TMI Blog2003 (7) TMI 62X X X X Extracts X X X X X X X X Extracts X X X X ..... Tribunal, Jodhpur Bench, Jodhpur, dated March 27, 2002. The appeal relates to intimation/assessment under section 143(1) of the Income-tax Act, 1961 (hereinafter called as "the Act"), for the assessment year 2000-2001 in the case of the respondent-assessee. The return of income was filed by the assessee on October 30, 2000, for the assessment year 2000-2001. An intimation under section 143(1) was sent by the Assessing Officer on November 9, 2000, making variation in the calculation computing the interest as made by the assessee under sections 234B and 234C of the Act. Aggrieved by the aforesaid additions made to the admitted liability to pay interest by the assessee while exercising jurisdiction under section 143(1), the assessee preferred a rectification application before the Assessing Officer which was dismissed by him on January 16, 2001. He held that there is no mistake apparent on the face of the record and the Assessing Officer had jurisdiction to make such adjustment in the computation of interest in exercise of his jurisdiction under section 143(1)(a) of the Act. The appeal filed by the assessee before the Commissioner of Income-tax (Appeals) was dismissed on Nove ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ll in payment of advance tax calculated as per the income returned by the assessee including capital gains from September 15, 1999, when the first instalment of advance tax became due and the assessee has failed to pay the minimum required percentage of advance tax on the basis of 30 per cent. of the tax on the basis of the returned income in terms of sub-section (1) of section 234C of the Act. The Tribunal on further appeal by the assessee found against the assessee on the question that whether recalculation of interest under section 234C on different interpretation of law at all could have been made in exercise of powers under section 143(1). However, on the merits, it found in favour of the assessee that the Assessing Officer was not justified in charging interest for the period prior to the date the liability to tax arose. It held that on reasonable interpretation of law, the assessee was liable to pay interest only for one month during which advance tax was not paid in respect of capital gains which had arisen after March 15, 2000. With this finding the appeal of the assessee was allowed. Under the aforesaid circumstances, this appeal has been preferred by the Revenue. Whi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nded a notice to the assessee before he could proceed further to make any assessment. A provision was made with effect from April 1, 1971, by enacting section 143(1)(a) enabling the Assessing Officer to make certain adjustments while making the assessment without requiring the presence of the assessee. It also prescribed under section 143(1)(b) what kind of adjustments were permissible under section 143(1)(a). It, inter alia, provided that where any return and documents mentioned in clause (a) of sub-section (1) are filed to allow any deduction, allowance or relief which on the basis of the information available in any such return or documents is prima facie admissible. Whether such claim is made in the return or not and vice versa to disallow any allowance or relief claimed in the return, which on the basis of the information available in the accounts and documents was "prima facie" inadmissible. Under section 143(1)(b), the Assessing Officer was further enabled to make adjustment by giving due effect to the allowance referred to in sections 32, 32A, 33, 33A, 35A, 350, 36, 72, 73, 74 and 74A and 80(5), which all related to the claims to deduction on account of depreciation, invest ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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'" It would be seen that after this amendment no provision like sub-section (2) of section 143 as it existed prior to April 1, 1989, was there enabling the assessee to make an application to the Assessing Officer within one month for protesting against such adjustment. However, intimation made under section 143 was made subject to correction through rectification under section 154. The term assessment was also not assigned to the adjustment made under section 143(1) but was simply described as intimation. The only remedy made available against intimation issued under section 143(1) and demand raised in pursuance of such intimation was to apply for rectification under section 154. The provisions of appeal against such intimation did not find place on the statute book until section 46 was amended vide Finance Act of 1994, with effect from June 1, 1994. Unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any tax paid on self-assessment and any amount paid otherwise by way of tax or interest, only suggests that on the basis of the return submitted and claims made by the assessee in respect of any of his liabilities, allowance, or claim to deductions the same has to be accepted and tax and interest is to be computed payable on that basis and any amount already paid by way of advance tax or tax deducted at source which becomes part of the tax paid by the assessee or any tax paid on self-assessment as well as any amount paid otherwise than in the aforesaid manner by way of tax or interest, against that liability, the balance has to be intimated either in the form of demand which may remain outstanding on such computation or order refund, of the amount if any, which is found to have been paid in excess of tax and other dues payable on such income under the Act. The question of any determination as to the liability of interest on the tax otherwise than as per the claims made by the assessee is not within the scope of sub-section (1) of section 143 as it has come into force with effect from April 1, 2000, and governs the assessment proceedings for the assessment year 2000-2001. Howeve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... allowance or the existence of the liability and any deviation required recourse to regular assessment, which could be the subject matter of regular appeal. Therefore, in our opinion, the recourse by the learned Assessing Officer to reject the assessee's claim to the extent of liability of interest in respect of capital gains only for one month, and to raise demand by holding him liable to pay interest for a longer period on the basis of his own reading of section 243C, while making an intimation to the assessee, was an error apparent on the face of the record which was clearly amenable to rectification proceedings under section 154 of the Act. In this connection, we may notice that the Finance Minister in his speech while introducing the Finance Bill, 1999, along with the memorandum explaining the amendment in direct taxes in the Finance Bill, 1999, had given indication that provision enabling the Assessing Officer to make prima facie adjustment and the provision for levy of additional tax on any such additional demand raised on the basis of such adjustment was to spare the time and to utilise other important work which has not been properly understood by the Revenue. authorit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the return subject to arithmetic calculation and adjusting such tax liability or interest liability against the tax or interest