9911796707
TMI Blog1987 (6) TMI 123X X X X Extracts X X X X X X X X Extracts X X X X ..... nbsp; Rs. Interest paid to Kesaria & Co. (E) 689 Interest paid to Kesaria & Co. (G) 6,460 Interest paid to Kesaria Nilgiri Hills Tea Plantations 16,898 ------ 24,047 It was however found from the copy of the assessee's accounts in the firms that the drawings from the firms had been made only for personal purposes such as payment of Life Insurance Premium, purchase of furniture, purchase of air tickets, etc. As the withdrawals from these firms were f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd the AAC erred in quashing the same and at best he should have only modified the addition. 5. We have considered the rival submissions. The present assessment has been made under section 143(1). The provision as it stood at the material time read as under: "143. Assessment. -(1)(a) Where a return has been made under section 139 the ITO may, without requiring, the presence of the assessee or the production by himself 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 ITO shall make the following adjustments to the income or loss declared in the return, that is to say, he shal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r clause (a)] shall not be issued by the ITO unless the previous approval of the IAC 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." 7. Finally there are the provisions of section 143(3) which state : "(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 ITO may require on specified points, and after taking into account all relevant material which he has gathered,- (a) in a case where no assessment has been made under sub-section (1), the ITO shall, by an or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ec. 143(1), he would be acting beyond his jurisdiction in making the assessment u/s 143(1). See. 143(1)(iii) is the only relevant provision in the present case. That permitted the ITO to disallow any deduction, allowance or relief claimed in the return, which on the basis of the information available in such returns, accounts and documents is prima facie inadmissible. On the ITO's own showing in the order u/s 154 it was found only from the copy of the assessee's accounts in the firms of which he was a partner that the drawings had been for personal purposes. Therefore, this was not information available in such returns', accounts or documents, because the accounts and documents referred to are accounts and documents, if any, which accompanied the return. Therefore, while making the assessment u/s 143(1) the ITO could not have made adjustments which he purported to make u/s 154. If he did so since he would have exceeded his jurisdiction his order u/s 143(1) would have suffered from a mistake apparent from the records since it would have been contrary to law. 9. On reading the provisions of sec. 143(2)(b) it is clear that before the ITO made the assessment u/s 143(1), he had the opt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The rectification u/s 154 cannot vest additional jurisdiction with the ITO. If the ITO wanted to. make adjustment according to his discretion, he should have taken recourse to the provisions of sub-secs. (2) and (3) of sec., 143 when he would have untrammelled vista; but not having chosen to do so, he was shut out from making the rectification in the present case u/s 154. Had the assessment been made u/s 143(3), the position would have been different but by giving up that option, the powers of rectification u/s 154 also become circumscribed with such powers alone that could be exercised within the jurisdiction conferred u/s 143(1). In the present case, such jurisdiction in making the assessment u/s 143(1) has clearly been transgressed by making the impugned adjustment u/s 154. The order u/s 154 was accordingly rightly annulled by the AAC though we have come to this conclusion by different reasons than those stated by the AAC. 11. Appeal of the revenue is accordingly dismissed. Per Shri D.S. Meenakshisundaram, Judicial Member - I have had the advantage of perusing the order of my learned brother, Shri George Cheriyan. With great respect to him, I find myself unable to agree with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er sec. 143(3)(b) of the Act. In cases where the Income-tax Officer does not act under section 143(3)(b), it is open to him to rectify any mistake apparent from the record by invoking his powers under section 154 of the Act. I find nothing in the provisions of section 143(1) of the Act which puts a constraint on the jurisdiction and powers of the Income-tax Officer u/s 154 of the Act so as to take all orders passed by an Income-tax Officer u/s 143(1) of the Act out of the purview of sec. 154 of the Act. Such a conclusion does not follow either on the express provisions contained in sec. 143(1) read with sec. 154 of the Act or by implication. 4. In CIT v. Shahzada Nand & Sons [1966] 60 ITR 392 at 400, their Lordships of the Supreme Court quoted with approval the following rules of construction : "The classic statement of Rowlatt J. in Cape Brandy Syndicate v. Inland Revenue Commissioners still holds the field. It reads: ' . . . In a taxing Act one has to look merely at what is clearly said. There is no room for any intendment. There is no equity about a tax. There is no presumption as to a tax. Nothing is to be read in, nothing is to be implied. One can only look fairly at the la ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o the proposed rectification till the Income-tax Officer passed the order of rectification under sec.154 on 26-8-1982. It is for the first time before the AAC the assessee's representative seems to have produced copies of accounts in support-of his contention that most of the drawings had been utilised for payment of taxes and that therefore the Income-tax Officer's view was not correct. If the AAC considered that this contention of the assessee was right, in fairness he should have given an opportunity to the Income-tax Officer to examine these copies of accounts and offer his comments before he accepted the same. Since the ITO had no opportunity to examine the copies of accounts produced