TMI Blog2008 (10) TMI 293X X X X Extracts X X X X X X X X Extracts X X X X ..... sment, and (ii) in illegally assuming jurisdiction under section 263 of Income-tax Act. The revision order under section 263 of Income-tax Act may therefore, kindly be quashed. 3. On the facts and in the circumstances of the case, the learned Commissioner of Income-tax erred in law in holding that the processing under section 143(1) amounted to an assessment order and that the processing done under section 143(1) was erroneous and prejudicial to the interest of revenue. Accordingly the order under section 263 may kindly be declared as void. 4. On the facts and in the circumstances of the case the order made under section 263 is null and void, as no proper notice or opportunity was allowed to the appellant before passing the order under section 263 and principle of natural justice were grossly violated. 2. The hearings in the present appeal took place on five different days spread out from 26-7-2007 to 28-8-2007. 2.1 On 26-7-2007 when the present appeal came up for hearing, adjournment application was moved by the revenue on the ground that the appeal had to be argued by the Sr. D.R. However, the same was rejected. The learned AR submitted that in the facts of the pres ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ourts relied upon by the CIT in the impugned order have to be addressed by the learned AR and the issue cannot be decided alone on the basis of the judgments relied upon before the Bench. Accordingly on the said date the appeal was adjourned to 8-8-2007. 2.5 The learned DR on the next date submitted that the fact that as per Scheme of the Act the summary assessments under section 143(1) or under section 143(a) were to be treated as regular assessment for the purpose of initiating action under section 263 of the Income-tax Act and these facts are discussed in CIT v. Sri Mahasastha Pictures [2003] 263 ITR 304 (Mad.). Reliance was also placed upon CIT v. Anderson Marine Sons (P.) Ltd [2004] 266 ITR 694 (Bom.). Reliance was also placed upon CIT v. Rajkumar Deepchand Phade [2001] 249 ITR 520 (Bom.) and Jai Bharath Tanners v. CIT [2003] 264 ITR 673 (Mad.). It was his submission that these judgments have been taken into consideration by the CIT and are latest in point of time since they have taken into consideration position of law as applicable today. 2.6 The learned AR, on the other hand, submitted that the two judgments of the Allahabad High Court and the judgment of the Calcutta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... authority under section 116 and sub-clause (b) makes a mention of rectification in regard to any intimation or deemed intimation under sub-section (1) of section 143 of the Act. 3.4 Similarly inviting attention to section 246(1)(a) it was his submission that even with regard to the appealable orders separate and distinct mentions are made intimation under section 143(1) and under section 143(3) or section 144 etc. 3.5 Accordingly on the basis of these above submissions it was his argument that the CIT travelled beyond his jurisdiction by invoking the provisions of the Act under section 263. 3.6 Inviting attention to section 263 of the Act it was his submission that he can pass such an order as the circumstances of the case justified including an order of enhancement; or modifying the assessment or cancelling the assessment and directing a fresh assessment. It was his submission that the assessment completed under section 143(1) is not an assessment. 3.7 Inviting attention to para 7 of the impugned order it was his submission that even if the same is set aside de novo as has been directed by the Commissioner to be passed afresh even then the Assessing Officer can neither en ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is rendered in the context of the position of law as was prevalent till 1999-2000 assessment year and their Lordships have made this fact the very basis of their judgment as for that period Explanation to section 143(5) was operative which was omitted subsequently. As such, since the position of law is very different and distinct by virtue of the Amendments in the relevant provisions it has no applicability. Attention for this purpose was invited to page 515 of the said judgment which takes into consideration the position the decision of law. For ready reference the same is reproduced hereunder:- "As discussed above, by no stretch of imagination an intimation/acknowledgement under section 143(1)(a) can be treated as an order except as contemplated in the Explanation 143 thereof in view of the fiction created thereunder. The Legislature had made a distinction between an order and an intimation. The intention of the Legislature was clear in creating the fiction through the Explanation to section 143 treating an intimation/acknowledgement to be an order within the confined meaning of sections 246 and 264 alone. The provisions of section 154(1) empowering the Assessing Officer to re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e sub-section (5) of section 143 stands omitted the said judgment does not have any applicability on the issue at hand. 4.4 Thus, inviting attention to section 263 of the Act it was his submission that there is no bar in the Scheme of the Act for the Commissioner to exercise his Revisionary powers under section 263 of the Act, specially since a perusal of the impugned order would show that the assessment completed under section 143(1) is erroneous and prejudicial to the interests of the revenue for the following reasons as have been set out in per para 1 of the impugned order:- (i) The Assessing Officer had failed to take note of low net profit results shown from liquor business which were apparently very poor (ii) The capital contribution of Rs. 27,50,000 shown in the names of partners were accepted in the absence of required enquiries. (iii) Cash credits of Rs. 11,95,512 were accepted in the absence of the required enquiries. 