Madhya Pradesh High Court
State Bank Of Indore vs Commissioner Of Income-Tax on 6 November, 1987
JUDGMENT G.G. Sohani, J.
1. By this reference under Section 256(1) of the Income-tax Act, 1961 (hereinafter referred to as "the Act"), the Income-tax Appellate Tribunal, Indore Bench, has referred the following question of law to this court for its opinion :
"Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the assessment order dated December 16, 1981, made by the Income-tax Officer was a provisional assessment under Section 141A of the Income-tax Act, 1961, and no appeal was maintainable against it ? "
2. The material facts giving rise to this reference, briefly, are as follows:
The assessee is a subsidiary of the State Bank of India. For the assessment year 1981-82, the assessee submitted its return. As according to the return filed by the assessee, there was a business loss of Rs. 7,29,640 while the amount of tax paid during the assessment year in question by or on behalf of the assessee was Rs. 56,07,084, the assessee submitted an application on June 5, 1981, for refund of Rs. 56,07,084. The Income-tax Officer proceeded to make a provisional assessment under Section 141A of the Act of the sum refundable to the assessee. For making provisional assessment of the amount refundable to the assessee, the Income-tax Officer sought certain information from the assessee. The Income-tax Officer thereafter passed an order under Section 141A on December 16, 1981. By that order, the Income-tax Officer disallowed certain deductions claimed by the assessee on the ground that those deductions were inadmissible. The assessee was accordingly provisionally held entitled by way of refund to the amount of Rs. 40,48,573. Aggrieved by that order, the assessee preferred an appeal before the Commissioner of Income-tax (Appeals). It was urged on behalf of the assessee that though the order passed by the Income-tax Officer purported to be one under Section 141A of the Act, the order, in fact, was one under Section 143(3) of the Act and that the appeal was, therefore, competent. The Commissioner held that under the provisions of Section 141A of the Act, it was incumbent on the part of the Income-tax Officer to make certain adjustments within the framework of that provision and if for making those adjustments, the Income-tax Officer called for certain information from the assessee, the order passed by the Income-tax Officer cannot be held to be an order passed under the provisions of Section 143(3). The Commissioner further held that as an appeal from an order under Section 141A of the Act was barred by Sub-section (6) of Section 141A, the appeal preferred by the assessee was not competent. In this view of the matter, the Commissioner dismissed the appeal. The assessee thereupon filed a further appeal before the Tribunal which dismissed the appeal affirming the view of the Commissioner that no appeal lay against the provisional assessment made by the Income-tax Officer under Section 141A of the Act. Aggrieved by that order, the assessee sought reference and it is at the instance of the assessee that the aforesaid question of law has been referred to this court for its opinion.
3. Shri Palkhivala, learned counsel for the assessee, contended that the order passed by the Income-tax Officer purporting to be one under Section 141A of the Act was in reality an order under Section 143(3) of the Act and an appeal was, therefore, competent. It was contended that the deductions disallowed by the Income-tax Officer could only have been properly disallowed while making an assessment under Section 143(3) of the Act and that reference to a wrong provision of law by the Income-tax Officer in passing the impugned order should not be considered to be decisive in determining as to whether the impugned order was passed under Section 141A or under Section 143(3) of the Act. It was, therefore, urged that the Tribunal was not justified in holding that the order passed by the Income-tax Officer was not appealable.
4. In reply, it was contended on behalf of the Revenue that the order passed by the Income-tax Officer on December 16, 1981, was merely a provisional order of assessment for refund under the provisions of Section 141A of the Act; that regular assessment under Section 143(3) was made by the Income-tax Officer by his order passed on March 20, 1984, and that the assessee had preferred an appeal from that order before the Commissioner of Income-tax (Appeals) and a further appeal before the Tribunal. It was contended that the Tribunal was right in holding that no appeal lay from the order of provisional assessment for refund passed by the Income-tax Officer in view of the provisions of Sub-section (6) of Section 141A of the Act.
5. Now, before we proceed to appreciate the contentions advanced by learned counsel for the parties, it would be useful to refer to the relevant provisions of Section 141A of the Act.
" 141A. Provisional assessment for refund.--(1) Where a return has been furnished under Section 139 and the assessee claims that the tax paid or deemed to have been paid under the provisions of Chapter XVII-B, or Chapter XVII-C, exceeds the tax payable on the basis of the return and the accounts and documents accompanying it, the Income-tax Officer, if he is of the opinion that the regular assessment of the assessee is not likely to be made within six months from the date of furnishing of the return, shall make in a summary manner within the said six months a provisional assessment of the sum refundable to the assessee, after making such adjustments to the income or loss declared in the return as are required to be made under Sub-section (2) with reference to such return, accounts and documents, and for the purposes of the adjustments referred to in Clause (iv) of Sub-section (2), also with reference to the records of the assessments, if any, of past years.
