AMIT BAJAJ ADVOCATE

Madras High Court has held in Tamil Nadu Magnesite Ltd., Versus The Commissioner of Income-Tax,   that once assessment u/s 143(3) of Income Tax Act is completed, no order ractifying the intimation u/s 143(1)(a) earlier issued, can be passed as after the assessment order u/s 143(3) the intimation u/s 143(1)(a) earlier issued gets merged with the said assessment order.
 

Facts: The petitioner is a Government of Tamil Nadu undertaking. It is an income tax assessee. For the accounting year ended with 31.03.1993, the petitioner submitted the tax return admitting Nil income. The said return was accepted by the second respondent on 07.03.1994 by issuance of an intimation in terms of Section 143(1)(a) of the Income Tax Act, 1961. Subsequently, the second respondent issued a notice under Section 143(2) of the Act on 31.03.1994. The petitioner later on filed a revised return of the income on 04.07.1995 wherein, the deduction originally claimed for the provisions created for bonus and gratuity was reversed. The second respondent acting on the revised return, completed the scrutiny assessment under Section 143(3) of the Act on 22.11.1995.    

While so, later on, the second respondent issued a notice under Section 154 of the Act, with a view to rectify the original intimation dated 07.03.1994 issued under Section 143(1)(a) of the Act. The petitioner objected to the same. Rejecting the said objection, the second respondent passed an order of rectification on 14.12.1998 thereby levying an additional income tax to the tune of Rs. 4,70,346/-. Aggrieved over the said order, the petitioner preferred a revision under Section 264 of the Act to the first respondent. The said revision was also dismissed. Challenging the same, the petitioner has come forward with this writ petition. 

Held:   After passing of an order under Section 143(3) of the Act, intimation under Section 143(1)(a) of the Act gets merged with the said order under Section 143(3) of the Act and the intimation under Section 143(1)(a) of the Act does not any more independently survive for rectification by the Assessing Authority under Section 154 of the Act. To put it precisely, after an order has been passed in terms of Section 143(3) of the Act, no rectification order under Section 154 could be passed to rectify the intimation under Section 143(1)(a) of the Act. 

 

No. - W.P.No.17819 of 2001

Dated - August 19, 2010

For Petitioner : Mr.R.Venkatanarayanan  
For Respondents : Mr.J.Naresh Kumar,  

O R D E R  

The short question which arises for consideration is, whether an order of rectification under Section 154 of the Income Tax Act could be passed to rectify the intimation given under Section 143(1)(a) of the Act, after a final assessment order under Section 143(3) of the Act has been passed.

2. The petitioner is a Government of Tamil Nadu undertaking. It is an income tax assessee. For the accounting year ended with 31.03.1993, the petitioner submitted the tax return admitting Nil income. The said return was accepted by the second respondent on 07.03.1994 by issuance of an intimation in terms of Section 143(1)(a) of the Income Tax Act, 1961. Subsequently, the second respondent issued a notice under Section 143(2) of the Act on 31.03.1994. The petitioner later on filed a revised return of the income on 04.07.1995 wherein, the deduction originally claimed for the provisions created for bonus and gratuity was reversed. The second respondent acting on the revised return, completed the scrutiny assessment under Section 143(3) of the Act on 22.11.1995.

3. While so, later on, the second respondent issued a notice under Section 154 of the Act, with a view to rectify the original intimation dated 07.03.1994 issued under Section 143(1)(a) of the Act. The petitioner objected to the same. Rejecting the said objection, the second respondent passed an order of rectification on 14.12.1998 thereby levying an additional income tax to the tune of Rs. 4,70,346/-. Aggrieved over the said order, the petitioner preferred a revision under Section 264 of the Act to the first respondent. The said revision was also dismissed. Challenging the same, the petitioner has come forward with this writ petition.

4. The learned counsel for the petitioner would submit that if there had been no notice under Section 143(2) of the Act, then, within the period of limitation of four years, the intimation under Section 143(1)(a) of the Act can be amended by the Assessing Authority under Section 154 of the Act. But, if once, after the said intimation, a notice is issued under Section 143(2) of the Act and an assessment order is passed under Section 143(3) of the Act, the intimation under Section 143(1)(a) of the Act merges with the order under Section 143(3) of the Act. Therefore, after such merger, Section 143(1)(a) of the Act does not survive for rectification under Section 154 of the Act.