4.5 Accordingly, after issuance of notice and conducting enquiries as discussed in para 5 the impugned order it was submitted that the learned Commissioner has held by a reasoned and speaking order that the assessment is erroneous and prejudicial t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nst intimations have been provided to the assessee. 4.7 This position has also been taken into consideration by the Bombay High Court and the Madras High Court who have noted that section 246 makes the intimations appealable. The judgment of the Calcutta High Court it was reiterated has been rendered in the context of the provisions as available on the Statute under section 143(5) and the Explanation thereto, however, for the year under consideration. Thus, the same stands omitted. 4.8 With regard to the submissions of the learned AR that by virtue of section 263 of the Act the Commissioner can enhance or modify and cause the enquiries to be made is a matter of fact and once the 263 order is upheld, all sections and consequences thereto shall automatically follow. 5. However, on the said date the hearing was again adjourned to 28-8-2007 so as to afford both the sides to make any arguments if necessary further and also to bring to the notice of the Bench if need be the objects and reasons placed before the Legislature for the omission of sub-section (5) of section 143 and the Explanation thereto. 6. On the next date of hearing the learned DR submitted that he could not lay h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has stated that assessment under section 143(1) is an order. Moreover by virtue of Amendment in section 143(3) the applicability of the judgment of the Calcutta High Court in Hilltop Holdings India Ltd. has also been opposed as such the non-applicability of section 263 of the Act does not arise. 8.2 Specific attention was invited to the impugned order so as to address the aspect that specific enquiries had not been made by the Assessing Officer and information etc., had been received by the Commissioner in terms of the provisions of the Act which have not been addressed by the learned AR at all. The issue of capital contribution of the partners of Rs. 27,50,000 has been accepted by the Assessing Officer without any enquiries and cash deposits of Rs. 1,23,05,565 have also not been enquired into and even in the 263 proceedings no explanation thereon has been given by the assessee and even before the Tribunal the explanation remains missing. Only technical arguments on the basis of judgments not applicable in the year under consideration due to the change in the position of law are being advanced. Thus since information has come to the Commissioner who has operated within the provis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... relied upon by either side so as to consider the applicability thereof the facts of the case which have already been elaborated in the earlier part of the order while discussing the facts and the respective stand of the parties. 9.1 It is seen that the learned AR had opened his arguments by first relying upon the judgments of the Allahabad High Court stating the same to be the judgments of the jurisdictional High Court. The judgments rendered by the Hon'ble Allahabad High Court even though sitting at Agra in view of the fact that the assessee is from Gwalior cannot be held to be the judgment of the jurisdictional High Court as it is a settled issue that the territorial jurisdiction of the Tribunal at times does not coincide with the territorial jurisdiction of the different High Courts and at times the orders of the same Bench are rendered taking into consideration the different High Courts under whose jurisdiction the particular Bench of the Tribunal falls. Thus for an assessee whose assessment is made in Gwalior his appeal against the Commissioner's order lies with the Agra Bench however the jurisdictional High Court for said an assessee would be the Hon'ble M.P. High Court an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of fact had been questioned by the revenue in the proposed questions and as such stood accepted. 10.2 Accordingly in these facts their Lordships holding that these findings of facts have not been questioned by the revenue and coming to the conclusion that it was evident that the order of the Tribunal rested on an appreciation of facts and material on record the finding operates on facts peculiar to the case. Further, it is seen their Lordships also examined the issue taking into consideration the fact that the tax effect involved in this case was very nominal i.e., Rs. 80 for assessment year under consideration i.e., 1984-85 and Rs. 475 for the assessment year 1985-86 and thus being guided also by the policy decision of the Central Board of Direct Taxes not to file references in the cases where the tax effect is less than Rs. 30,000 per year contained in Circular F. No. 279/26 of 1983-ITJ, dated 12-7-1984 and Circular F. No. 319/11 of 1987-WT, dated 14-7-1987 the applications of the Department were rejected. 10.3 In the facts of the present case it has been agitated on behalf of the assessee that the Board Circulars, namely. Circular Nos. 4 and 76, dated 8-7-1986 and 26-8-198 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r are decided and concluded against the assessee and as considered earlier the impact would not necessarily be minimal if the enquiries are not satisfactorily explained by the assessee. 