Allahabad High Court Judgement

Allahabad High Court Judgement

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JUDGEMENT HEADLINE : Prior To 1.4.1989, Assessment U/s 141(1) Of The IT Act Was Regular Assessment.
JUDGEMENT TITLE : The Commissioner Of Income Tax Vs. D.S. Batra (Indl) On 01/07/2011 By Allahabad High Court
CASE NO : INCOME TAX APPEAL NO. 61 OF 2000
CORAM : Hon'ble Yatindra Singh,J. And Hon'ble Prakash Krishna,J.

HIGH COURT OF JUDICATURE AT ALLAHABAD

AFR
RESERVED
Income Tax Appeal No. 61 Of 2000
Commissioner Of Income Tax, Kanpur Vs. Shri DS Batra

HON'BLE YATINDRA SINGH, J
HON'BLE PRAKASH KIRSHNA, J.
( Delivered By Hon'ble Yatindra Singh, J)
1. Although, This Appeal Was Admitted On The Proposed Five Substantial Questions Of Law But The Main Question Involved In This Appeal Is,
Whether The Assessment Order, Passed On 29.2.1986 For The Assessment Year (AY) 1987-88 Under Section 143(1)(a) Of The Income Tax Act, 1961 (the Act), Is A Regular Assessment Within The Meaning Of Section 215 Read With Section 217 Of The Act Or Not.

THE FACTS
2. Sri DS Batra (the Assessee) Filed His Return On 31.7.1987 On The Income Of `54,560. An Assessment Order Was Passed On 29.2.1988 Under Section 143(1)(a) Of The Act.

3. There Was A Survey Of M/s Rajendra Tube Ltd. Belonging To M/s Rajendra Pipe & Leasing Group Under Section 133A Of The Act. The Assessee Was The Managing Director/ Financial Surveyor There.

4. During The Survey, The Assessee Surrendered A Sum Of `30 Lakhs, Which Was Excess Stock In The Hands Of The Aforesaid Concern, As His Undisclosed Income On 30.3.1990.

5. Thereafter, A Notice Under Section 148 Of Act Was Issued To The Assessee. In This Proceeding, The Following Order Was Passed On 19.7.1990:
The Taxable Income Of The Assessee Was Assessed To Be `30,56,56;
On This Income, Statutory Interest As Per Rules Was Charged; And
The Penalty Proceeding U/s 271(1)(c) And 273(2)(a) Were Initiated Against The Assessee.
The Statutory Interest Meant Interest Under Section 215 Read With Section 217 Of The Act Up To The Date Of The Aforesaid Order.

6. The Assessee Filed An Application Under Section 154 Of The Act For Correction Of The Order. This Application Was Rejected On 1.4.1990. It Was Held That The Order Dated 19.7.1990 Was The Regular Assessment And Interest Was To Be Charged Upto That Date And Not Upto 29.2.1988, The Date Of Order Under Section 143(1)(a) Of The Act.

7. The Assessee Filed An Appeal. The Appeal Was Allowed By The Commissioner (Appeals). It Was Held That:
The Assessment Order Dated 29.2.1988 Under Section 143(1)(a) Was The Regular Assessment; And
The Interest Could Be Charged Upto This Date.

8. The Income Tax Department (the Department) Filed An Appeal Before The Income Tax Appellate Tribunal, Allahabad (the Tribunal). It Was Also Dismissed. Hence The Present Appeal.

9. There Seems To Be Some Confusion, Whether The Notice And Order Was Passed Under Section 143(2)/ 143(3) Of The Act Or Under Section 143(3)/ 148 Of The Act. The Assessment Order Dated 19.7.1990 Indicates Both. However, All Subsequent Orders As Well As Statement Of Fact Accompanying The Appeal Mention Only Section 143(3)/ 148 Or Section 147 Of The Act.

10. The Commissioner (Appeals) As Well As The Tribunal Have Decided The Case On The Footing That Proceeding Under Section 147 Was Taken. The Case Before Us Was Also Argued On The Same Footing And We Are Deciding The Same Accordingly.

11. We Have Heard Sri Shambhu Chopra, Counsel For The Department. No One Has Put Up Appearance On Behalf Of The Assessee. On Our Request, Sri Ashish Bansal And Sri Shubham Agrawal Assisted Us As The Friends Of The Court On Behalf Of The Assessee. We Record Our Appreciation For The Assistance Given By Them.1

THE DECISION
12. Section 215 As Well As Section 217 Of The Act Provide For Interest Payable By An Assessee. In Case The Conditions Mentioned In These Sections Are Satisfied, Then An Assessee Is Liable To Pay The Interest At The Rate Mentioned Therein From 1st Day Of April Next Following The Financial Year Up To The Date Of The Regular Assessment.

