Income Tax Appellate Tribunal - Chandigarh
Malwa Cotton Spg. Mills Ltd. vs Assistant Commissioner Of Income-Tax on 11 November, 1994
Equivalent citations: [1995]52ITD433(CHD)
ORDER
J. Kathuria, Accountant Member
1. The main issue in this appeal by the assessee for assessment year 1991-92 is as to whether the Assessing Officer was justified in passing an order under Section 143(1)(b) of the Income-tax Act, 1961.
2. Brief and relevant facts in this regard may first be noted. The assessee is a limited company whose accounting period relevant to assessment year 1991-92 ended on 31-3-1991. The assessee-company filed its return of income on 31-12-1991 declaring total income at Rs. 8,59,54,567. The Assessing Officer processed that return under Section 143(1)(a) of the Act and determined the total income at Rs. 8,59,70,974. In the intimation under Section 143(1)(a) of the Act, the Assessing Officer made two small additions of Rs. 14,722 on account of excess claim under Section 80H and of Rs. 1,685 on account of excess deduction under Section 80HHCofthe Act. The assessee-company filed a revised return on 31-3-1992 declaring total income at Rs. 8,44,42,809. This was also processed by the Assessing Officer under Section 143(1)(a)on 18-5-1992 and the earlier two additions of Rs. 14,722 and Rs. 1,685 were repeated by him. The total income assessed under section I43(1)(a) came to Rs. 8,44,59,216.
3. The Assessing Officer passed an order under Section 143(3) of the Act for assessment year 1990-91 on 30-12-1992 on total income of Rs. 4,28,81,010. On the basis of this order for assessment year 1990-91, the Assessing Officer processed the case of the assessee for assessment year 1991-92 under Section 143(1)(b) of the Act. While passing order under Section 143(1)(b) on 5-2-1993, the Assessing Officer made an addition of Rs. 1,64,62,908 to the total income already assessed under Section 143(1)(a) on 18-5-1992 at Rs. 8,44,59,216. The addition of Rs. 1,64,62,908 was made by withdrawing deductions under Section 80HH (Rs. 73,16,848) and under Section 80-1 (Rs. 91,46,060) in respect of Poanta Sahib unit. It may be mentioned that the assessee-company has its head office at Ludhiana where no manufacturing activity is carried on and has two units at Barnala and Poanta Sahib. It may also be mentioned that no such addition by way of withdrawing deduction under Section 80I1H and under Section 80-1 was made though the matter had been processed twice under Section 143(1)(a).
4. The assessee filed application dated 3-3-1993 under Section 154 of the Act challenging the addition of Rs. 1,64,62,908. The Assessing Officer rejected the assessee's plea vide order dated 26-3-1993 passed under Section 154 of the Act. The learned CIT(A) also upheld the action of the Assessing Officer.
5. Shri G.K. Sood, the learned counsel for the assessee, submitted that when processing under Section 143(1)(a) was done by the Assessing Officer twice, mind was duly applied because two additions of Rs. 14,722 and Rs. 1,685 had been made. It was submitted that the Assessing Officer wrongly assumed jurisdiction under Section 143(1)(b) and illegally withdrew the deductions admissible to the assessee under sections 80HH and 80-1 of the Act in respect of the Poanta Sahib unit. It was submitted that Section 143(1)(b) could be applied only where as a result of an order made under various sections specified under Section 143(1)(b) relating to any earlier assessment year and passed subsequent to the filing of the return, there had been any variation in the carry-forward of loss or deduction or allowance or relief claimed in the return. It was submitted that the first return for assessment year 1991-92 was filed by the assessee on 31 -12-1991 and a revised return on 31 -3-1992. It was also submitted that an order under Section 143(3) for assessment year 1990-91 was passed by the Assessing Officer on 30-12-1992 which was after the filing of the original return and the revised return. It was, however, pointed out that as a result of that order, the total income for assessment year 1990-91 was determined at a positive figure of Rs. 4,28,81,010. It was, therefore, submitted that as a result of the assessment completed under Section 143(3) for assessment year 1990-91 which was after the filing of the return for assessment year 1991-92, there could have been no variation in the carry-forward of loss or deduction or allowance or relief claimed in the return for assessment year 1991-92. It was submitted that the scope and ambit of Section 143(1)(b) was limited and that if for assessment year 1990-91, a particular view had been taken that deductions under sections 80HH and 80-1 were not admissible in respect of a particular unit in the absence of positive income, then it was beyond the scope of Section 143(1)(b). It was pointed out that for making any such addition the correct course was to pass an order under Section 143(3) of the Act.
