High Court Of Madhya Pradesh
Kamal Textiles vs. Income Tax Officer & Ors.
Sections 143, 143(2), 143(1)(a)
Asst. Year 1989-90
B.C. Varma & S.K. Seth, JJ.
MP No. 2673 of 1990
28th December, 1990
B.L. Nema, for the Petitioner : None, for the Respondent
B.C. VARMA, J.:
Petitioners are assessed to income-tax. They submitted their returns for the year of assessment 1989-90. The IT authority took steps under s. 143 of IT Act and issued intimation to the assessees specifying the sum payable as tax in accordance with the returns submitted. Such intimation is to be treated as a notice of demand under s. 156 of the Act. It appears that thereafter the authorities issued notices Annexures 12 to 38 in exercise of powers under s. 143(2) of the Act with a view to assess the income of the assessees for the relevant year. It is these notices which are challenged in this petition. It may be mentioned that such notice has also been issued in Misc. Petition No. 2697 of 1990 under the similar circumstances and for the same assessment year.
2. Challenging the notices, Shri B.L. Nema, learned counsel for the petitioners, submitted that the intimation sent to the assessee under s. 143(1)(a)(i) is after due assessment on the basis of the returns submitted. This is clear from the terms of that provision which by a fiction requires such intimation as notice of assessment under s. 156 of the Act. The Submission made, therefore, is that the proceedings under s. 143(2) of the Act tantamount to proceedings for reassessment which could be taken only in terms of s. 147 and 148 of the Act. In our opinion, the contention cannot be acceded to. Sec. 143, so far as relevant for the purposes of this petition, is as follows: “143. Assessment.â(1)(a) where a return has been made under s. 139, or in response to a notice under sub-s. (1) of s. 142,â (i) if any tax or interest is found due on the basis of such return, after adjustment of any tax deducted at source, any advance tax paid and any amount paid otherwise, by way of tax or interest, then, without prejudice to the provisions of sub-s. (2), an intimation shall be sent to the assessee specifying the sum so payable, and such intimation shall be deemed to be notice of demand issued under s. 156 and all the provisions of this Act shall apply accordingly; and (ii) if any refund is due on the basis of such return, it shall be granted to the assessee: Provided that in computing the tax or interest payable by, or refundable to, the assessee, the following adjustments shall be made in the income or loss declared in the return, namely: (i) any arithmetical errors in the return, accounts or documents accompanying it shall be rectified; (ii) any loss carried forward, deduction, allowance or relief, which on the basis of the information available in such return, accounts or documents, is prima facie admissible but which is not claimed in the return, shall be allowed; (iii) any loss carried forward, deduction, allowance or relief claimed in the return, which on the basis of the information available in such return, accounts or documents, is prima facie inadmissible, shall be disallowed.” A reading of cl. (i) of sub-s. (1)(a) of s. 143 to us makes it clear that the giving of intimation in terms of that provision is “without prejudice to the provisions of sub-s.(2)”. This expression/phrase is normally used in negotiation of compromise or offers to settle differences causa pecis in order to guard against any waiver of right should they be ineffectual and go off. Thus, where parties in the Court agreed that the cause should “stand adjourned and without prejudice to the either parties” would only mean that no harm should result to the rights of either of the parties by reason of his consent to the adjournment at that time. Thus understood, in the present context, the expression shall mean only that an intimation sent to the assessee specifying the sum payable by him in terms of that sub-section, although technically a demand issued under s. 156, shall nevertheless not preclude the operation of the provision of sub-s. (2). By force of this expression as inserted in subs. (1)(a)(i), the right of the assessing authority to proceed under sub-s. (2) of s. 143 despite intimation to the assessee of the sum payable by him as tax or interest is not taken away. That right is clearly saved and is not in any way curtailed or hampered by the giving of the intimation. It may be noticed that the section has been recast and one of the main changes brought about is that under s. 143(1), a regular assessment order as such is not to be passed. Power to make an adjustment in terms of its proviso can be invoked only when the claim is “prima facie inadmissible”, that is, it should be clear or self-evident. A decision on debatable issue is not envisaged. On the contrary, when proceedings are taken under s. 143(2), it partakes the of nature of a regular assessment and the assessing authority should pass an order under s. 143(3).
Shri Nema also urged that because the intimation is deemed to be a notice of demand of tax under s. 156 of the Act, the proceedings for assessment should be taken as complete in all respects, subject of course, to the assessment being reopened in terms of s. 147. This contention also is devoid of any substance. The intimation under s. 143(1)(a)(i) is only fictionally taken as a notice of demand under s. 156. Like all other fictions, to understand the meaning of this fiction so created here, one must look to its purpose. It is only thereafter that the Court has to assume all facts and consequences which are incidental or an inevitable corollary to the giving effect to the fiction. One must be cautious to see that the fiction is not extended beyond the purpose for which it is created. [See CIT vs. Vadilal Lallubhai 1972 CTR (SC) 321 : AIR 1973 SC 1016 : (1972) 86 ITR 2 (SC). The apparent purpose of the fiction so created here to treat the intimation as a notice of demand under s. 156, is to make the machinery provision of recovery of tax applicable to the recovery of tax assessed in terms of s. 143(1)(a)(i) and nothing more. A notice of demand under s. 156 is to be served in the prescribed form. The intimation under s. 143(1)(a)(i) is not in any such prescribed form. Nevertheless, by the fiction so created, all incidents of the notice of demand shall become applicable even to that intimation for any statutory fiction must be carried to its logical conclusion. Such being the limited purpose of the fiction, it is difficult to accept the contention that on issuance of such intimation, the assessment proceedings can be reopened only in terms of s. 147 and the authority is not entitled to proceed under sub-s. (2) of s. 143.
We are also not impressed with the argument of learned counsel that the issuance of intimation under sub-s. (1)(a)(i) of s. 143 is final because no appeal is provided against the demand of the amount of income-tax or interest. This contention overlooks the fact that even if not appealable, it is clearly revisable. However, as we have noticed above, the assessment made in proceedings under s. 143(2) shall for all purposes be an assessment of tax made under s. 143(3) and, in that event, shall be appealable under s. 246(1)(a) of the Act.
It was in passing submitted that the provisions of s. 143(1)(a)(i) are ultra vires being opposed to the natural justice. The argument is that the before issuing the intimation which is demand under s. 143(3), no opportunity is afforded to meet the adverse consequence, if any. The fallacy in the suggestion lies in omitting to see that the intimation is issued on the basis of the assessee’s own return. What is permissible to be adjusted are (i) only apparent arithmetical errors in the return, accounts or documents accompanying the return, (ii) loss carried forward, deduction, allowance or relief, which is prima facie admissible on the basis of information available in the return but not claimed in the return, and similarly, (iii) those claims which are on the basis of information available in the return, prima facie inadmissible, are to be disallowed. This only means that at that stage, as we have seen above, only errors apparent on the face of the record alone may be corrected. It may be further noticed that even this is permissible on the basis of the information accompanying the return. The assessing authority is not permitted under this guise of making adjustment to adjudicate upon any debatable issue. We have, therefore, little hesitation in rejecting this contention.
6. For the aforesaid reasons, we dismiss this petition.
[Citation : 189 ITR 339]