TMI Blog1998 (7) TMI 123X X X X Extracts X X X X X X X X Extracts X X X X ..... s. 2,15,386.77 in Textile Division and the detail of interest was furnished but ld. Assessing Office disallowed the interest of Textile Division amounting to Rs. 2,13,383 and of Rs. 1,38,919 of Singh Export Corporation out of the total amounts of respective interest claimed by both the concerns as detailed above. The assessee preferred appeal against this order of assessing officer and it was submitted that details of interest paid to the Bank for specific borrowings such as term loan, interest on export bill, interest on packing credit for production of garments for export was filed. It was submitted that these borrowings were specific from banks which does strict monitoring of utilization of such borrowings, that these are used only for the purpose for which borrowings were made as for purchase of machinery, purchase of fabric etc., the question of disallowance of interest does not arise. Moreover, there were no advances to sister concerns from the Textile Division and therefore, no disallowance of interest is called for out of interest paid to banks amounting to Rs. 2,15,385. It was, thus, pleaded that disallowance of interest made by the Assessing Officer needs to be deleted. L ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... purpose of the Income Tax Act. The language of section 143(3) and judicial pronouncement on the subject leaves no ambiguity that determination of tax liability is essential for making a valid assessment under section 143(3). In fact, the whole purpose of the Income Tax Act will be lost if the tax liability remains undetermined in scrutiny assessment made by an assessing officer. (c) The assessment without determination of tax liability is not procedural omission which could be protected under section 292B. The assessment is null and void and the same should be annulled.' 5. The ld. CIT(A), however, upheld the validity of the assessment order as per para 3, 4 and 5 of his order. The assessee preferred second appeal against this order of ld. CIT(A), wherein he has challenged the legal aspect as raised before and decided by him against the assessee as well as decision on merits whereby disallowance of interest paid of Rs. 36,137 on packing credit borrowed for export business was upheld. 6. The assessee's counsel first took up legal issue and reiterated the submissions as made before the ld. first appellate authority and while relying upon the judgments in the case of S. Mubarik ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f facts and circumstances of the case. 7. Ld. DR, while supporting the order of authorities below in respect of ground Nos. 1 and 2 of the grounds of appeal, submitted that so far as defect in demand notice is concerned, section 292B of the Act, which was inserted by Taxation Laws Amendment Act 1975 w.e.f. 1- 10- 1975, takes care of such defects and said provision was, in fact, inserted with a view to overcome the situation on technical grounds declaring an order to be invalid merely by reasons of some mistake, defect or omission in the return of income, assessment, notice and summons etc. So far as judgments in the case of S. Mubarik Shah Naqshbandi and Mohendra J. Thacker Co. are concerned, the same cannot be applied to the case of assessee as these were- delivered before insertion of section 292B of the Act and as regards judgment in the case of R. Giridhar is concerned, it was submitted that it holds the view that an order passed after insertion of section 292B of the Income-tax Act, if in substance and effect is in conformity and according to the intent and purpose of the Act, the same cannot be deemed to be invalid merely by reasons of some mistake, defect or omission in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t all relevant material which he has gathered, (a) in a case where no assessment has been made under sub-section (1), the Income Tax 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 or refundable to him on the basis of such assessment.... 144. If any person -- (a) fails to make the return required by any notice given under sub section (2) of section 139 and has not made a return or a revised return under sub-section (4) or sub-section (5) of that section, or (b) fails to comply with all the terms of a notice issued under sub section (1) or section 142 (or fails to comply with a direction issued under sub-section (2A) of that section), or (c) having made a return, fails to comply with all the terms of a notice issued under sub-section (2) of section 143, the Income Tax Officer, after taking into account all relevant material which the Income Tax Officer has gathered, shall make the assessment of the total income or loss to the best of his judgement and determine the sum payable by the assessee or refundable to the assessee on the basis of such assessment." 9. It is an admitted po ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inst the notice of demand. A notice of demand always contains the tax payable by the assessee but it does not follow that a notice of demand should be treated as part of the assessment order. A notice of demand is issued in consequence of an assessment order and not as part of it. The counsel for the Revenue further contends that there is a clear distinction between the two parts of section 144 namely (1) which requires the ITO to determine the tax payable by the assessee. According to the counsel it is the first part which requires the application of mind by, the ITO and the second part is only a mechanical application of the rates of the income-tax prescribed by the Finance Act of the relevant year. There is a distinction between the two parts of section 144 but this distinction does not in any way affect the mandatory nature of section 144 which requires not only that the ITO should determine the income of the assessee, but he should also determine the tax payable by the assessee. It was concluded that an assessment order which determines the total income of an assessee should also determine the tax payable by the assessee, as the determination of tax payable in as much mandator ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he total income as well as of the sum payable) should be done on the same sheet of paper, the sheet that is superscribed 'assessment order'. It does not prescribe any form for the purpose. It will be appreciated that once the assessment of the total income is complete with indications of the deduction, rebates, reliefs and adjustments available to the assessee, the calculation of the net tax payable is a process which is mostly arithmetical but generally time-consuming. If, therefore, the ITO first draws up an order assessing the total income and indicting the adjustments to be made, directs the office to compute tax payable on that basis and then approves of it, either immediately or some time later, no fault can be found with the process, though it is only when both the computation sheets are signed or initialled by the ITO that the process described in section 143(3) will be complete'. But the situation as obtaining in the case in hand is somewhat, if we say so, entirely different as calculation of tax is not there at all. 15. The Hon'ble Supreme Court further held that : - "In this context, one may take notice of the fact that, initially rule 15(2) of the IT Rules prescribe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . In Sushil Chandra Ghose v. ITO [1959] 35 ITR 379 (Cal.), the assessee was served, apart from the assessment order, with a copy of the form known as I.T.N.S. 150 which was not signed by the Income Tax Officer but the court upheld the assessment because the original thereof had been duly signed. In S. Mubarik Shah Naqshbandi v. CIT [1977] 110 ITR 217 (J K), the 'assessment order' did not determine the tax payable and there was no other paper or form containing the computation except the notice of demand. In R. Gopal Ramnarayan v. Third ITO [1980] 126 ITR 369 (Kar.), the Tribunal had annulled an assessment because the tax calculations had been made on a separate sheet of paper but the Department could not raise this issue before the High Court because it had not challenged the Tribunal's order in appropriate proceedings. The Karnataka High Court, however, did not have occasion later to consider the question directly and upheld an assessment made in similar circumstances in CIT v. R. Giridhar [1984] 145 ITR 246 (Kar), even though the separate sheet containing the tax computations had not been signed by the Income Tax Officer. ThePunjaband Haryana High Court has also taken the same vi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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