10.7 Accordingly we find that the judgment of Smt. Prakashwanti on account of his above reasons is not applicable to the issue at hand for the reasons discussed herein above, as such is not of much help to the assessee. 11. Reliance has also been placed on another judgment of the Allahabad High Court in the case of Smt. Brijbala. A perusal of the said judgment would show that the finding has been given in the context of Circular No. 176, dated 28-8-1987. Although the assertion on behalf of the assessee has been that the said Circular has not been withdrawn, the learned DR has expressed his inability to address the aspect. Further their Lordships have taken into consideration the fact that apart from relying upon the Circular the Tribunal was further of the opinion that on close perusal of the statement of income filed with the returns the action of the Commissioner was totally unjustified. In the facts of the present case the facts brought out in the impugned order had not been addressed by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The Commissioner of Income-tax being an income-tax authority, was bound by the said view of the Board depicted by the said circular. Secondly, when the same matter came to the notice of the Commissioner of Income-tax, it was obviously a matter touching the provisions of section 143(1) of the Act. When that was so, there was no reason for the Commissioner of Income-tax to think of invoking the provisions of section 263 of the Act, because he was to follow the instructions conveyed by the said circular making it clear that the scrutiny was to be used in cases involving the evasion of tax of huge amounts. The assessee's case involved the liability of payment of tax of Rs. 1,300 only. The orders of revision pertaining to the assessment years 1983-84 and 1984-85 were not valid and were liable to be quashed. 12.1 Accordingly the said judgment is not applicable on facts and position of law as it is in the context of the fact which are entirely different and distinguishable and are not on the issue that the assessment Was made de hors the relevant enquiries as has been addressed in paras 1 and 5 of the impugned order. 13. The Department as per the impugned order and the arguments of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessing Officer is erroneous and, secondly that the order of the Assessing Officer is prejudicial to the interests of the revenue is applicable. Thus, in the light of the judgment of the Apex Court, their Lordships have held it is clear that merely because an order is passed under section 143(1) by the Assessing Officer there is no bar for the Commissioner to invoke under section 263 of the Income-tax Act. Further observing that in the facts of the case before them it clearly showed that the assessee had claimed deduction in respect of interest amount paid to the trust on the goodwill during the period under consideration whereas under the partnership deed the goodwill amount was payable by the incoming partners and thus in fact no amount was payable by the firm by way of interest for the liability of the goodwill. Therefore, under these circumstances their Lordships held that in the order under section 143(1) the relevant facts had not been examined by the Assessing Officer since due to the peculiar arrangement on facts the assessee-firm was not entitled to claim any deduction in respect of interest paid to the trust which as per the arrangement had to be paid by the incoming par ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Calcutta High Court in the case of Hilltop Holdings India Ltd. shall be addressed in the succeeding paras. Before that we propose to examine the applicability of the judgment of the Bombay High Court in the case of Anderson Marine Sons (P.) Ltd. which has also taken into consideration the arguments advanced by the learned A.R. 14.1 Their Lordships in the said judgment have had an occasion to examine in detail the amended provisions of section 143(1) of the Income-tax Act, 1961 which is applicable with effect from 1-4-1998 i.e., assessment year 1989-90. Their Lordships therein have taken into consideration the fact that the procedure for assessment has been simplified so as to dispense with the regular assessment order to be passed by the Assessing Officer in every case. In this background in the said judgment their Lordships have held that acceptance or acknowledgement of the return filed by the assessee and intimation sent for the purpose of section 143(1) is an assessment. Their Lordships have examined the relevant provisions of law while coming to that conclusion. One of the reasons taken into consideration by them is the wording of the section 2(8) which defines assessm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... timation or to proceed under sub-section (2) of section 143 and complete the assessment under section 143(3). The arguments advanced on behalf of the assessee before the Bench that by virtue of the amended section 143(1) of the Act the Assessing Officer has to mechanically acknowledge or accept the returns so filed which is the end of the matter so as to argue that the Assessing Officer is not at all required to apply his mind which is the quintessence to constitute an order but only discharges his ministerial work of acknowledging the return so filed and sends an intimation on the basis of such return for payment of deficit tax or interest or for refund of excess amount already paid by the assessee have been examined at length by their Lordships. Before their Lordships also it was canvassed