(2)(a) of the Act to make an application within one month to the Income-tax Officer objecting to such assessment. On receipt of an application under this provision, the Income-tax Officer is required to make a fresh assessment after considering the objections raised by the assessee.
18.2 It had come to notice that, in certain cases, where order of assessment under Section 143(1) of the Act was made towards the expiry of the period of limitation laid down in Section 153(1), the Income-tax Officer was not in a position to make a fresh assessment because the period of limitation had expired by the time that the application filed by the assessee under Section 143(2)(a) raising objections against the said assessment order was taken up for consideration by the Income-tax Officer.
18.3 With a view to removing this difficulty, the Amending Act has inserted a new Clause (c) in Sub-section (1) of Section 153 of the Act to secure that, in such cases, the fresh assessment may be made by the ITO within the period of limitation laid down under the existing provisions of Section 153(1) or before the expiry of six months from the end of the month in which an application under Clause (a) of Sub-section (2) of Section 143 of the Act is made by the assessee, whichever is later. The aforesaid amendment takes effect from 1st October, 1984. [Section 28(a) of the amending Act] [1984] 150 ITR (St.) 11.
7. Thus, the above amendment was made to remove the difficulty in making fresh assessments under Section 143 within the prescribed time limit under Section 153. The amendment has come into force with effect from 1-10-1984 whereas the orders were passed on 12-4-1983 to which the above amendment was not applicable. The above orders of assessment passed under Section 143 were clearly barred by time and the AAC was right in annulling the same. We accordingly uphold the decision of the AAC and dismiss these appeals.