by the assessee to substantiate his claim and since the AAC also did not give any opportunity to the ITO, I consider it Just, fair and reasonable to set aside the order of the AAC and restore the matter to his file for fresh disposal in accordance with law after giving an opportunity both to the assessee and the Income-tax Officer to substantiate their contentions. For statistical purposes, I would treat the appeal filed by the department as partly allowed. ORDER UNDER SECTION 255(4) OF THE INCO ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eal is an individual deriving income from various firms and dividends. I am concerned in this appeal with three of these firms, viz., M/s. Kesaria & Co. (E), M/s. Kesaria & Co. (G) and M/s. Kesaria Nilgiri Hills Tea Plantations. From the first two firms, the assessee had shown nil income and from the third firm, a share income of Rs. 21,929 was determined. The assessee also paid interest to these three firms of the following sums:- Rs. (i) Kesaria & Co. (E) 689 (ii) Kesaria & Co. (G) 6,460 (iii) Kesaria Nilgiri Hills Tea Plantations 16,898 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be rectified was not a mistake apparent from record and that it was only a change of opinion, and (b) the copies of the accounts of the assessee in the said three firms showed that most of the drawings were utilised for the payment of taxes and, therefore, the view taken by the ITO that the withdrawals were used for non-business purposes like payment of insurance premium, purchase of furniture and purchase of air tickets, was incorrect. 7. The AAC allowed the assessee's claim with the following observations :- "After going through the facts of the case and the learned representative's argument, I hold that the ITO has no jurisdiction to rectify the assessment u/s. 154 as on this issue more than two opinions are possible, and in no sense the mistake s ought to be rectified here can be termed as a mistake apparent from records." Aggrieved by this order, the Department has come up in further appeal before the Tribunal. 8. After hearing the arguments advanced both for and against the assessee, the learned Judicial Member took the view that the adjustment made by the ITO under sec. 154 fell very much within the purview of the provisions of sec. 154 even though the assessment, in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at an order passed under sec. 143(1) is not amenable to rectification under sec. 154, since any mistake that crept into an assessment order can be rectified. If this extreme view is taken, he argued, if there is a simple arithmetical mistake in addition or subtraction or In the calculation of tax, there will be no remedy left to rectify those mistakes except resorting to the long-drawn process of seeking the intervention of the CIT. This is not the object of section 154. By relying upon the wordings of sec. 154, he submitted that 'any order' passed by an ITO used in that section, referred to any assessment order passed by the ITO irrespective of whether they are under sec. 143(1) or 143(3) or 144. Therefore, the ITO is entitled to apply the provisions of sec. 154 if he found that there was a mistake. When he made an assessment without making statutory enquiries as he was bound to do under sec. 143(1) and makes an allowance which is prima facie disallowable, that becomes a mistake apparent from record which he can rectify under sec. 154. In this case, the assessee's withdrawals from the firms were discovered to have been made only for personal purposes and not for business purposes. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion to make further enquiry was not called for. 12. I have carefully considered these submissions and, in my opinion, the matter could be disposed of on facts without referring to the legal questions raised although I am of the opinion that it will be very difficult to say that to an assessment made under sec. 143(1), the provisions of sec. 154 would have no application. I would not like to dwell on this point much further. I would like to see whether the facts of this case present a view that the interest was wrongly allowed. The order passed by the ITO under sec. 154 shows that it was only after seeing the firms' records that he came to know from the copies of accounts of the assessee in those firms that the withdrawals made were for personal purposes. It is not clear from the facts, of this case whether the records of the firms were available to the ITO when he made the assessment under sec. 143(1). If the records were available to the ITO at that time, then it could perhaps be said that the ITO made a mistake in allowing the assessee the interest. But, if the information came into his possession subsequent to the making of the assessment under sec. 143(1), that information ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ttributable to the withdrawals made for payment of income-tax and other matters other than insurance premium are allowable as a deduction even as per the admission of the ITO in the order passed under sec. 154. Thus, the enquiry made by the ITO was half-baked and in such a situation, to propose to disallow the entire amount is certainly not called for. To that extent, the matter has become debatable. The position with regard to the other account is not dissimilar except that the amount paid towards life insurance is hardly Rs. 2,140 out of total withdrawal of Rs. 2,53,000. The conclusion drawn by the ITO that the withdrawals were utilised for payment of insurance premium, purchase of furniture and purchase of air-tickets is, therefore, factually incorrect and this is. the aspect which was emphasised by the AAC in his order when he allowed the claim. Therefore, the observations made by the learned Accountant Member in his order that the record must mean the record available with the ITO while making the assessment and the enquiry must be with regard to this record, appears to be correct and if any mistake is not apparent from those records, the provisions of sec. 154 were not availa ..... X X X X Extracts X X X X X X X X Extracts X X X X
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