in the case of Anderson Marine Sons (P) Ltd. that it is only when the Assessing Officer has reason to believe that any claim of loss, exemption, deduction, allowance or relief made in the return is inadmissible that the Assessing Officer would resort to procedure provided under section 143(2) and thus pass an order under section 143(3) in writing either allowing or rejecting the claim or clai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessment on the return filed by the assessee. Such a construction would according to their Lordships militate against the interests of the assessee. The construction to be made on the provisions of law according to their Lordships was found to have been reinforced also by the legal fiction provided in the amended provisions which postulate that intimation shall be deemed to be notice of demand issued under section 156 and all the provisions of the Act shall apply accordingly. 14.7 Accordingly on a careful examination of the arguments advanced by the assessee we find that the arguments do not have any force as by virtue of the fact that section 143 is a provision regarding assessment which the Assessing Officer chose in his wisdom to proceed under section 143(1) by way of acknowledgement or intimation. In the face of the impugned order qua paras 1 and 5 of the same it is eminently established that the assessment is framed without proper application of mind by the Assessing Officer, his action to proceed under section 143(1) was a conscious act of decision making and it is this Act of decision making which according to us has rightly been held to be erroneous and prejudicial to th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gh Court and Madhya Pradesh High Court. 14.10 In the facts of the present case also if the case as made out by the Commissioner on enquiries is established, it is not the case of smallness of the revenue involved. 14.11 Their Lordships have also observed that no doubt the judgment of the Bombay High Court in the case of Rajkumar Deepchand Phade judgment of the Madras High Court in the case of CIT v. Chidambaram Construction Co. [2003] 261 ITR 754 in respect of applicability of section 263 is in the context of summary assessments made under unamended section 143(1) of the Act. However, their Lordships held that these arguments would have no substance and the principle laid down therein was considered to be relevant and applicable. 14.12 Before us no attempt has been made by the learned AR to either distinguish the judgment of Rajkumar Deepchand Phade's case which was in the context of unamended section 143(1) or in the case of Anderson Marine Sons (P.) Ltd. which is in the context of amendments under section 143(1) of the Act. 14.13 Another argument taken into consideration by their Lordships in the case of Anderson Marine Sons (P.) Ltd. is the finding of the Madras High ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ders, instructions and directions to other income-tax authorities as it may deem fit for the proper administration of this Act, and such authorities and all other persons employed in the execution of this Act shall observe and follow such orders, instructions and directions of the Board...' It is thus clear that the authorities empowered to issue the instructions is the Board, and not the Director of Inspection. The instructions are instructions which are approved by the Board, and not the instructions given by anyone Member of the Board. The circular issued by the Director of Inspection, therefore, cannot be regarded as disabling the Commissioner from exercising the statutory powers under section 263 of the Act. Learned counsel for the assessee placed reliance on the decision of the Madhya Pradesh High Court in the case of Nazir Singh v. CIT [2001] 252 ITR 820, wherein, it has been held that the circular of the Director of Inspection bins all income-tax authorities. With great respect, we are unable to agree, as we are unable to read that circular issued by the director as a circular issued by the Board in exercise of its powers under section 119 of the Act. We answer the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of the revenue. The arguments on behalf of the assessee therein that the Commissioner was not correct in holding that the Assessing Officer should conduct an enquiry in the proceedings initiated and concluded under section 143(1) of the Act and complete the assessment under section 143(3) which would require a thorough enquiry was found to be not maintainable as the order under consideration of the Revisionary powers of the Commissioner was found to be having been made without enquiry, as such erroneous and prejudicial to the interests of the revenue. 16.2 In the facts of the present case also we are of the view that identical arguments advanced on behalf of the assessee do not have any merit as herein the Assessing Officer has chosen to proceed under section 143(1) without any enquiry into the matter of cash credits, cash deposits and capital contribution of the partners and on the basis of information available to the learned Commissioner confronted to the assessee the action of the Assessing Officer is not only erroneous but is also prejudicial to the interests of the revenue and meets the twin requirements as have been held by the Apex Court in the case of Malabar Industrie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Tribunal in holding that the Commissioner has no jurisdiction to revise an order under section 143(1)(a) of the Act was held to be not correct and legally not sustainable. 