Allahabad H.C : The intimation issued under section 143(1)(a) is bad in law without appreciating that intimation under section 143(1)(a) was issued in respect of the revised return whereas the notice under section 143(2) was issued in respect of the original return prior to the filing of the revised return by the respondent

High Court Of Allahabad

CIT vs. Sahara India

Assessment Year : 1996-97

Section : 143(1)(A), 254

Devi Prasad Singh And Dr. Satish Chandra, JJ.

IT Appeal No. 36 Of 2005

July 22, 2011

JUDGMENT

Dr. Satish Chandra, J. – The present appeal is filed under section 260A of the Income-tax Act, 1961, against the order dated December 9, 2004, passed by the Income-tax Appellate Tribunal, Lucknow, in I. T. A. No. 189/Alld/2000 ; I. T. A. No. 254/Alld/2000 and CO No. 17/Luc/2003 for the assessment year 1996-97 whereby, the Tribunal, vide its impugned order has admitted the following additional ground and allowed relief to the assessee accordingly :

“That the learned Assessing Officer is not justified in passing the order of intimation under section 143(1)(a) of the Income-tax Act subsequent to issuance of notice under section 143(2) of the Income-tax Act for regular assessment.”

2. The Tribunal in its order dated December 9, 2004, observed that :

“The learned counsel for the assessee has also filed before us a copy of notice under section 143(2) dated March 11, 1997, and pointed out that the intimation under section 143(1)(a) was issued on December 14, 1998, i.e., after the issuance of notice under section 143(2), which is bad in law in view of the decision of the hon’ble Supreme Court in [2003] 260 ITR 84 (SC) in the case of CIT v. Gujarat Electricity Board wherein it has been held that it is not open to the Revenue to issue intimation under section 143(1)(a) of the Income-tax Act after the notice for regular assessment is issued under section 143(2). The additional ground raised by the assessee being purely legal in nature is admitted. In view of the decision of the hon’ble Supreme Court, the intimation issued under section 143(1)(a) being bad in law, is cancelled.

In the result, the appeal filed by the assessee is allowed and the appeal filed by the Department is dismissed.”

3. Being aggrieved, the Department has filed the present appeal raising the following substantial question of law :

“Whether the hon’ble Income-tax Appellate Tribunal has erred in law in holding that the intimation issued under section 143(1)(a) is bad in law without appreciating that intimation under section 143(1)(a) was issued in respect of the revised return whereas the notice under section 143(2) was issued in respect of the original return prior to the filing of the revised return by the respondent.”

4. The brief facts of the case are that, in the instant case, the original return of income was filed on January 31, 1997, declaring the total income of Rs. 6,97,59,206. Thereafter, the assessee filed a revised return on March 30, 1998, declaring the loss of Rs. 74,97,579 in which expenses amounting to Rs. 8,14,55,626 were further claimed and in respect of the said claim, the assessee, vide letter dated March 30, 1998, clarified that the necessity of revising the return has arisen as during the course of finalization of return for the assessment year 1997-98, it transpired that the expenses totalling to Rs. 8,14,55,626 relating to and which accrued for the previous year relevant to the assessment year 1996-97, have been paid and accounted for in the subsequent year and as per the mercantile system of accounting, the same are allowable in the assessment year 1996-97 and, as such, the claim thereof has been made in the revised return. The revised return was processed under section 143(1)(a) of the Act on December 14, 1998, on a total income of Rs. 9,86,85,952 by treating the status of the assessee as an association of persons under section 185 and also making certain prima facie adjustment in the return of negative income.

5. Not being satisfied, the assessee has filed an appeal before the Commissioner of Income-tax (Appeals)-II, Lucknow, who has allowed the appeal, vide its order dated December 13, 1999, for the assessment year under consideration. Being aggrieved, both the parties have filed appeals before the Tribunal, where the Tribunal has admitted the abovementioned additional ground and allowed the claim of the assessee.

6. With this background, Sri D. D. Chopra, learned counsel for the appellant, submits that the Tribunal has not appreciated the decision of the hon’ble Supreme Court in the case of CIT v. Gujarat Electricity Board [2003] 260 ITR 84/129 Taxman 65, which is distinguishable from the facts of the case of the assessee. In the case of the assessee, notice under section 143(2) was issued by the Assessing Officer against the original return and not after filing of the revised return.