(2) In making any assessment under this section, the Income-tax Officer shall make the following adjustments to the income or loss declared in the return, that is to say, he shall-
(i) rectify any arithmetical errors in the return, accounts and documents referred to in Sub-section (1);
(ii) allow any deduction, allowance or relief which, on the basis of the information available in such return, accounts and documents, is, prima facie, admissible, but is not claimed in the return;
(iii) disallow any deduction, allowance or relief claimed in the return which, on the basis of the information available in such return, accounts and documents, is, prima facie, inadmissible ; ...
(6) There shall be no right of appeal against a provisional assessment made under Sub-section (1)."
6. In view of the aforesaid provisions, the short question for consideration is to determine the nature of the impugned order passed by the Income-tax Officer. Was it an order which could be passed and was passed under Section 141A of the Act ?
7. It is not disputed that on March 20, 1984, an order of assessment was passed by the Income-tax Officer under Section 143(3) of the Act and that the appeals from that order have been entertained by the authorities concerned. It is, however, strenuously contended that the order passed on December 16, 1981, by the Income-tax Officer could not be held to be an order under Section 141A of the Act, that it was, in fact, an order under Section 143(3) of the Act and that an appeal from that order was competent.
8. It is well-settled that reference to a particular provision of law by the Income-tax Officer would not be decisive if the source of power is referable to another provision of law under which the order in question could have been properly passed. Let us, therefore, examine how the order dated December 16, 1981, come to be passed by the Income-tax Officer.
9. Now, the assessee after filing its return for the assessment year 1981-82, submitted an application on June 5, 1981, for refund on the ground that the tax paid by the assessee exceeded the tax payable on the basis of the return. When such an application is submitted, the. Income-tax Officer is empowered, under Section 141A of the Act, to make, in a summary manner, a provisional assessment of the sum refundable to the assessee, after making such adjustments as are required to be made under Sub-section (2). In making these adjustments, the Income-tax Officer is empowered to disallow certain deductions claimed in the return if such deductions are prima facie inadmissible. Now, the view taken by the Income-tax Officer in a given case that a certain deduction claimed in the return is prima facie inadmissible, may be erroneous. But, can an order passed by the Income-tax Officer under Section 141A of the Act be held to be an order of regular assessment made under Section 143(3) merely because the view taken by the Income-tax Officer with regard to inadmissibility of certain deductions, as provided by Clause (iii) of Subsection (2) of Section 141A of the Act, is held to be erroneous?
10. It was contended that the provisional order of assessment for refund has got to be made strictly on the basis of the assessee's return. Our attention was invited to the decision in Jaipur Udyog Limited v. CIT [1969] 71 ITR 799 (SC). That decision, however, dealt with the case of provisional assessment under Section 141 of the Act, which has been deleted by the Taxation Laws (Amendment) Act, 1970. The provisional assessment under Section 141 as it stood, had to be made strictly on the basis of the assessee's return. It was virtually an assessment on admission. Under that provision, the Income-tax Officer had no power, as held by the Supreme Court in Jaipur Udyog Ltd.'s case [1969] 71 ITR 799 (SC), to make a provisional assessment by holding that certain claims made by the assessee were not justified according to law. But Section 141A of the Act empowers the Income-tax Officer to make certain adjustments, as provided by Sub-section (2) of Section 141A for provisionally determining the sum refundable to the assessee. Even assuming that the Income-tax Officer had erroneously disallowed certain deductions while passing the order of provisional assessment of the sum refundable to the assessee, that fact would not convert an order under Section 141A of the Act into an order of assessment under Section 143(3) of the Act. An erroneous order of provisional assessment of the sum refundable to the assessee made under Section 141A will not bring it within the purview of Section 143(3) of the Act, so as to make it appealable.
11. It was also contended that under Section 246(n) of the Act, an order under Section 237 of the Act was appealable and that the order passed by the Income-tax Officer in the instant case must be held to be an order under Section 237. The contention cannot be upheld. The claim for refund under Section 237 for any assessment year is allowed only after determination of the amount with which the assessee is properly chargeable under the Act for the year in question. In the instant case, that stage did not arise on June 5, 1981, when an application for refund was made. That application could be dealt with, and was dealt with, under Section 141A of the Act. By the impugned order passed on December 16, 1981, the Income-tax Officer made a provisional assessment for refund under Section 141A of the Act. The order passed by the Income-tax Officer on December 16, 1981, cannot, therefore, be held to be an order under Section 237 of the Act. In our opinion, the Tribunal was right in holding that the order dated December 16, 1981, made by the Income-tax Officer was a provisional order of assessment for refund under Section 141A of the Act and that no appeal was maintainable from that order in view of the provisions of Sub-section (6) of Section 141A of the Act.
12. For all these reasons, our answer to the question referred to this court is in the affirmative and against the assessee. In the circumstances of the case, parties shall bear their own costs of this reference.