6. On merits, it was submitted that so far as deduction under Section 80HH was concerned, the matter stood settled in favour of the assessee by the Supreme Court decision in the case of CIT v. Patiala Flow Mills Co. (P.) Ltd. [1978] 115 ITR 640. Our attention was specifically drawn to the discussion at page 646 of the report in which it was observed by the Supreme Court that whatever be the profits or gains of the new industrial undertaking computed for purposes of arriving at the total income chargeable to tax, would have to be taken to be the profits or gains for applying the provisions contained in Section 80J(1) of the Act. It was also pointed out that the Supreme Court further observed that Sub-section (1) of Section 80J does not create a legal fiction that for purposes of applying the provisions contained in that sub-section the profits or gains of the new industrial undertaking shall be computed as if the new industrial undertaking were the only business of the assessee right from the date of its establishment or the losses, depreciation allowance or development rebate in respect of the new industrial undertaking for the past assessment years were not set off against the profits from other businesses. In short, the submission was that language of Section 80-1(6) was not there is Section 80J and since Section 80HH was in part materia with Section 80J, the same provisions, i.e., Section 80-1(6) could not be read into Section 80HH either. It was vehemently argued that on merits, there could be no withdrawal of deduction under Section 80HH simply because there was no positive income in the unit. Similarly, it was submitted that no addition could be made under Section 143(1)(b) even in respect of the assessee's claim under Section 80-1.
7. The learned D.R. strongly relied on the orders of the revenue authorities and submitted that the scope of Sections 143(1)(a) and 143(1)(b) was different. It was pointed out that under Section 143(1)(a) only prima facie adjustments could be made whereas the scope of Section 143(1)(b) was wider. It was, therefore, vehemently argued that as a result of the assessment order passed under Section 143(3) on 30-12-1992 for assessment year 1990-91, the Assessing Officer could withdraw the claims under sections 80HH and 80-1 for assessment year 1991-92 under Section 143(1)(b) of the Act.
8. We have carefully considered the rival submissions as also the facts on record. Before proceeding further with the matter, it would be necessary to examine the scheme of Section 143(1). Earlier, after return of income had been filed, the Assessing Officer could make an assessment under Sub-section (1) of Section 143 without requiring the presence of the assessee or production by him of any evidence in support of the return. Section 143(1) was substituted by the Direct Taxes Laws (Amendment) Act, 1987 w.e.f. 1-4-1989. The section was completely re-cast to provide for a new scheme of assessment wherein the requirement of passing an assessment order in all cases where returns were filed were dispensed with. Under Section 143(1)(a), the Assessing Officer was empowered to make certain adjustments. For instance, any arithmetical error in the return, accounts or documents accompanying it could be rectified. Any loss carried forward, deduction, allowance or relief which on the basis of the information available in such returns etc., was prima facie admissible but which was not claimed in the return had to be allowed. Similarly, any loss carried forward, deduction, allowance or relief claimed in the return which on the basis of the information available in such return etc., was prima facie inadmissible had to be disallowed. It was presumed that the assessee would claim proper deduction, allowance or relief in the return.
9. There could, however, be a situation where the assessee may claim deduction, allowance or relief on the basis of certain circumstances which may undergo a change when an earlier assessment was completed by the Assessing Officer after the submissions of the return for the subsequent year. In such a situation, where for instance, the loss claimed by an assessee at a particular amount had been reduced as a result of an earlier assessment completed after the filing of the return for the subsequent assessment year, Section 143(1)(b) provided that where as a result of orders passed under various sections specified in Section 143(1)(b) subsequent to the filing of the return, there was variation in the carry forward of loss, deduction, allowance or relief claimed on the return, then the Assessing Officer could process the return under Section 143(1)(b) of the Act and make the necessary changes in the total income.
10. Sub-section (2) of Section 143 further provided that when the Assessing Officer considered it necessary or expedient to verify the correctness or completeness of the return or to ensure that the income had not been understated or the loss declared was not excessive or the tax had not been underpaid, he shall serve on the assessee a notice either to attend his office or to produce on a date specified any evidence on which the assessee may rely in support of the return. Where a notice under Section 143(2) was issued, the assessment could be made under Section 143(3) or under Section 144 of the Act.