7. In the case of Gujarat Electricity Board (supra), it has been observed by the hon’ble Supreme Court that it is not open to the Revenue to issue intimation under section 143(1)(a) of the Act after the notice for regular assessment is issued under section 143(2) of the Act. The Legislature intended that where the summary procedure under section 143(1) has been adopted, there should be scope available for the Revenue, either suo motu or at the instance of the assessee, to make a regular assessment under section 143(2). The converse is not available ; a regular assessment proceeding having been commenced under section 143(2), there is no need for a summary proceeding under section 143(1)(a) of the Act.

8. Learned counsel also submits that the order passed by the Income-tax Appellate Tribunal is erroneous for the reason that the Tribunal has admitted the additional ground raised by the assessee on the plea of the same being purely legal and allowing the appeal in favour of the assessee on the basis of the same very additional ground. The Tribunal has decided the additional ground on the merits for the first time by itself, which is not desirable as per the ratio laid down in the case of CIT v. Tollaram Hassomal [2008] 298 ITR 22/[2006] 153 Taxman 532 (MP).

9. He further submits that the Tribunal has failed to appreciate that the effect of filing the revised return is that the original return loses its sanctity. Once the original return is withdrawn or is substituted by filing a valid revised return, the natural consequence is that the earlier return would be effaced or obliterated for all purposes under the Act as per the ratio laid down in the case of CIT v. Mangalore Chemicals & Fertilizers Ltd. [1991] 191 ITR 156/59 Taxman 508 (Karn). Lastly, he made a request to set aside the impugned order passed by the Income-tax Appellate Tribunal.

10. On the other hand, Sri Amit Shukla, learned counsel for the assessee, relied on the Tribunal’s order by stating that the additional ground was a legal ground, which was rightly adjudicated by the Tribunal. For this purpose, he relied on the ratio laid down in the case of CIT v. Mohd. Ayub & Sons Agency [1992] 197 ITR 637 (All), where it was observed that if such a legal issue has been raised, it is not only the mandate of law to admit such ground/plea but also to adjudicate, if there is no requirement for investigation of facts.

11. He further submits that the revised return was a non est return as the return can be revised only if the original return has been filed under section 139(1) and not under section 139(4) of the Act. In the instant case, the revised return was filed on March 30, 1998, which was processed under section 143(1)(a) of the Act. The regular assessment order was passed on April 23, 1999.

12. According to the learned counsel for the assessee, as per the scheme of the assessment with effect from April 1, 1989, summary assessment has been provided under section 143(1)(a) of the Act, wherein returns are processed and prima facie adjustment can be made for working out the tax liability, if any. Such a prima facie adjustment are strictly circumscribed by section 143(1)(a). For this purpose, he relied on the ratio laid down in the following cases :

I. Gujarat Poly-Avx Electronics Ltd. v. Dy. CIT [1996] 222 ITR 140/89 Taxman 634 (Guj) ;

II. Lakhanpal National Ltd. v. Dy. CIT [1996] 222 ITR 151/[1997] 90 Taxman 12 (Guj) ; and

III. Peico Electronics & Electricals Ltd. v. Dy. CIT [1999] 236 ITR 702/103 Taxman 98 (Cal).

13. According to the learned counsel for the assessee, the Assessing Officer himself while passing the regular assessment order in scrutiny proceedings, treated the revised return, filed on March 30, 1998, as non est return, which is evident from page 3 of the regular assessment order. The Income-tax Appellate Tribunal has rightly held that the intimation issued under section 143(1)(a) was bad in law after following the decision of the hon’ble Supreme Court in the case of Gujarat Electricity Board [2003] 260 ITR 84 (SC).

14. Lastly, he submits that if intimation has been issued on the revised return filed subsequent to issuance of notice under section 143(2) will not obliterate, the position of law that once regular assessment proceedings have been commenced, summary assessment comes to an end and the same cannot be pursued for the purposes of any additional tax liability to be fastened upon the assessee.