19. After having examined the judgments relied upon by either side at length, we now1proceed to examine the applicability of the judgment of the Calcutta High Court in the case of Hilltop Holdings India Ltd. which has been heavily relied upon by the learned AR. 19.1 It may be stated once again that Mr. Rajender Sharma, learned AR for the assessee has vehemently canvassed that the said judgment is latest in point of time as the same is rendered on 18-5-2005 so as to contend that the same should be followed. 19.2 It has also been canvassed that the same pertains to assessment year 1999-2000, as such has taken into consideration the post amended period also. 19.3 It has also been canvassed by the learned A.R. that the judgment of the Madras High Court, namely, Sri Mahasastha Pictures relied upon by the Commissioner has been taken into consideration along with the judgment of the very same High Court, namely Smt. R.G. Umarani's case. 19.4 Apart from that the judgment of the Calcutta High Court it was conten ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... learned AR. 21.2 Their Lordships at page 504 of the said judgment under the heading "The position" appreciated the facts of the case. They have set out that the case pertains to the assessment year 1999-2000 wherein an acknowledgement was issued under section 143(1)(o)(i) by the revenue in respect of the return submitted by the assessee which was sought to be revised by the Commissioner under section 263. 21.3 Immediately thereafter their Lordships on the said page summed up the contention on behalf of the assessee which was that intimation under section 143(1)(a) at best could be treated as a notice of demand and not an assessment order in terms of the Explanation to section 143(5) as an intimation sent under sub-section (1) is to be an order by the fiction created thereunder for the purpose of sections 246 and 264 only. 21.4 The argument was also put forth on behalf of the assessee that by virtue of making the same amenable to rectification by virtue of section 154(1)(b) also the intimation or acknowledgement has still not been treated as an order. 21.5 The contention was also put forth that the intimation or acknowledgement is a ministerial act and not an order passed by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... confined to assessment orders only. 21.10 The following decisions were relied upon:- (a) CIT v. Christian Mica Industries Ltd [1979] 120 ITR 627 (Cal.). (b) Rajkumar Dipchand Phade's case. (c) Smt. R.G. Umarani's case. (d) Sri Mahasastha Pictures' case. (e) CIT v. M.M. Khambhatwala [1992] 198 ITR 144 (Guj.). 21.11 On the basis of the above, the argument put forth by the revenue was that an intimation or an acknowledgement slip is an order passed in the proceedings by the Assessing Officer finally determining the rights of the assessee and as such is an order passed by the Assessing Officer and subject to Revisionary jurisdiction. 21.12 In the light of the above arguments their Lordships examined the issue and came to the conclusion on facts that so long as the Explanation to section 143(5) remains operative as it does for assessment year 1999-2000 pertaining to the financial year 1998-99 the fiction created thereby operates. The issue was to be decided as per the provisions of Act as they stood prior to the 1999 amendment which was brought into effect only from 1-6-1999. Thus, in this background following the well-settled proposition of law that the law as it stands ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot help the assessee in any manner. 21.16 The other judgment taken into consideration by their Lordships of the Calcutta High Court is the judgment of Punjab National Banks case in the context of the proposition of law as applicable to 1989-90 assessment year. The said judgment lays down the proposition that notice under section 143(2) can be issued even after intimation issued under section 143(1) and rectification of intimation cannot be made after the issuance of notice under section 143(2). Specific pages 771 and 772 of this judgment have been referred to by their Lordships of the Calcutta High Court. The principle herein also is a settled principle and does not help the assessee in any manner. 21.17 Similarly judgment of Kerala High Court in the case of K.V. Mankaram Co. is a judgment which lays the proposition that change of status by an Assessing Officer from a firm to that of Association of Persons by intimation under section 143(1)(a) is not permissible in regard to the position of law in 1995-96 assessment year. The same also is of no help to the assessee. 21.18 Similarly the judgment of the Calcutta High Court in the case of Kalyanpur Cement Ltd. was in the conte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ase of Rajkumar Deepchand Phade was not considered applicable as the same had not taken into consideration the impact of section 143(5). 21.26 In the facts of the present case it has been canvassed by the learned DR as has been addressed in the earlier part of this order that the judgment of the Calcutta High Court was rendered in regard to the provisions of law applicable at the relevant point of time only in the context of the fact that appeal was provided against section 143(1)(a) intimation/acknowledgement by virtue of Explanation to section 143(5). However, as a result of the Amendment in the statute the orders have been made appealable as such the constrains which were considered by their Lordships on account of Explanation to section 143(5) are no longer in existence and their Lordships of the Calcutta High Court took very good care to confine their conclusion in favour of the assessee on account of this specific fact alone. For this purpose emphasis was laid on 278 ITR 515. Their Lordships took note of the fact that an Explanation was inserted in section 143 by the Finance (No. 2) Act, 1991, to provide that an intimation sent under sub-section (1) or sub-section (1B) shal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nfining their finding only to the position of law as it stood at the point of time when Explanation to sub-section (5) of section 143 of the Act was in existence. 