5. But the learned Senior Standing Counsel (Income Tax) appearing for the respondents would submit that there is no legal impediment for the Assessing Authority to invoke his jurisdiction under Section 154 of the Act to rectify the intimation under Section 143(1)(a) of the Act notwithstanding the fact that subsequent to the said proceeding, a final assessment order has been passed under Section 143(3) of the Act.

6. The learned counsel for the petitioner would rely on a judgment of the Hon ble Supreme Court in Commissioner of Income Tax v. Gujarat Electricity Board (2003 ITR (Vol.260) 84) wherein, it has been held as follows:-

Even otherwise, the view taken by the Gujarat High Court seems to be correct on principle. There is no dispute that section 143(1)(a) of the Act enacts a summary procedure for quick collection of tax and quick refunds. Under the scheme if there is a serious objection to any of the orders made by the Assessment Officer determining the income, it is open to the assessee to ask for rectification under Section 154. Apart therefrom, the provisions of section 143(1)(a) indicate that the intimation sent under section 143(1)(a) shall be without prejudice to the provisions of sub-section (2). The Legislature, therefore, intended that, where the summary procedure under sub-section (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 sub-section (2) of section 143. 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).
(Emphasis supplied)

7. A glance through the said judgment would make it clearly understandable that if once an assessment order is made under Section 143(3) of the Act, preceded by due notice under Section 143(2) of the Act, then there is no scope at all to proceed under Section 143(1)(a) of the Act.

8. The learned counsel for the petitioner nextly relied on a judgment of the Kolkatta High Court in C.E.S.C. Ltd., v. Deputy C.I.T (2003 ITR (Vol 262) 243) wherein, the High Court had an occasion to consider the judgment of the Hon ble Supreme Court in Commissioner of Income Tax v. Gujarat Electricity Board (cited supra) case, besides the judgments of various other High Courts. The relevant portion of the said judgment is extracted below:-

A further question therefore arises whether summary assessment or the provisional assessment or to be more precise, the assessment made on the basis of the return itself under Section 143(1)(a) of the Act accepting appropriation to contingency reserve as an allowable expenditure merged in the order passed under section 143(3) of the Act wherein the aforesaid appropriation to contingency reserve was disallowed ? What was accepted in the intimation has been reversed in the regular assessment and the assessee has preferred an appeal which is pending. I am firmly of the view that this is a case where the theory of merger is bound to apply because the intimation issued under section 143(1)(a) is no longer operative in respect of the assessment years 1990-91 and 1992-93. The only order which is effective and operative is the one passed under section 143(3) of the Act.

9. To hold that the intimation made under section 143(1)(a) of the Act merged with the order made under Section 143(3) of the Act, the Gujarat High Court has relied on the following judgments: (1)CIT v. Arihant Industries Ltd., (2002 (255) ITR 458 (Punjab & Haryana); (2)Gujarat Poly-AVX Electronics Ltd., v. Deputy CIT (Assessment) (1996 (222) ITR 140 (Gujarat) and (3)CIT V. Punjab National Bank (2001(249) ITR 763 (Delhi).

10. The Kolkatta High Court after having analysed many more judgments and also after having a scientific analysis of all the relevant provisions of the said Act, has ultimately held as follows:-

It follows that the effective and operative order is the one under section 143(3) of the Act and therefore the question of seeking to rectify the order under section 143(1)(a) of the Act can never arise.

11. In view of the law laid down by the Hon ble Supreme Court in Commissioner of Income Tax v. Gujarat Electricity Board (cited supra), after passing of an order under Section 143(3) of the Act, intimation under Section 143(1)(a) of the Act gets merged with the said order under Section 143(3) of the Act and the intimation under Section 143(1)(a) of the Act does not any more independently survive for rectification by the Assessing Authority under Section 154 of the Act. To put it precisely, after an order has been passed in terms of Section 143(3) of the Act, no rectification order under Section 154 could be passed to rectify the intimation under Section 143(1)(a) of the Act. Thus, I agree with the law laid down by the Kolkatta High Court in Commissioner of Income Tax v. Gujarat Electricity Board (cited supra). In such view of the matter, since the rectification is wholly without jurisdiction, I hold that the impugned order passed by the second respondent and confirmed by the first respondent is liable to be interfered with.

12. In the result, the writ petition is allowed and the impugned order is set aside. No costs.