Madras High Court
The Commissioner Of Income Tax vs M/S. Shamlal Bajaj on 8 October, 2012
Author: Chitra Venkataraman
Bench: Chitra Venkataraman, K.Ravichandrabaabu
In the High Court of Judicature at Madras Dated: 08.10.2012 Coram The Honourable Mrs.JUSTICE CHITRA VENKATARAMAN and The Honourable Mr.JUSTICE K.RAVICHANDRABAABU Tax Case (Appeal) No.2395 of 2006 The Commissioner of Income Tax Salem ... Appellant Vs. M/s. Shamlal Bajaj 106, Peramanur Main Road Salem 636 007 ... Respondent Tax Case (Appeal) is against the the order of the Income Tax Appellate Tribunal, SMC III 'D' Bench, Chennai dated 18.11.2005 passed in I.T.A.No. 1386/ Mds/ 2004 for the assessment year 1997-98. For Appellant : Mr.J.Narayanaswamy For Respondent : No appearance ------- JUDGMENT
(Judgment of the Court was delivered by CHITRA VENKATARAMAN,J. ) The Revenue is on appeal as against the order of the Tribunal relating to assessment year 1997-98 by raising the following substantial question of law:-
"Whether the excess claim of deduction, which was held as could not be adjusted under Section 143(1)(a) proceedings, could empower the Assessing Officer under Section 147 to reopen the assessment for the purpose of disallowing the excess relief of deduction?"
2. In spite of service of notice on the assessee, there is no representation either in person or through counsel. After hearing learned counsel for the Revenue, following order is passed.
3. It is seen from the discussion in the assessment order that originally the Officer considered the merits of the claim under Section 143(1)(a) of the Income Tax Act and made adjustments thereby disallowing the claim of deduction under Section 80HHC. The assessee went on appeal before the Commissioner of Income Tax (Appeals) and on the intimation sent under Section 143(1)(a) of the Act, the assessee submitted that there could not be any prima facie adjustment on the disputed question of law and on fact. The Commissioner of Income Tax (Appeals) allowed the assessee's claim on 24.3.2000, thereby set aside the intimation. As far as the proceedings under Section 147 of the Act is concerned, the issue was taken up by issuing notice under Section 148 of the Act on 23.6.2000. Since there was no response from the assessee, notice under Section 143(2) of the Act was issued on 1.3.2001. Since the assessee could not produce necessary document in support of his claim, the assessment was completed. Aggrieved by this, the assessee went on appeal before the Commissioner of Income Tax (Appeals), who agreed with the assessee that there was no ground for reopening the assessment. There was no new fact recorded permitting the Assessing officer to take up reassessment proceedings. In the circumstances, the assessee's appeal was allowed. Aggrieved by the same, the Revenue went on further appeal before the Tribunal, who held that there was no new information which had come into possession of the Assessing Officer for reopening the assessment, thereby rejected the Revenue's appeal. Aggrieved by this, the Revenue is on appeal before this Court.
4. Learned Standing counsel appearing for the Revenue placed reliance on the decision of the Apex Court reported in 291 ITR 500 ASST. CIT v. RAJESH JHAVERI STOCK BROKERS P. LTD, and submitted that the law declared by the Apex Court in the said decision covers the issue on hand. He pointed out that since the proceedings under Section 143(1)(a) of the Act is only in the nature of intimation, the Revenue has the jurisdiction to assess the assessee's case as an escaped assessment falling for consideration in the main provision under Section 147 of the Act and proviso has no relevance herein.
5. A reading of Section 147 of the Act reveal that it concerns not only about the reassessment, but it also concerns about the escaped assessment being brought under Section 147 of the Act, as original assessment, which means the assessment hitherto not having been done under the regular assessment procedure under Section 143, the Officer could resort to original assessment as an escaped assessment; such assumption of jurisdiction would arise in a case where, the assessee fails to make a return under Section 139 or fails to disclose fully and truly all material facts necessary leading to an escaped assessment. Sub section (b) of Section 147 provides for a case where, even when there has been no omission on the part of the assessee while making or disclosing all material facts, consequent on information in his possession leading to formation of believe that the income chargable to tax has escaped assessment, the officer could take up proceedings for assessing or reassessing such income or recompute the loss of depreciation subject to the provisions of Section 148 to 153 of the Act.
6. In the decision reported in 291 ITR 500 ASST. CIT v. RAJESH JHAVERI STOCK BROKERS P. LTD, after elaborately considering the amendment to Section 143(1)(a) of the Act, the Apex Court pointed out that the intimation under Section 143(1)(a) cannot be treated to be an order of assessment. Under Section 143(1)(a) as it stood with effect from April 1, 1989, under proviso to Section 143(1)(a) only arithmetical errors in the return, the claim which are prima facie inadmissible alone were allowed. Thus what was possible was correction of errors apparent on the basis of the documents accompanying the return. The intimation made was deemed to be a demand notice under Section 156. It however enabled the Officer to proceed under Section 143(2) of the Act. During the period from 1.4.98 to 31.5.1999 sending an intimation was mandatory. With effect from April 1, 1998, the second proviso to Section 143(1)(a) was substituted by the Finance Act, 1997, which was operative till June 1, 1999. The requirement was that an intimation was to be sent to the assessee whether or not any adjustment had been made under the first proviso to Section 143(1) and notwithstanding that no tax or interest was found due from the assessee concerned. Between April 1, 1998 and May 31, 1999, sending of an intimation under Section 143(1)(a) was mandatory. Under the newly substituted Section 143(1) of the Act with effect from 1.6.99, except as provided in the section, the acknowledgement of the return shall be deemed to be an intimation under Section 143(1)(a) of the Act, where no tax is payable by the assessee or no refund is due to him. The acknowledgement is done mostly by ministerial staff. The intimation sent to the assessee under Section 143(1)(a) was deemed to be a notice of demand under Section 156 of the Act. Therefore, there being no assessment under Section 143(1)(a) of the Act, the question of change of opinion does not arise for the purpose of Section 147 of the Act. Referring to Section 147 of the Act, both prior to 1987 and post 1987, the Apex Court pointed out that under the substituted provision, with effect from 1987, if the Assessing Officer has reason to believe that income has escaped assessment it confers jurisdiction on the Assessing Officer to reopen the assessment. Thus, the case herein is covered by the main provision and not the proviso. So long as the ingredients of Section 147 are fulfilled, the Assessing Officer is free to initiate proceeding under Section 147 and failure to take steps under Section 143(3) will not render the Assessing Officer powerless to initiate reassessment proceedings even when intimation under Section 143(1) had been issued.
7. Thus, applying the law declared by the Apex Court, on the admitted facts, it is seen that prima facie adjustments were made under Section 143(1-A) of the Act on a debatable issue, which was subsequently set aside by the Commissioner and thereafter there being no regular assessment rightly, the Officer assumed jurisdiction under Section 147 of the Act as a case of an escaped assessment for making the original assessment under Section 147 of the Act.
8. In the light of the facts, we accept the case of the Revenue and thereby, we set aside the order of the Tribunal and allow the Tax Case (Appeal). No costs.
bg To
1. The Commissioner of Income Tax, Salem
2. The Income Tax Appellate Tribunal, SMC III 'D' Bench, Chennai