13. In This Appeal, The Question Is, Which Is The Date Of The Regular Assessment:
Is It 29.2.1988, When The Assessment Was Made Under Section 143(1)(a) Of The Act; Or
Is It 19.7.1990 When The Order Was Passed Under Section 147 Read With Section 143(3) Of The Act.

14. The Case Relates To The AY 1987-88. Section 2(40) And Section 143(1) As Applicable At That Time Are Indicated In Appendix-1.

15. Section 143 Was Fundamentally Changed By Direct Tax Laws Amendment Act, 1987 (4 Of 1988) (the 1988 Amendment). Section 2(40) Was Also Amended By Finance Act Of 1990 With Effect From 1.4.1989. These Sections As Amended Are Mentioned In Appendix-2.

16. Section 143 As Amended By The 1988 Amendment Is Applicable To The Assessments For The Assessment Year 1989-90. The Un-amended Section 143 Is Applicable To The Assessments For The Assessment Year Commencing On The 1st April 1988 And Earlier Years. This Was Also Clarified By The Income Tax (Removal Of Difficulties) Order, 1989 {Notification No. GSR 376 (E) Dated 23rd March 1989} {see (1989) 176 ITR (Statutes) 322}.

17. Section 2 Is Definition Clause. Section 2 {2(40)} Of The Act Defined The Word 'regular Assessment'. At The Relevant Time It Meant Assessment Under Section 143 Or 144. This Indicates That An Order Under Section 143 {whether U/s 143(1) Or 143(3)} Or Under 144 Of The Act Was To Be Treated As A Regular Assessment.

18. Section 2(40) Has Been Amended With Effect From 1.4.1989. It Now Means Assessment Order Under Sub-section (3) Of Section 143 Or 144 Of The Act. At Present, It Undoubtedly Exclude The Order Passed Under Section 143 (1) Of The Act.

19. Section 143(1) At The Relevant Time Used The Word 'make An Assessment'. The Aforesaid Definition Of The Word 'regular Assessment' Changed Wef 1.4.1989. This Indicates That The Assessment Under Section 143(1) Was Included In The Ambit Of The Word 'regular Assessment' In The Relevant Year.

20. However, The Counsel For The Department Submitted That,
(i) A Mere Use Of The Word Assessment In A Section Is Not Conclusive But It Has To Be Seen In Its Context;
(ii) The Assessment Under Section 147 Of The Act Is The Regular Assessment;
(iii) The Amendment In Section 2(40) Is Clarificatory And Applies With Retrospective Effect.

21. In Support Of His Submissions, The Counsel For The Department Also Brought To Our Notice The Following Passage Of Kanga & Palikawala On Income Tax 9th Edition:
The Word 'assessment' Is Used In This Act As Meaning Sometimes The Computation Of Income, Sometimes The Determination Of The Amount Of Tax Payable, And Sometimes The Whole Procedure Laid Down In The Act For Imposing Liability On The Taxpayer. The Word 'assessment' Must Be Understood In Each Section Of This Act With Reference To The Context In Which It Is Used: In Some Sections It Has A Comprehensive Meaning And Includes Reassessment (e.g. S. 265) And In Some Sections It Has A Restricted Meaning And Is Used As Distinct From Reassessment (e.g. S.147).

(i) & (ii) Only First-Initial Assessment U/S 147 Is
Regular Assessment
22. There Was Difference Of Opinion Whether The Assessment Under Section 147 Of The Act Could Be Treated As A Regular Assessment Or Not. One View Was That The Assessment Made For The First Time Under Section 147 Was A Regular Assessment. The Other View Was That The Assessment Under Section 147 Was Of Different Nature And Content From The Assessment Under Section 143 And It Was Not A Regular Assessment.

23. The Aforesaid Controversy Was Settled By Supreme Court In K Govindan And Sons Vs Commissioner Of Income-Tax: 247 ITR 192 (the Govindan Case). It Was Held That The First Or Initial Assessment Under Section 147 Of The Act Is A Regular Assessment.