already paid by way of tax, advance tax, self-assessment tax or otherwise. This being the clear position, in our opinion, the Tribunal was not justified in rejecting the preliminary objection raised by the assessee to the exercise of jurisdiction under section 143(1) by the Assessing Officer for deciding important questions of law by interpreting the provisions. The assessee's plea for rectification was not that the liability to pay interest under section 234C is disputable. But his contention was that under section 143(1), the Assessing Officer had no authority to make such adjustment to interest statutory provision and on which possibly two opinions can exist. Such issues can be determined only under section 143(3) and not under section 143(1). Therefore, it was beyond the jurisdiction of the Assessing Officer to have increased the interest liability by deciding the question of extent of interest chargeable on capital gains accruing after 15th March, 2000, unilaterally without notice to the assessee. This issue in our opinion notwithstanding noticed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d the jurisdiction of the Assessing Officer. Having noticed this aspect of the matter but in not deciding the question squarely on the ground of jurisdiction to make such additions and alterations in the assessment year in question vide intimation under section 143(1), the Tribunal clearly erred. Be that as it may, both learned counsel argued at length on the merits regarding the extent of liability to pay interest for non-payment of advance tax in respect of capital gains prior to its accrual and the scope of appeal under section 260A is much wider than it existed earlier while opining on the question of law referred to it. We deem it proper to deal with this aspect also and do not consider it proper to pursue the assessment proceedings de novo and leave this case again to go through the same process. The Tribunal too has decided the appeal on the merits of the issue. The rival views of the Revenue as well as the assessee have been noticed above. It will be relevant to notice here the provisions of section 234C to find an answer. Section 234C as it prevailed during the relevant assessment year 2000-01 reads as under: "234C Interest for deferment of advance tax. -(1) Where in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e or rates of the income-tax on which total income is to be subjected to tax for any assessment year, no income-tax would be chargeable. Unless the Central Act comes into force, the liability to tax on the total income of the previous year cannot be subject to charges. The taxable income is derived in the previous year. Thus the taxing event occurs in the previous year and the total income of the year can be computed only at the close of the year. Though liability to tax stands ex hypothesis determined on that date no tax can be levied and collected in the absence of any other provision authorising such collection prior to the enactment of such Central Act and the machinery for assessment can be put into action. It is to make bridge between the taxing event and the collection of tax on being determined through the assessment so that the flow of tax to the public exchequer remains uninterrupted, it was devised that every assessee periodically pay estimated tax on such income earned during the previous year. Provision for advance tax has been made in Part C of Chapter XVII, which provides for collection and recovery of tax under section 207, and creates a liability for payment of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt income whether, estimated by the assessee or determined by the Assessing Officer in accordance with the provisions of sections 209 and 210 of the Income-tax Act, advance tax payable by the assessee is to be computed and to be paid in the manner stated above. However, it is to be noticed that advance tax becomes payable on "current income" and current income is computed on estimate basis and does not in the very nature of thing reflect the exact income which ultimately find place in the return. Such estimate on certain assumptions is founded on existing materials. It is for this reason, when there is variation between advance tax paid and actual liability to tax as per return the provision for payment of interest on shortfall in payment of advance or excess payment of advance tax has also been made. The difference of advance tax and the actual tax liability as per return results either because the assessee has paid less tax than what becomes payable by him on his income earned during the previous year as per his own showing or the assessee may have paid more amount than what is payable by him on the basis of the return submitted by him after the previous year ended. It is for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... date on which such deficit is paid, no such time limit is fixed in case there is shortfall on the last instalment. In that event the interest is payable under section 234C only up to 31st March. On the amount remaining unpaid after 31st March, interest is payable until the date of actual payment, if any, before filing of the return under section 234B. We have noticed above that the liability to pay advance tax arises on current income computed by the assessee or by the Assessing Officer, as the case may be. While income from a regular source like profits and gains of business, interest on deposits, rents, salaries which occur regularly can be estimated at any given point of time up to that period, the income which accrues or arises on completion of a particular transaction only and not out of any current or regular activity, obviously cannot be the subject matter of estimate before the event actually occurs. Considering the impossibility for the assessee or the Assessing Officer to estimate any income arising out of any particular transaction which has not occurred or come into existence, a proviso has been made to sub-section (1) of section 234c. It provides that the provision ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me does not arise prior to the date of such accrual and that liability for payment of advance tax on such income arising with the next instalment falling due. Therefore, on a transaction which has taken place on the 30th September, the liability to pay advance tax, in respect of such income by including in current income arises only when the next instalment becomes due on or before the 15th December. But no such liability to pay advance tax in respect of capital gains accruing on the 30th September, existed on the 15th September, non-payment of which can be considered as deficiency in payment of advance tax only when it became due. Therefore, no deficit amount can be determined in respect of advance tax payable on the current income on the 15th September. Likewise, if no capital gains have arisen prior to the 15th March of any financial year, as in the present case, the assessee had no liability to include the same in the computation of current income on that date and to pay tax in respect of such income with last instalment due on the 15th March. Therefore, he has no occasion to make payment of any advance tax on such part of the income during the previous year. To collect tax eve ..... X X X X Extracts X X X X X X X X Extracts X X X X
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