High Court Of Rajasthan
Suparas Mal Kothari vs. Union Of India & Ors.
Asst. Year 1993-94
Rajesh Balia & Sunil Kumar Garg, JJ.
Writ Petn. No. 3497 of 1994
5th February, 2001
M.R. Singhvi, for the Petitioner : Sandeep Bhandawat, for the Respondents
RAJESH BALIA, J. :
Heard learned counsel for the parties. The petitioner challenges the order Annexure-3 by which the assessee was intimated that adjustments made in the return submitted by him under s. 139 of the IT Act, 1961, for the asst. yr. 1993-94 showing a total income of Rs. 27,560. The adjustments sheet shows that a sum of Rs. 12,872 has been added to the aforesaid disclosed income by making additions on account of the income allegedly received by minor children of the assessee under s. 64(1A) of the Act of 1961.
The assessee has challenged the vires of s. 143(1)(a) inter alia on the ground that it permits the AO to make adjustments to the demand of the assessee without notice to him and without hearing and also on the merit that the adjustments made under s. 143(1)(a) by the AO do not per se fall within the ambit of s. 143(1)(a).
Having heard learned counsel for the parties, we are of the opinion that this petition must succeed on the short grounds of adjustments made by the AO on the face of it does fall within the ambit of s. 143(1)(a). Sec. 143 of the Act lays down the procedure for assessment of the income of the relevant assessment year. Once return has been filed, sub-s. (1) of s. 143 envisages acceptance of the return as it is, provisionally, with apparent adjustments required to be made on the basis of information contained in the return itself without requiring the presence of the assessee or production by him or any evidence in support of the return.
In other words, it is not in the form of regular assessment after holding detailed enquiry into the correctness of the return submitted and verifications of the claim made by the assessee. It is a summary act on the basis of undisputed material submitted by the assessee, without factually disputing its correctness and applying thereto set principles of law on which possibly ordinarily there cannot be any dispute. Under sub-s. (3) regular assessment takes place after service of a notice for such assessment inviting attention to participate by affording him an opportunity of hearing as well as producing the evidence. However, assessment under s. 143(1)(a) does not attain finality immediately and adjustments made under s. 143(1)(a) are not without remedies to the assessee. If he is aggrieved by such adjustments, sub-s. (2) of s. 143 provides procedure for getting it set right and offers such opportunity to the assessee against the adjustments which are thought necessary by the AO to be made in the return submitted by him on the basis of material emanating from the return itself. In case the assessee is aggrieved with such adjustments which are required to be intimated to him, he is entitled to make an application within one month from the date of receipt of notice of demand issued in consequence of such assessment under s. 143(1)(a) to the very same AO raising objections to such adjustment. On receiving such application the AO is bound to take recourse to regular assessment by issuing him notice of regular assessment under sub-s. (2) of s. 143. Thus, against the alleged uncalled for adjustments made in the return, on an application being made he is bound to give opportunity of hearing to the assessee and form a regular assessment in terms of s. 143(3) and in that event assessment order under s. 143(1)(a) gets replaced by regular assessment under s. 143(3). In view of these clear provisions we do not find any merit in the contention that because no opportunity is afforded to the assessee against adjustments to be made under s. 143(1)(a) and for that reason the provision be held ultra vires. It is true that an opportunity of hearing before any order adverse to a person is made is a necessary concomitant of fair procedure required of any authority to follow before he exercises his power to make such orders. But at the same time principles of natural justice are not cast in straitjacket formulae. Firstly it is always subject to explicit provision of statute. The principles of natural justice in given case can be excluded by specific statutory provisions. Secondly how and in what manner principles of natural justice are to be applied, even where the same are not so excluded, can also be regulated by statute. A statutory provision does not impinge upon the constitutional guarantees merely because it provides particular stage at which and mode in which the opportunity of hearing is to be granted. Sec. 143(1)(a) provides for specific adjustments to be made by assessing authority without requiring the presence of assessee. Having so provided it further envisages its intimation to assessee of such adjustments and also envisages right of the assessee to object to such adjustments by making an application within one month from the date of service of such intimation. On raising of such objection the assessing authority is enjoined to take recourse to regular assessment. This procedure in our opinion amply safeguards the interest of an affected assessee to have an opportunity to raise objection and to be heard in that regard before any assessment becomes final against him, intimation of adjustments made serving the purpose of show-cause notice. Therefore, s. 143(1)(a) cannot be held bereft of element of reasonableness and suffer from vice of arbitrariness on procedural unreasonableness. We therefore, reject the contention to the constitutional validity of impugned provision on the ground of Art. 14.
5. However, what adjustments can be made while reframing adjustment under s. 143(1)(a) without requiring the attendance of the assessee are itself enumerated in the statute. The cl. (b) of sub-s. (1) which reads as under : (b) In making an assessment of the total income or loss of the assessee under cl. (a), the AO shall make the following adjustments to the income or loss declared in the return, that is to say, he (i) rectify any arithmetical errors in the return, accounts and documents, referred to in cl. (a); (ii) …… (iii) …… (iv) give due effect to the allowance referred to in sub-s. (2) of s. 32, the deduction referred to in cl. (ii) of sub-s. (3) of s. 32A or cl. (ii) of sub-s. (2) of s. 33 or cl. (ii) of sub-s. (2) of s. 33A or cl. (i) of sub-s. (2) of s. 35 or sub-s. (1) of s. 35A or sub-s. (1) of 35D or sub-s. (1) of s. 35E or the first proviso to cl. (ix) of sub-s. (1) of s. 36, any loss carried forward under sub-s. (1) of s. 72 or sub-s. (2) of s. 73 or sub-s. (1) or sub-s. (3) of s. 74 or sub-s. (3) of s. 74A and the deficiency referred to in sub-s. (3) of s. 80J, as computed, in each case, in the regular assessment, if any, for the earlier assessment year or years.
The aforesaid cl. (b) existed as aforesaid during the relevant assessment order in question. A perusal of the section itself goes to show that no authority has been conferred on the AO to make any adjustments by way of making additions under s. 64 of any income not discharged by the assessee to be his own. Obviously the AO has transgressed his authority under sub-s. (1) of s. 143 for making addition of minorâs income in the income of the assessee without notice to him and without taking recourse to regular assessment proceedings. Whether income of any other person is includible in the income of assessee under s. 64 is not a matter enumerated in the list of adjustments that could be made without requiring the presence of the assessee. Sub-cl. (i) refers only to correct arithmatical error in calculation. The adjustments made by additions under s. 64 (1A) is apparently not a mistake of calculation arithmetically. Sub-cl. (iv) enumerate exhaustively the list of adjustments that are permissible to be made under s. 143(1)(a).
Accordingly, this petition succeeds. The intimation slip (Annexure-3) along with notice of demand issued in pursuance thereof are quashed. However, the AO shall be free now to take recourse to regular assessment proceedings, if he so desires.
There shall be no order as to costs.
[Citation : 257 ITR 658]