15. We have heard both the parties at length and gone through the material available on record.

16. There is no dispute that the hon’ble Supreme Court in the case of Gujarat Electricity Board [2003] 260 ITR 84 (SC) held that it is not open to the Revenue to issue intimation under section 143(1)(a) of the Income-tax Act, 1961, after notice for regular assessment has been issued under section 143(2) of the Act but, in the instant case, intimation under section 143(1)(a) was issued for the revised return while the notice under section 143(2) was issued for the original return of income. Therefore, the ratio laid down in the aforesaid case is distinguishable from the facts of the case in hand. The revised return was filed by the respondent on March 30, 1998, i.e., after the receipt of notice under section 143(2) dated March 11, 1997. Thus, the Assessing Officer has rightly made the necessary adjustment on the basis of the revised return. The said notice under section 143(2), which was issued prior to the filing of the revised return by the assessee, cannot bar the Assessing Officer from processing the said revised return under section 143(1)(a) of the Act.

17. Moreover, the Tribunal while admitting the so-called additional ground has not discussed the full facts of the case.

18. Needless to mention that as per the ratio laid down in the case of Dhampur Sugar Mills Ltd. v. CIT [1973] 90 ITR 236 (All), there is a distinction between a revised return and a correction of the return. If the assessee files some application for correcting a return already filed or making amendments therein, it would not mean that he has filed a revised return. It will still retain the character of an original return but once a revised return is filed, the original return must be taken to have been withdrawn and to have been substituted by a fresh return for the purpose of assessment. But, in the instant case, revised return was filed by the assessee by showing the negative income.

19. When the facts of the case are neither clear nor discussed by the Tribunal, then, in our considered view, the Tribunal having permitted the assessee to raise additional grounds treating it to be a legal ground in appeal for the first time, should have set aside the order of the Commissioner of Income-tax (Appeals) and remanded the case to him for deciding the appeal afresh, rather than to decide the same on the merits for the first time by itself. Had the case been remanded by the Tribunal, the Commissioner of Income-tax (Appeals) would have been in a position to examine the issue for the first time in relation to the additional ground, which he did not decide for want of any attack initially in the first round. It cannot be disputed that the Commissioner of Income-tax (Appeals) had jurisdiction to examine the said additional ground, had it been raised before him in appeal even in the first round. Thus, we cannot subscribe to the approach and the manner in which the Tribunal allowed the assessee to raise the additional ground in appeal for the first time and then deciding the appeal on this ground by not only setting aside the order of the Commissioner of Income-tax (Appeals) but even proceeding to set aside the order of the Assessing Officer. Such approach is neither legal nor proper. It only exhibits the anxiety of the Tribunal to decide the appeal on the merits even on the point which did not arise for decision out of the order of the Commissioner of Income-tax (Appeals). In other words, instead of concentrating on the issues already decided by the Commissioner of Income-tax (Appeals), the Tribunal only concentrated on the additional ground, which had not been taken before the Commissioner of Income-tax (Appeals) and then answered it in favour of the assessee by completely setting aside the whole assessment. It is also relevant to point out that the Income-tax Appellate Tribunal while entertaining the additional ground has not given the reason for admitting the same and overlooked this vital fact that the said ground was not arising out of the order of the Commissioner of Income-tax (Appeals) which was challenged by both the parties. It is well settled that a legal issue can be raised at any stage but there shall be good reason for admitting the additional ground. However, in the instant case, the Income-tax Appellate Tribunal has not given any reason while admitting the additional ground. Moreover, the assessment order dated April 23, 1999, was passed by the Assessing Officer under section 144 of the Income-tax Act, 1961, on the basis of the original return filed on January 31, 1997, and not on the basis of the revised return filed on March 30, 1998.

20. In view of the above, we are of the view that there would have been no prejudice caused to either party if the case had been remanded to the Commissioner of Income-tax (Appeals).

21. Therefore, without entering into the merits of the case, we set aside the impugned order passed by the Tribunal and remand the matter back to the Commissioner of Income-tax (Appeals) for fresh adjudication as per law and, as such, the answer to the substantial question of law is not required.

22. The appeal filed by the Department is allowed in the above terms.

23. No costs.

[Citation : 347 ITR 331]

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