Income Tax Appellate Tribunal - Amritsar
Gurmail Singh Gurjit Singh & Co. vs Income-Tax Officer on 18 March, 1997
Equivalent citations: [1997]62ITD101(ASR)
ORDER
B.S. Saluja, Judicial Member
1. The assessee is in appeal against the order of the CIT, Jalandhar dated 21-3-1996 made under section 263 of the Income-tax Act, 1961.
2. In this case, the assessment had been completed under section 143(1)(a) of the Income-tax Act at returned income of Rs. 56,320.
2.1 The Learned CIT found on scrutiny of the assessment records that the assessment was made without invoking the provisions of section 44AC of the Income-tax Act, 1961. He, therefore, held that the assessment order was erroneous, insofar as it was prejudicial to the interests of the revenue. He issued a show-cause notice under section 263. On the date of hearing, Shri V.P. Vijh, C.A., attended and the case was discussed by the learned CIT with him. He also filed a written reply dated 18-3-1996. In the said reply, it was submitted that there was no error in the order of the Assessing Officer dated 29-7-1994 and the reported decisions relied upon by the learned CIT, in fact, supported the order made by the Assessing Officer. A reference was made to the decision of the Andhra Pradesh High Court in the case of A. Sanyasi Rao v. Government of Andhra Pradesh [1989] 178 ITR 31/43 Taxman 271 and conclusions arrived at by the Hon'ble High Court. The broad conclusions were that Parliament was competent to enact section 44AC and 206C and that section 206C did not suffer from any constitutional infirmity and was perfectly valid. Section 44AC was not an independent provision and it did not dispense with regular assessment accordance with the provisions of the Income tax Act and that section 44AC was merely an adjunct to and explains the provisions in section 206C. A regular assessment has to be made in respect of an assessee dealing in specific goods in accordance with the provisions of sections 28 to 43C.
2.2 A reference was also made to the decision of the Hon'ble Supreme Court in the aforesaid case given on 13-2-1996 and stress was laid on the following portion of the judgment :
"Considered in the light of the practical difficulties envisaged by the revenue to locate the persons and to collect the tax due in certain traders, if the Legislature in its wisdom thought that it will facilitate, the collection of the tax due from such specified traders on a "presumptive basis", there is nothing in the said legislative measure to offend Article 14 of the Constitution. In the light of the legal principles stated above, we are unable to hold that section 44AC read with section 206C is wholly hit by Article 14 of the Constitution of India.
However, the denial of relief provided by sections 28 to 43C to the particular business of trades dealt with in section 44AC calls for a different consideration. Even according to revenue the provisions (sections 44AC and 206C) are only "machinery provisions". If so, shy should the normal reliefs afforded to all assessee's be denied to such traders? Prima facie, all assessees similarly placed under the Income-tax Act are entitled to equal treatment. In the matter of granting various reliefs provided under sections 28 to 43C the assessees carrying on business are similarly placed and should there be a law, negativing such valuable reliefs to a particular trade or business, it should be shown to have some basis and fair and rational. It has not been shown as to why the persons carrying on business in the particular goods specified in section 44AC are denied the reliefs available to others. No plea is put forward by revenue that those trades are distinct and different even for the grant of reliefs under sections 28 to 43C of the Act. The denial of such reliefs to trades specified in section 44AC, available to other assessees, has no nexus to the object sought to be achieved by the Legislature. To this extent it appears to us that the non-obstante clause in section 44AC denying such reliefs has no basis and so unfair and arbitrary and equality of treatment is denied to such persons, necessitating grant of appropriate relief (see Royappa v. State of Tamil Nadu AIR 1974 SC 555, Maneka Gandhi v. Union of India AIR 1978 SC 597, Ajay v. Khalid AIR 1981 SC 487 and other cases)."
The learned CIT considered the aforesaid reply in the light of the judgments cited and ultimately directed the Assessing Officer "to modify the said assessment order and re-compute the taxable income of the assessee in the light of the provisions of section 44AC read with sections 28 to 43C". The assessee is aggrieved.
3. The learned counsel for the assessee, Shri V.P. Vijh, referred to the basic facts of the case and submitted that there was nothing wrong with the assessment as originally framed by the Assessing Officer under section 143(1)(a). He, therefore, referred copiously to the decisions of the Hon'ble Supreme Court in the case of Union of India v. A. Sanyasi Rao [1996] 219 ITR 330/85 Taxman 321. The thrust of the submissions made by Shri Vijh is as under :-
(a) The object of sections 44AC and 206C was to enable the revenue to collect the legitimate dues of the State from persons carrying on particular trade in view of the peculiar difficulties experience in the past. In order to prevent evasion of tax legitimately due on certain incomes, sections 44AC and 206C were enacted so as to facilitate the collection of tax on that income, which is bound to arise or accrue, at the very inception itself or at an anterior stage.