24. According To The Counsel For The Department,
The Govindan Case Clinches The Issue;
The Assessment Order Dated 19.7.1990 Under Section 147 Is The Regular Assessment; And
The Interest Upto The Date Of The Order Under Section 147 Is Chargeable.

25. In The Govindan Case, The Supreme Court Took The View That Order Under Section 147 Is The Regular Assessment Provided It Is First And The Initial Assessment. In The Present Case, The Order Under Section 147 Is Not The First Or The Initial Assessment. There Was Another Order Under Section 143(1)(a) Of The Act Prior To It And The Question Is, Is That Order A Regular Assessment? If That Be So, Then Interest Upto That Date Can Only Be Charged.

(iii) Does Not Apply Retrospectively
26. The Counsel For The Department Submitted That:
The Amendment In Section 2(40) Of The Act Was Merely To Clarify The Law;
It Is Retrospective In The Law;
In Fact Assessment Under Section 143(1)(a) Was Never The Regular Assessment.

27. In Support Of His Submission, He Also Brought To Our Notice The Object And Reasons Of The Finance Act, 1990 In Respect Of Amendment Under Section 2(40). It Is As Follows:
'The Proposed Amendment, Vide Sub-clause (ii), Seeks To Amend The Definition Of The Expression "regular Assessment" Given In Clause (40) Of That Section So As To Clarify That It Would Mean An Assessment Made Only Under Sub-section (3) Of Section 143 Or Section 144.'

28. Section 143(1) As Applicable In The Assessment Year 1987-88 (see Appendix-1) Provided That The Income Tax Officer Could Make Assessment Of The Total Income Or Loss Of The Assessee After Making Adjustments Without Requiring The Presence Of The Assessee Or Production By Him Of Any Evidence In Support Of The Return. He Could Determine The Sum Payable Or Refundable By Or To The Assessee On The Basis Of Such Assessment.

29. Under Section 143(1)(a) As It Existed In AY 1987-88, The Assessing Officer (the AO) Was To Prima Facie Examine The Return Filed By An Assessee. He Could Adjust The Obvious Mistake And Determine The Sum Payable By Or Refundable To An Assessee. In Case The AO Was Not Satisfied With It, Then He Could Also Issue Notice Under Section 143(2)(b) Of The Act And After Giving Opportunity To The Assessee, Could Also Pass The Order Under Section 143(3) Of The Act.

30. The Assessee Could Also Object To The Assessment Order Passed By The AO Under Section 141(1) {under Section 143(2)(a) Of The Act}. This Indicates That Though The Order Under Section 143(1) Of The Act Was To Be Passed Without Requiring The Presence Of The Assessee Yet, The AO Was Required To Apply His Mind To The Return Filed By An Assessee Under Section 139 Of The Act And Prima Facie Determine The Sum Payable By Or To Be Refunded To Him. He Could Also Go Deep Into The Same But Could Be Done After Notice To The Assessee Under Section 143(2) Of The Act.

31. The Aforesaid Scheme Of The Act Was Fundamentally Changed With Effect From 1.4.1989. Under The Amended Section 143 (see Appendix-2), The AO Was Neither Required To Determine Nor Pass An Assessment Order. Only An Intimation Is Sent To An Assessee Intimating The Sum Payable That Is Treated As A Demand; Similarly Refund Can Also Be Made. At Present, The Assessment Order Is Passed Only If The Case Was Taken Up In Scrutiny.

32. If No Assessment Order Is Passed, As Is The Case After 1.4.1989, Then Sending Intimation Can Never Be A Regular Assessment. Section 2(40) Of The Act, As It Stood Before 1.4.1989, Might Have Created Confusion. It Is For This Reason That Section 2(40) Of The Act Was Amended Excluding Section 143(1) From Being Treated As A Regular Assessment.

33. This Is How The Income Tax Department Also Understood The Law. This Is Clear By The Circulars Issued By The Department. The Relevant Part Of The Circular Number 281 Dated 22.9.1980 (the 1980 Circular) Is Appendix-3. It Clarifies The Situation Under Section 143(1) For The Assessment Year 1987-88.

34. In Paragraphs 27.1 And 27.2 Of The 1980 Circular, It Is Mentioned That The Assessment Under Section 143(1) Of The Act Was A 'summary Assessment' Nevertheless It Was Clarified That The Income Tax Officer Could Make Regular Assessment Without Requiring The Presence Of Assessee Or Production By Him Of Any Evidence And Could Also Make Certain Adjustments. The Presence Of An Assessee Or Production Of Any Evidence Was Not Mandatory For Holding Regular Assessment.

