TMI Blog2008 (4) TMI 276X X X X Extracts X X X X X X X X Extracts X X X X ..... ibunal is right in holding that the cross-objection filed by the appellant had become academic and infructuous ? (ii) Whether after issuance of notice under section 143(2) of the Act, it is not open to the Assessing Officer to make adjustments or pass an order under section 143(1) of the Act, and he has to make the assessment under section 143(3) of the Act ?" 2. The relevant facts, in a nutshell, which give rise to the present appeal are as follows: 3. The appellant is a public limited company engaged in business of manufacture and sale of sponge iron. It was incorporated under the Companies Act, 1956, on July 31, 2005, and assessed to income-tax since the assessment year 1984-85. The appellant filed return under section 139 of the Income-tax Act, 1961 (hereinafter referred to as "the Act") for the assessment year 1997-98 on September 26, 1997, and subsequently revised it by return dated December 30, 1997. The return was accompanied by audited profit and loss account and balance-sheet as well as tax audit report. On receipt of the return the Assessing Officer has initiated proceedings of assessment by issuing notice under section 143(2) of the Act on February 19, 1998 an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... holding that the Commissioner of Income-tax (Appeals) was not justified in granting relief claimed on account of depreciation of guest house and salary and wages paid for the maintenance of guest house. The learned Income-tax Appellate Tribunal did not adjudicate the issue raised in the cross-objection holding that the cross-objection filed by the present appellant only supported the action of the Commissioner of Income-tax (Appeals) and in view of its finding in the Department appeal, the cross-objection became infructuous and has become an academic one. 5. Learned counsel appearing on behalf of the appellant strenuously argued that the learned Income-tax Appellate Tribunal is not justified in holding that the cross-objection filed by the appellant supported the action of the Commissioner of Income-tax (Appeals) and therefore it had become academic and infructuous. He further contended that once notice under section 143(2) of the Act is issued for making a scrutiny assessment under section 143(3) of the Act the Assessing Officer cannot exercise jurisdiction under section 143(1) for making any prima facie adjustment. In support of his contention, he relied on the decision of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sal of the grounds of cross-objection clearly reveals that the appellant in its ground Nos. 3 and 4 challenged the decision of the learned Commissioner of Income-tax (Appeals) in upholding the action of the Assessing Officer in issuing intimation under section 143(1) subsequent to issue of notice under section 143(2) of the Act instead of annulling the said intimation. Thus the observation of the learned Income-tax Appellate Tribunal that in the cross-objection the present appellant only supported the action of the learned Commissioner of Income-tax (Appeals) is contrary to the materials available on record. As required under section 253(4) of the Act, the learned Income-tax Appellate Tribunal should have disposed of the memorandum of cross-objection as if it were an appeal presented before it section 253(4) of the Act is reproduced herein below: "The Assessing Officer or the assessee, as the case may be, on receipt of notice that an appeal against the order of the Deputy Commissioner (Appeals)] or, as the case may be, the Commissioner (Appeals) has been preferred under sub-section (1) or sub-section (2) by the other part, may, notwithstanding that he may not have appealed agains ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cuments, 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 where adjustments are made under the first proviso, an intimation shall be sent to the assessee, notwithstanding that no tax or interest is found due from him after making the said adjustments:…. (2) Where a return has been made under section 139, or in response to a notice under sub-section (1) of section 142, the Assessing Officer shall, if he considers it necessary or expedient to ensure that the assessee has not understated the income or has not computed excessive loss or has not underpaid the tax in any manner, 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 Provided that no notice under this sub-section shall be served on the assessee after the expiry of twelve months from the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct return of income is submitted with a view to save additional tax which may be imposed on them. This additional tax is not leviable when an assessment order is passed under section 143(3) of the Act. Thus, what is not permissible under section 143(3) of the Act cannot be made permissible by allowing the Assessing Officer to resort to section 143(1) of the Act. What cannot be done directly cannot be done indirectly. Therefore, after calling upon the assessee to produce evidence by issuing notice under section 143(2), the Assessing Officer cannot issue intimation under section 143(1) (a). 12. The Central Board of Direct Taxes also in ifs Circular No. 549, dated October, 31, 1989 (see [1990] 182 ITR (St.) 1) has advised the Assessing Officers to issue intimation under section 143(1) before issuance of notice under section 143(2) of the Act. Therefore, it is not open to the Assessing Officer to make prima facie adjustment as provided under section 143(1) of the Act, after issuance of notice under section 143(2) of the Act. 13. In Modern Fibotex India Ltd. [1995] 212 ITR 496 the Calcutta High Court held that once notice under section 143(2) has been issued there is no s ..... 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