(b) The aforesaid provisions ar akin to advance-tax and that the standard by which the amount of tax is measured, being the purchase price, will not in any way alter the nature and basis of levy, i.e., the tax imposed is a tax on income. It cannot be labelled as a tax on purchase of goods.
(c) The provisions of section 44AC read with section 206C are only machinery provisions and not charging sections and that what is brought to tax, though levied with reference to the purchase price and at an estimate, is nonetheless income liable to be taxed under the Income-tax Act.
(d) The charging sections under the Income-tax Act are sections 4 to 9 and that the profits and gains of business or profession have to be computed under sections 28 to 43C.
(e) The provisions of sections 44AC and 206C do not dispense with the procedure of regular assessment. In view of the foregoing, the learned counsel emphasised that the order of the learned CIT is bad in law as the decision of the Hon'ble Supreme Court has not been properly appreciated and that the assessment properly made under section 143(1)(a) has been unnecessarily disturbed.
3.1. The learned D.R. relied heavily on the orders of the tax authorities.
3.2. We have carefully considered the rival submissions on this issue and have also perused the order of the learned CIT in the light of the aforesaid judgment of the Hon'ble Supreme Court in A. Sanyasi Rao's case (supra). It is observed that the basic is sue before the Hon'ble Supreme Court was as to whether the provisions of sections 44AC and 206C of the Income-tax Act were constitutional and were validly enacted. The Hon'ble Supreme Court held that the provisions were valid and there was nothing in the said legislative measure to offend Article 14 of the Constitution and that the said provisions were not hit by Article 14 of the Constitution. In the process, the Hon'ble Supreme Court observed as follows :-
"However, the denial of relief provided by sections 28 to 43C to the particular business or trades dealt with in section 44AC calls for a different consideration. There is no reason why the persons carrying on business in the particular goods specified in section 44AC are to be denied the reliefs available to others. The denial of such reliefs to trades specified in section 44AC, available to other assessees, has no nexus to the object sought to be achieved by the Legislature. Hence, to the extent the non obstante clause in section 44AC excludes the provisions of sections 28 to 43C (applicable to all assessees), the provisions are unreasonable. Section 44AC is a valid piece of legislation and is an adjunct to and explanatory to section 206C. It does not dispense with the regular assessment, as provided in accordance with sections 28 to 43C of the Act."
It may be observed from the above that the Hon'ble Supreme Court have laid down that there is no reason why persons carrying on business in particular goods specified in section 44AC should be denied the reliefs available to others vis-a-vis sections 28 to 43C of the Income-tax Act. The Hon'ble Supreme Court have further observed that the denial of such reliefs to trades specified in section 44AC, available to other assessees, has no nexus to the object sought to be achieved by the Legislature. They have, therefore, held that the provisions of section 44AC, "to the extent the non obstante clause in section 44AC excludes the provisions of sections 28 to 43C (applicable to all assessees) are unreasonable". They have further held that section 44AC is a valid piece of legislation and is an adjunct and explanatory to section 206C and that it does not dispense with regular assessment as provided in accordance with sections 28 to 43C of the Act. In this connection, we may also mention that the Hon'ble Supreme Court have referred to the decision of the Andhra Pradesh High Court in the case of A. Sanyasi Rao (supra) at page 357 of the judgment. The Hon'ble Supreme Court has observed that in the said case the Andhra Pradesh High Court had observed that it does not dispense with the regular assessment altogether. After the tax is collected in the manner provided by section 206C a regular assessment will be made where the profits and gains of the business in specified goods will be ascertained in accordance with sections 28 to 43C. The Hon'ble Supreme Court have concurred with the aforesaid conclusion of the Andhra Pradesh High Court on this aspect. In view of the foregoing, we feel that the learned CIT was justified in directing the Assessing Officer to recompute the taxable income of the assessee in the light of the provisions of section 44AC read with section 28 to 43C, as the assessment made under section 143(1)(a) cannot be called a regular assessment in view of the expression "regular assessment" defined in section 2(40) of the Income-tax Act amended by the Finance Act, 1990 w.e.f. 1-4-1989. In view of the said definition, regular assessment means assessment made under sub-section (3) of section 143 or section 144. In this connection, reference may also be made to the Explanation inserted under section 143 of the Income-tax Act by the Finance (No. 2) Act, 1991 w.e.f. 1-10-1991, which provides that an intimation sent to the assessee under sub-section (1) or sub-section (1B) shall be deemed to be an order for the purpose of sections 246 and 264. However, the intention of the said Explanation was only to provide for appeal against an order made under section 143(1)(a). Thus, the order of the learned CIT is confirmed.
4. In the result, the appeal of the assessee is dismissed.