35. The Position After 1.4.1989 Was Also Explained In The Circular Number 549 Dated 31.10.1989 (the 1989 Circular). Its Relevant Part Is Appendix-4. Its Clause 5.1 Explains The Reason For Amending The Law Namely, The Increase In Number Of Income-tax Assessees And Need To Reduce The Department's Work Load By Greater Reliance On Voluntary Compliance By The Assessees. It Was For This Reason That The Entirely New Scheme Of Assessment Was Introduced.

36. In Our Opinion, The Aforesaid Circulars Correctly Portray The Position Of Law.

37. This Was Also So Held By The Division Bench Of Delhi High Court Reported In Apogee International Ltd And Another Vs Union Of India: 20 ITR 248. The Court Observed:
'The Prime Reason For Amendment Of Sub-clause (i) Of Section 143(1)(a) Of The Act Is That Earlier Under Section 143(1)(a), As It Stood Prior To Its Substitution In The Present Form By The Direct Tax Laws (Amendment) Act, 1987, With Effect From April 1, 1989, The Assessing Officer Had To Pass An Assessment Order If He Decided To Accept The Return But Under The New Section, The Requirement Of Passing An Assessment Order In All Cases, Where Returns Of Income Are Filed, Has Been Dispensed With And In Turn Only An Intimation Is Required To Be Sent If On The Basis Of The Return, After Prima Facie Adjustments, Any Amount Is Found Due From The Assessee. As A Matter Of Fact Various Circulars Issued By The Central Board Of Direct Taxes After The Amendment Of Section 143 Clearly Spell Out The Intention Of The Legislation To Minimise The Volume Of The Department's Work To Scrutinise Each And Every Return And To Concentrate On Selective Scrutiny Of Returns.'

38. The Supreme Court In Assistant Commissioner Of Income Tax Vs. Rajesh Jhaveri Stock Brokers P. Ltd.: 291 ITR 500 (the RajeshJhaveri Case) Also Similarly Opined.

39. In The RajeshJhaveri Case, The High Court Had Quashed The Notice Under Section 148 Of The Act. The Supreme Court While Allowing The Appeal, Considered The Legislative History And Observed:
'Under Section 143(1)(a) As It Stood Prior To April 1, 1989, The Assessing Officer Had To Pass An Assessment Order If He Decided To Accept The Return, But Under The Amended Provision, The Requirement Of Passing Of An Assessment Order Has Been Dispensed With And Instead An Intimation Is Required To Be Sent. Various Circulars Sent By The Central Board Of Direct Taxes Spell Out The Intent Of The Legislature, I.e To Minimize The Departmental Work To Scrutinize Each And Every Return And To Concentrate On Selective Scrutiny Of Returns.'

40. A Division Bench Of Rajasthan High Court Considered The Question Whether An Order By An AO Passed Under Section 143(1) Prior To 1.4.1989 Was Merely An Intimation Or An Assessment Order In CIT Vs. Manohar Lal Gupta (2007) 213 CTR (Raj) 193: 2008 Taxman 483. The Bench Relying Upon The RajeshJhaveri Case Held That:
'[T]he Observations Of The Supreme Court [in RajeshJhaveri Case] That The Acceptance Of Return Under S. 143(1) Is An Intimation And Not The Assessment Order Are Referable To The Amended Provisions Of S. 143(1) Post 1st April, 1989. Insofar As The Provisions Of S. 143(1) As It Stood Prior To 1st April, 1989 Were Concerned, The Supreme Court Held Thus: "under S. 143(1)(a) As It Stood Prior To 1st April, 1989, The AO Had To Pass An Assessment Order If He Decided To Accept The Return, But Under The Amended Provision, The Requirement Of Passing Of An Assessment Order Has Been Dispensed With And Instead An Intimation Is Required To Be Sent."
Thus, The Order Dated 15th June, 1982 Accepting Return By The AO Is An Order Of Assessment.'

41. Had Section 2(40) Not Amended By Clarifying The Law Then Mere Sending Of The Intimation Might Have Been Treated As A Regular Assessment. It Is For This Reason That Section 2(40) Was Amended And In The Objects And Reasons It Was Mentioned That This Amendment Was Being Carried Out To Clarify The Law.