11. This, in brief, is the broad outline of the new scheme of assessment with effect from 1 -4-1989. It will at once be seen that under both Sections 143(1)(a) and 143(1)(b), there could be adjustment of loss carried forward, deduction, allowance or relief claimed. While Section 143(1)(a) visualised the prima facie adjustments being made, Section 143(1)(b) could also be invoked where there had been a variation in any loss carried forward, deduction, allowance or relief as a result of an order for an earlier assessment year passed subsequent to the filing of the return for the succeeding year. There is no doubt, that in the instant case, the assessment order under Section 143(3) for assessment year 1990-91 was passed by the Assessing Officer on 30-12-1992 which was much after the filing of the return for assessment year 1991-92. If Section 143(1) could be legitimately applied, then the subsequent order dated 30-12-1992 for assessment year 1990-91 did give the Assessing Officer the necessary jurisdiction to do the processing under Section 143(1)(b). But before Section 143(1)(b) could be applied, the real thing to be seen is as to whether there has been any variation in the brought forward loss, or relief or allowance etc. We have already noted above that as per order passed on 30-12-1992 for assessment year 1990-91, the total income of the assessee-company was determined at Rs. 4,28,81,010 which was a positive figure. There was thus no variation in the brought forward of loss as a result of which action could be taken under Section 143(1)(b) for assessment year 1991-92. Once the basic condition of variation in loss, relief etc., is not fulfilled, then no adjustment can be made under Section 143(1)(b) of the Act. and no intimation issued to the assessee. In such a situation where a different view is taken in an earlier assessment year and that view the Assessing Officer wants to adopt in subsequent year, then the right course would be not to take resort to Section 143(1)[) but to issue a notice under Section 143(2). It is under Section 143(2) that the Assessing Officer with a view to ensuring that the income has not been understated or the loss declared is not excessive or tax has not been underpaid, he can serve upon the assessee a notice and then make the assessment under Section 143(3} or under Section 144 of the Act. Section 143(2) can also be resorted to where the Assessing Officer considers it necessary or expedient to verify the correctness or completeness of the return. This, however, cannot be allowed in Section 143(1)(b)of the Act, The scope of Section 143(1)(b) is, therefore, limited. This can be illustrated by an example. Supposing in the return for assessment year 1991-92, the assessee claims a brought forward loss of Rs. 10 lacs. The assessment for the preceding year, namely, assessment year 1990-91, is finalised after the filing of the return for assessment year 1991-92 and the carried forward loss is reduced to Rs. 5 lacs. In such a situation, the Assessing Officer would be justified in making a suitable adjustment in the total income of the assessee for assessment year 1991-92 by allowing the brought forward loss at Rs. 5 lacs instead of the loss of Rs. 10 lacs claimed in the return. This action could be legitimately taken by the Assessing Officer under Section 143(1)(b) of the Act. But if there is no variation in the brought forward loss or other reliefs or claims, then under Section 143(1)(b) no adjustment could be made by the Assessing Officer for any change of view. For finding out the correctness or completeness of the return or for other purposes stated in Section 143(2), the Assessing Officer could legitimately issue a notice under Section 143(2) to the assessee and then pass the necessary order under Section 143(3) or under Section 144 but there could be no processing under Section 143(1)(b) of the Act.
12. We are, therefore, of the considered opinion that in the present case, there has been no variation in the brought forward loss, deduction, allowance or relief, etc., which should necessitate justify the taking of action under Section 143(1)(b) for assessment year 1991-92. We do not wish to go into the merits of the case though much could be said in favour of the assessee particularly with regard to the claim under Section 80HH. Suffice it to say that on the facts and in the circumstances of the case, the Assessing Officer was not justified in invoking the provisions of Section 143(1)(b) to make an addition of Rs. 1,68,62,908. We, therefore, hold that the assessee's income under Section 143(1)(a) would stand at Rs. 8,44,59,216 as per Assessing Officer's order dated 18-5-1992 and not at Rs. 10,09,22,124 as per the order dated 5-2-1993 under Section 143(1)(b) of the Act.
13. In the result, the appeal is allowed.