21.31 A perusal of the said judgment would instead show that in view of the changed position of law the said judgment in fact supports the case of the revenue. Accordingly on a detailed examination of the issues the judgments and the principles of law agitated before the Bench, we are of the view that even the judgment of the Calcutta High Court in the case of Hilltop Holdings India Ltd. which have been heavily relied upon by the learned AR in fact militates in favour of the revenue as has been examined by us in detail and does not render any help to the assessee. 22. Accordingly ground Nos. 1 to 3 of the assessee, for the detailed reasons given herein above, are dismissed. 23. In regard to ground No. 4 no arguments were advanced on behalf of the assessee. In fact right at the outset on 26-7-2007 the learned AR when it had been pointed out at the Bench that ex parte order has been passed, as such the appeal may be restored to the CIT, Gwalior for granting an opportunity to the assessee, the learned AR had stated tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ackground, by his order dated 25-2-2005, expressed his satisfaction that the order passed under section 143(1) of the Act on 1-9-2003 was erroneous and prejudicial to the interests of revenue. Accordingly, the same stood set aside to be passed afresh and made de novo. 6. In several sittings, the ld. counsel for the assessee Shri Rajendra Sharma, advocate in support of grounds in appeal, contends that the Assessing Officer has acted within the scope of powers provided under section 143(1) of the Act, which are very limited. The ld. Commissioner of Income-tax did not have any valid jurisdiction to initiate action under section 263 of the Income-tax Act, 1961 in a case where return has been processed under section 143(1) of the Act, as the processing of return as such is neither an assessment nor an order. In support, he placed reliance on the following judgments:- (i) Hilltop Holdings India Ltd.'s case; (ii) Smt. Prakashwanti's case; (iii) Smt. Brijbala's case. 7. He also pointed out the marked difference in the expressions used as "assessment" and "intimation" in sections 154(1)(b), 143(3), 143(1) and 246 of the Act. The intimation can be deemed an order for the limited pu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or and relying on the judgments referred in his order, contends that the ld. CIT cannot be held to have acted beyond his jurisdiction. The judgment relied upon by the assessee's counsel was with respect to law prevalent in assessment year 1999-2000 when sub-section (5) below section 143 of the Act was operative. The said sub-section however, stands omitted by the Finance Act, 1999 with effect from 1-6-1999. Intimation under section 143(1) has to be taken as an order which can be revised under section 263 of the Act. The ld. CIT has found that specific enquiries having not been made by the Assessing Officer, the order so passed has to be termed as an erroneous order which has caused prejudice to revenue. The exercise of jurisdiction by ld. CIT be upheld. 11. After hearing the parties and careful consideration of relevant provisions of law as well as the precedents cited at Bar. I am satisfied that the processing of return done under section 143(1) of the Act or the intimation thereof cannot be termed as an order passed in any proceedings under the Income-tax Act, which could be a subject-matter of revision within the meaning of section 263 of the Act. The Hon'ble Calcutta High Cou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 (ii) If any refund is due on the basis of such return, it shall be granted to the assessee and an intimation to this effect shall be sent to the assessee: Provided that except as otherwise provided in this sub-section, the acknowledgement of the return shall be deemed to be an intimation under this sub-section where either no sum is payable by the assessee or no refund is due to him: Provided further that no intimation under this sub-section shall be sent after the expiry of one year from the end of the financial year in which the return is made. Provided also that where the return made, is in respect of the income first assessable in the assessment year commencing on 1-4-1999, such intimation may be sent at any time up to 31-3-2002." 13. A perusal of section 143(1) of the Act will reveal that the intimation or the acknowledgement of the return were to be deemed as a notice of demand issued under section 156 of the Act. However, such a deemed notice of demand can never be treated to be an asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e extended beyond the purpose for which such fiction is created and the provisions are to be interpreted strictly as was held in Karimtharuvi Tea Estate Ltd.'s case and C.P. Sarathy Mudaliar's case held in unequivocal terms that:- "the effect of such amendment was that the intimation was deemed to be an order for the purpose of sections 246 and 264. The Explanation did not provide that the intimation shall be deemed to be an order within the meaning of the Act or for all purposes of the Act. It specifically mentioned only the said two provisions". It also held in the same judgment at page 510 of the report that "the issue of intimation or acknowledgement, therefore, is not an order within the meaning of section 263 by the reason of the Explanation to section 143...." 