42. In Our Opinion, The Order Dated 29.2.1988 Under Section 143(1)(a) Of The Act Was The Regular Assessment And Interest Could Be Charged Upto That Date Only.


CONCLUSION
43. Our Conclusions Are That:
(a) Prior To 1.4.1989, The Assessment Order Under Section 143(1) Of The Act Was Not Merely An Intimation But A Regular Assessment;
(b) This Case Relates To AY 1987-88. The Assessment Order Dated 29.2.1988 Under Section 143(1) Of The Act Was The Regular Assessment;
(c) The Interest Under Section 215 And 217 Could Only Be Charged Upto The Date Of Assessment Order Under Section 143(1)(a) Namely 29.2.1988;
(d) There Is No Mistake In The Order Of The Tribunal Upholding The Finding Of The Commissioner (Appeals).

44. In View Of Our Conclusions, The Appeal Has No Merits And Is Dismissed.
Date: 7.1.2011
BBL




Appendix-1
Section 2(40) And Relevant Part Of Section 143 Of The Income Tax Act, 1961 As Applicable In The AY 1987-88 Was As Follows:
2(40) "regular Assessment" Means The Assessment Made Under Section 143 Or Section 144;

143. Assessment
(1) (a) Where A Return Has Been Made Under Section 139, The Income Tax Officer May, Without Requiring The Presence Of The Assessee Or The Production By Him Of Any Evidence In Support Of The Return, Make An Assessment Of The Total Income Or Loss Of The Assessee After Making Such Adjustments To The Income Or Loss Declared In The Return As Are Required To Be Made Under Clause (b), With Reference To The Return And The Accounts And Documents, If Any, Accompanying It, And For The Purposes Of The Adjustments Referred To In Sub-clause (iv) Of Clause (b), Also With Reference To The Record Of The Assessments, If Any, Of Past Years And Determine The Sum Payable By The Assessee Or Refundable To Him On The Basis Of Such Assessment.
(b) In Making An Assessment Of The Total Income Or Loss Of The Assessee Under Clause (a), The Income-tax Officer Shall Make The Following Adjustments To The Income Or The Loss Declared In The Return, That Is To Say, He Shall--
(i) Rectify Any Arithmetical Errors In The Return, Accounts And Documents Referred To In Clause (a);
(ii) [Omitted]
(iii) [Omitted)
(iv) Give Due Effect To The Allowance Referred To In Sub-section (2) Of Section 32, The Deduction Referred To In Clause (ii) Of Sub-section (3) Of Section 32A Or Clause (ii) Of Sub-section (2) Of Section 33 Or Clause (ii) Of Sub-section (2) Of Section 33A Or Clause (i) Of Sub-section (2) Of Section 35 Or Sub-section (1) Of Section 35A Or Sub-section (1) Of Section 35D Or Sub-section (1) Of Section 35E Or The First Proviso To Clause (ix) Of Sub-section (1) Of Section 36, Any Loss Carried Forward Under Sub-section (1) Of Section 72 Or Sub Section (2) Of Section 73 Or Sub Section (1) Of Section 74 Or Sub-section (3) Of Section 74A And The Deficiency Referred To In Sub-section (3) Of Section 80J, As Computed, In Each Case, In The Regular Assessment, If Any, For The Earlier Assessment Year Or Years.
From 1.4.88: Finance Act, 1987: In Sub-clause (iv) Of Clause (b) Of Section (1), For The Words "sub-section (1) Of Section 74" The Words "sub-section (1) Or Sub-section (3) Of Section 74 Are To Be Substituted.
(2) Where A Return Has Been Made Under Section 139, And--
(a) An Assessment Having Been Made Under Sub-section (1), The Assessee Makes Within One Month From The Date Of Service Of The Notice Of Demand Issued In Consequence Of Such Assessment, An Application To The Income-tax Officer Objecting To The Assessment, Or
(b) Whether Or Nor An Assessment Has Been Made Under Sub-section (1), The Income-tax Officer Considers It Necessary Or Expedient To Verify The Correctness And Competence Of The Return By Requiring The Presence Of The Assessee Or The Production Of Evidence In This Behalf,
the Income-tax Officer Shall Serve On The Assessee A Notice Requiring Him, On A Date To Be Therein Specified, Either To Attend At The Income-tax Officer's Office Or To Produce, Or To Cause To Be There Produced, Any Evidence On Which The Assessee May Rely In Support Of The Return.
Provided That, In A Case Where An Assessment Has Been Made Under Sub-section (1), The Notice Under This Sub-section Except Where Such Notice Is In Pursuance Of An Application By The Assessee Under Clause (a) Shall Not Be Issued By The Income-tax Officer Unless The Previous Approval Of The Inspecting Assistant Commissioner Has Been Obtained To The Issue Of Such Notice:
Provided Further That In A Case Where The Assessment Made Under Sub-section (1) Is Objected To By The Assessee By An Application Under Clause (a), The Assessee Shall Not Be Deemed To Be In Default In Respect Of The Whole Or Any Part Of The Amount Of The Tax Demanded In Pursuance Of The Assessment Under That Sub-section, Which Is Disputed By The Assessee, In So Far As Such Amount Does Not Relate To Any Adjustment Referred To In Sub-clause (i) Of Clause (b) Of Sub-section (1), And Further No Interest Shall Be Chargeable Under Sub-section (2) Of Section 220 In Respect Of Such Disputed Amount.
...


Appendix-2
Section 2(4) And Relevant Part Of Section 143 Of The Act As Applicable On 1.4.1989 Was As Follows:

2(40) "regular Assessment" Means The Assessment Made Under Sub-section (3) Of Section 143 Or Section 144;

Section 143. Assessment.
(1) (a) Where A Return Has Been Made Under Section 139, Or In Response To A Notice Under Sub-section (1) Of Section 142,-
(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-section (2), An Intimation Shall Be Sent To The Assessee Specifying The Sum So Payable, And Such Intimation Shall Be Deemed To Be A Notice Of Demand Issued Under Section 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 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.

Provided Further That An Intimation For Any Tax Or Interest Due Under This Clause Shall Not Be Sent After The Expiry Of Two Years From The End Of The Assessment Year In Which Income Was First Assessable.

(b) Where As A Result Of An Order Made Under Section 147 Or Section 154 Or Section 155 Or Section 250 Or Section 254 Or Section 260 Or Section 262 Or Section 263 Or Section 264, Or Any Order Of Settlement Made Under Sub-section (4) Of Section 245D Relating To Any Earlier Assessment Year And Passed Subsequent To The Filing Of The Return Referred To In Clause (a), There Is Any Variation In The Carry Forward Loss, Deduction, Allowance Or Relief Claimed In The Return, And As A Result Of Which,-
(i) If Any Tax Or Interest Is Found Due, An Intimation Shall Be Sent To The Assessee Specifying The Sum So Payable, And Such Intimation Shall Be Deemed To Be A Notice Of Demand Issued Under Section 156 And All The Provisions Of This Act Shall Apply Accordingly, And
(ii) If Any Refund Is Due, It Shall Be Granted To The Assessee:
Provided That An Intimation For Any Tax Or Interest Due Under This Clause Shall Not Be Sent After The Expiry Of Four Years From The End Of The Financial Year In Which Any Such Order Was Passed.

(1A) (a) Where In The Case Of Any Person, The Total Income, As A Result Of The Adjustments Made Under The Proviso To Clause (a) Of Sub-section (1), Exceeds The Total Income Declared In The Return By Any Amount, The Assessing Officer Shall, -
(i) Further Increase The Amount Of Tax Payable Under Sub-section (1) By An Additional Income-tax Calculated At The Rate Of Twenty Per Cent Of The Tax Payable On Such Excess Amount And Specify The Additional Income -tax In The Intimation To Be Sent Under Sub-clause (i) Of Clause (a) Of Sub-section (1);
(ii) Where Any Refund Is Due Under Sub-section (1), Reduce The Amount Of Such Refund By An Amount Equivalent To The Additional Income-tax Calculated Under Sub-clause (i).

(b) Where As Result Of An Order Under Section 154 Or Section 250 Or Section 254 Or Section 260 Or Section 262 Or Section 263 Or Section 264, The Amount On Which Additional Income-tax Is Payable Under Clause (a) Has Been Increased Or Reduced, As The Case May Be, The Additional Income-tax Shall Be Increased Or Reduced Accordingly, And, -
(i) In A Case Where The Additional Income Tax Is Increased, The Assessing Officer Shall Serve On The Assessee A Notice Of Demand Under Section 156;
(ii) In A Case Where The Additional Income-tax Is Reduced, The Excess Amount Paid, If Any, Shall Be Refunded.