17. I also find that the said fiction created by Explanation to section 143 stands omitted by the Finance Act, 1999. An 'omission' of a provision being different from 'repeal' and since section 6 of General Clauses Act applies to a repealed Law and not to an omission as was held by Apex Court in Rayala Corpn. (P.) Ltd. M.R. Partap v. Director of Enforcement [1969] 2 SCC 412 and again applied in the case of Ge ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the return filed by the assessee. The very fact that no opportunity of being heard is given under section 143(1)(a) indicates that the Assessing Officer has to proceed accepting the return and making the permissible adjustments only.... It is to be noted that the expressions "intimation" and "assessment order" have been used at different places. Contextual difference between the two expressions has to be understood in the context the expressions are used. Assessment is used as meaning sometimes 'the computation of income', sometimes 'the determination of the amount of tax payable' and sometimes 'the whole procedure laid down in the Act for imposing liability upon the taxpayer'. In the scheme of things, as noted above, the intimation under section 143(1)(a) as it stood prior to 1-4-1989, the Assessing Officer had to pass an assessment order if he decided to accept the return, but under the amendment provision, the requirement of passing of an assessment order has been dispensed with an instead an intimation is required to be sent. Various circulars sent by the CBDT spell out that the intents of Legislature, i.e., to minimize the Departmental work to scrutinize each and every r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n to the assessee and the Assessing Officer proceeds on his own on the basis of the return filed by an assessee. Otherwise, also, no addition or enhancement can be made without giving an opportunity of being heard. The provision of opportunity being given under section 143(1)(a) has not been made, because the Assessing Officer has to proceed accepting the return and the adjustments which he can make, are only of such a nature which fully accord to the information furnished in the return. It means that the Assessing Officer cannot do anything detrimental to an assessee under section 143(1)(a) and if he wants to do so for cogent reasons, then he will have to make a regular assessment under section 143(3) giving a due notice under sub-section (2) of section 143." 21. The learned Commissioner of Income-tax, however, is found to have relied upon the judgment in the case of Anderson Marine Co. (P.) Ltd. and the learned D.R. has taken the Bench through the following passages where intimation under section 143(1) of the Act has been taken to be in the nature of the order passed by the Assessing Officer for the purpose of section 263 of the Act:- "The question is, whether acceptance o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r in respect of proceeding under section 143(1) of the Act, which is also an assessment and, therefore, in the nature of an order, it would have expressly made provision in that behalf just as it has amended section 154 of the Act by the Finance Act, 1999, in respect of the provision for "rectification of mistake" as a consequential amendment made to envelop the amended section 143(1) of the Act. It will be useful to advert to section 142 of the Act which enables the Assessing Officer to make inquiry before assessment, after the return of income under section 139 of the Act is filed by the assessee. Section 142 precedes section 143 and is not restricted only to the assessment order to be passed within the meaning of section 143(3) of the Act. In other words, on the filing of the return under section 139, it the Assessing Officer has reason to believe that an inappropriate claim has been made by the assessee in the return, before sending the intimation under section 143(1) he can make such inquiry and if he is satisfied in that inquiry about the inappropriate claim of the assessee, he appears to be the scheme regarding the procedure of assessment of the return filed by the assessee. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 63 of the Act and on that account alone, his order needs to be set aside. Accordingly, the decision reached by him is hereby set aside and the ground in appeal raised by the assessee stands allowed. 24. On facts also, I find that the intimation under section 143(1) of the Act as per amended section and applicable in the year under consideration, can neither be termed to be an erroneous order nor the same can be said to have caused any prejudice to the revenue. Under the scheme of the Act, as contained under section 143(1) of the Act relevant to the year under consideration, the Assessing Officer is not required to apply his mind nor can he make any adjustment in the returned income as could be done under the earlier provisions contained in section 143(1)(a) of the Act. In the present scheme of the Act, he discharges his ministerial work of acknowledging the return so filed and sending an intimation on the basis of such return for payment of deficit tax or interest or refund of excess amount already paid by the assessee, if any. The provisions of section 143(1) of the Act do not envisage any enquiry into the aforesaid three points, as set out in para 2 of this order hereinbefore, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is official duties and in strict compliance of law in this case. Had he not done so, the