Explanation - For The Purposes Of This Sub-section, "tax Payable On Such Excess Amount" Means, -
(i) In Any Case Where The Amount Of Adjustments Made Under The Proviso To Clause (a) Of Sub-section (1) Exceed The Total Income, The Tax That Would Have Been Chargeable Had The Amount Of The Adjustments Been The Total Income;
(ii) In Any Other Case, The Difference Between The Tax On The Total Income And The Tax That Would Have Been Chargeable Had Such Total Income Been Reduced By The Amount Of Adjustments.

(2) In A Case Referred To In Sub-section (1), If The Assessing Officer Considers If Necessary Or Expedient To Ensure That The Assessee Has Not Understated The Income Or Has Not Computed Excessive Loss Or Has Not Under-paid Tax In Any Manner, He Shall Serve On The Assessee A Notice Requiring Him, On A Date To Be Specified Therein, Either To Attend His Office Or To Produce, Or Cause To Be Produced There, Any Evidence On Which The Assessee May Rely In Support Of The Return:
Provided That No Notice Under This Sub-section Shall Be Served On The Assessee After The Expiry Of The Financial Year In Which The Return Is Furnished Or The Expiry Of Six Months From The End Of The Month In Which The Return Is Furnished, Whichever Is Later.
(3) On The Day Specified In The Notice Issued Under Sub-section (2), Or As Soon Afterwards As May Be, After Hearing Such Evidence As The Assessee May Produce And Such Other Evidence As The Assessing Officer May Require On Specified Points, And After Taking Into Account All Relevant Material Which He Has Gathered, The Assessing Officer Shall, By An Order In Writing, Make An Assessment Of The Total Income Or Loss Of The Assessee, And Determine The Sum Payable By Him On The Basis Of Such Assessment.

Appendix-3
Excerpts From Departmental Circular No. 281, Dated 22.9.1980

...
27.1 Under Section 143(1) Of The Income-tax Act, An Income-tax Officer May Make A Regular Assessment Without Requiring The Presence Of The Assessee Or The Production By Him Of Any Evidence In Support Of The Return, And Without Being Satisfied That The Return Was Correct And Complete In All Respects. In Making Such A 'summary Assessment,' The Income-tax Officer Has The Authority To Make Certain Adjustments To The Income Or Loss Declared In The Return. These Adjustments Are By Way Of--
(i) Rectifying Any Arithmetical Error In The Return, Accounts And Documents, If Any, Accompanying It;
(ii) Allowing Any Deduction, Allowance Or Relief Which, On The Basis Of Information Available In Such Return, Accounts And Documents Is, Prima Facie, Admissible Though Not Claimed In The Return;
(iii) Disallowing Any Deduction, Allowance Or Relief Claimed In The Return Which, On The Basis Of The Information Available In Such Return, Accounts And Documents, Is, Prima Facie, Inadmissible; And
(iv) Giving Due Effect To The Deductions And Allowances Brought Forward From Earlier Years, Namely, Unabsorbed Depreciation [section 32(2)]; Unabsorbed Investment Allowance [section 32A(3)(ii)]; Unabsorbed Development Rebate [section 33A(2)(ii)]; Unabsorbed Amount Of Capital Expenditure Incurred On Scientific Research [section [35(2)(i)]; Capital Expenditure On Acquisition Of Patent Rights And Copyrights [section 35 A(1)]; Unabsorbed Amount Of Certain Preliminary Expenses Which Are Amortisable Against Profits [section 35D(1)]; Expenditure On Prospecting For Or Development Of Specified Minerals Amortisable Against Profits [section 35E(1)]; Capital Expenditure On Family Planning Incurred By An Indian Company [section 36(1)(ix), 1st Proviso]; Unabsorbed Losses Brought Forward From Earlier Years Which Are Admissible As Set Off [section 72(1), 73(2), 74(1) And 74A(3)]; And The Deficiency In Tax Holiday Profits Which Is Eligible For Set Off [section 80J (3)].
The Adjustments To Be Made In The Summary Assessment In Regard To Items Specified In (iv) Above Are To Be Bases On The Computation Made In The Regular Assessment, If Any, For The Earlier Assessment Year Or Years.

27.2 The Assessment Made Under The Summary Assessment Scheme In The Aforesaid Manner Is Final Except Where The Proceedings Are Initiated For Making A Fresh Assessment. Where An Assessee Objects To The Summary Assessment Made By The Income-tax Officer By Making An Application Within The Specified Period Of One Month, It Is Incumbent On The Income-tax Officer To Reopen The Assessment By Issuing The Necessary Notice Calling Upon The Assessee To Produce The Books Of Account And Other Evidence In Support Of The Return. The Income-tax Officer Is Also Empowered To Issue A Notice In Cases Where An Assessment Has Been Completed Under Section 143(1). However, The Issue Of A Notice In Such Cases Is Subject To The Requirement That Prior Approval Of The Inspecting Assistant Commissioner Has Been Obtained. The Basis For The Issue Of Such A Notice Is That The Income-tax Officer Considers It Necessary Or Expedient To Verify The Correctness And Completeness Of The Return By Requiring The Presence Of The Assessee Or The Production Of Evidence In This Behalf.
...
Appendix-4
Excerpts From Departmental Circular No. 549, Dated 31.10.1989

...
5.1 With The Number Of Income-tax Assessees Continuously Increasing, There Was An Urgent Need To Reduce The Department's Work Load By Greater Reliance On Voluntary Compliance By The Assessees. The Amending Act, 1987, Has, Therefore, Substituted A New Section 143 In The Income-tax Act To Introduce An Entirely New Scheme Of Assessment After A Return Of Income Has Been Filed. The Main Features Of The New Scheme Are:
(i) The Requirement Of Passing An Assessment Order In All Cases, Where Returns Of Income Are Filed, Has Been Dispensed With And The Issue Of An Acknowledgement Slip To The Assessee Will Be The End Of The Matter, If He Has Correctly Paid Tax An Interest, If Any, Due On The Basis Of The Return.
(ii) If On The Basis Of The Return Any Amount Is Found Due From The Assessee, It Can Be Recovered; If Any Refund Is Found Due To The Assessee, It Can Be Granted Without Passing An Assessment Order.
(iii) Assessment Orders Will Be Passed Only In A Very Limited Number Of Cases Selected For Scrutiny.

The Old And The New Provisions Of Section 143 Are Discussed In Greater Details In The Following Sub-paras.

5.2 Requirement Of Passing An Assessment Order In All Cases Dispensed With [sub-section (1) Of Section 143] --Under The Old Provisions Of Sub-section (1) Of Section 143, After A Return Of Income Had Been Filed, A Regular Assessment Order Had To Be Passed By The Assessing Officers Even Where The Return Was Accepted Without Requiring The Presence Of The Assessee Or The Production By Him Of Any Evidence In Support Of The Return. However, Sub-section (1) Of The New Section, Substituted By The Amending Act, 1987, Has Done Away With This Requirement And It Only Provides For Proper Recovery Of Tax Or Interest Due From The Assessee Or Issue Of Refund Due To The Assessee On The Basis Of The Return. Clause (a) Of Sub-section (1) Of The New Section Provides That After A Return Has Been Made Under Section 139 Or In Response To Notice Under Section 142(1), The Following Action Shall Be Taken:-
(i) If Any Tax Or Interest Is Found Due On The Basis Of The Return, After Adjustments Of The Pre-paid Taxes, An Intimation Shall Be Sent To The Assessee Specifying The Amount So Payable And Such Intimation Shall Be Deemed To Be The Notice Of Demand; And
(ii) If Any Refund Is Due, It Shall Be Granted To The Assessee.
Thus, If The Tax On The Basis Of The Returned Income And Interest, If Any, Due Under Various Provisions Of The Act (as Explained In Para 4.16 Of These Explanatory Notes) Has Been Correctly Paid So That No Sum Is Found Payable By Or Refundable To The Assessee, No Further Action On The Return Is Necessary, Unless, Of Course, The Case Is Picked Up For Scrutiny.
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5.18 These Amendments Come Into Force With Effect From The 1st April, 1989. It Has Been Clarified By The Issue Of An Income-tax (Removal Of Difficulties) Order, 1989, Vide No. GSR 376 (E), Dated 23.3.1989 (refer To Paras 11.2 And 11.3 Of Part I Of These Explanatory Notes), That The Provisions Of Section 143, As They Stood Prior To The Commencement Of The Amending Act, 1987, Shall Apply In Respect Of The Assessment Year 1988-89 And Earlier Assessment Years. It Follows, Therefore, That The Provisions Of The New Section 143, As Substituted By The Amending Act, 1987, Would Apply To The Assessment Year 1989-90 And Subsequent Assessment Years.

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