acknowledgement of return was to be deemed as an intimation under section 143(1) of the Act in terms of proviso clause contained therein. The judgments of certain High Courts that were referred by ld. Commissioner of Income-tax, Gwalior in the impugned order for the proposition that intimation under section 143(1) of the Act can be a subject-matter of revision under section 263 are found considered by Hon'ble Calcutta High Court in the case of Hilltop Holdings India Ltd. which is a latest judgment on the issue under consideration and any such judgment that were not referred before the Hon'ble High Court, the same were with respect to the issuing of intimation under section 143(1)(a) of the Act whereby Assessing Officer had powers of making certain adjustment in terms of provisions contained under that section. As already found, such adjustments, however, are not possible under the scheme of the Act as contained under section 143(1) of the Act in the impugned year. The ld. Assessing Officer is, thus, found to have done what he was required to do under the scheme of the Act. The ld. CIT, Gwalior, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve followed the direction in letter and spirit and within four corners of the directions but had no jurisdiction to make any enquiry as contemplated by ld. CIT, Gwalior, which also was not authorized under the statutory provisions contained in section 143(1) of the Act. In any event, nothing contrary to that what is permitted under law could be read in the directions so given and I find myself in agreement with the ld. counsel for the assessee when he says that a notice under section 143(2) cannot be issued nor an order can be required to be made for which statutory period has already expired. The revenue's plea that enquiry into the said points could have shown that there has been loss of revenue, cannot be taken a basis to term the intimation as an erroneous order. First that such an enquiry cannot be carried out through the known process of law for making intimation under section,143(1) of the Act afresh and secondly even if the enquiry is made and some additions in returned income are called for, then also, that cannot be done in the intimation to be made under section 143(1) of the Act. As such, the Assessing Officer will have to make the similar intimation de novo and, there ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the order of the Income-tax Officer is erroneous insofar as it is prejudicial to the interests of the revenue. The Commissioner has to be satisfied of twin conditions, namely (i) the order of the Assessing Officer sought to be revised is erroneous; and (ii) it is prejudicial to the interests of the revenue. If one of them is absent if the order of the Income-tax Officer is erroneous but is not prejudicial to the revenue or if it is not erroneous but is prejudicial to the revenue, recourse cannot be had to section 263(1) of the Act." 29. In the light of findings reached that the intimation dated 1-9-2003 issued under section 143(1) is neither erroneous nor prejudicial to the interest of revenue, the twin conditions which are essential for enabling the ld. CIT to take action under section 263 are found missing and as such, his action is hereby held to be vitiated and un-called for. I, therefore, set side his order and allow all the grounds in appeal raised by the assessee. 30. In the result, appeal by assessee stands allowed. THIRD MEMBER ORDER Per Vimal Gandhi, President (As a Third Member)-On account of difference between Hon'ble Members of Agra Bench, this matter has been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te and acrimonious correspondence between the two learned Members on the question to be referred. However, no decision could be reached. between the Members and, ultimately, both the Members were transferred out of Agra Bench. The Registry, thereafter, noted that this file was pending for disposal and sent the file to me for disposal. 6. I have seen the difference between the Members and see that the only question that arises for my determination is whether provisions of section 263 are applicable to an intimation sent under section 143(1) of the Income-tax Act. 7. The matter was fixed and both the parties were made aware of the above controversy. Both the parties argued the appeal without objecting to the fact that the Members had not agreed on question to be framed under section 255(4) of the Income-tax Act. 8. Shri Rajendra Sharma, Advocate on behalf of the assessee, drew my attention to the following decisions:- (i) Smt. Prakashawanti's case. In this case, it was observed as under:- "Held, that in setting aside the order of the Commissioner of Income-tax, the Tribunal in the first instance had held that in view of the departmental instructions contained in the Board's ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, it was observed as under:- " Held, dismissing the appeal of the Department, that in the absence of a clearance by the High Powered Committee, the appeal was not required to be entertained at this stage." (iv) Hilltop Holdings India Ltd.'s case. In this case, it was observed as under:- "The law as it stands on the 1st of April of the financial year would govern the assessment of the returns submitted in respect of that financial year and any amendment made after 1st of April of that financial year would not apply to the assessment of the return of the year commencing 1st of April of that year. Under section 143(1)(a), as it originally stood, the Assessing Officer was required to make a summary assessment. After the amendment under the Direct Tax Laws (Amendment) Act, 1987, effective from 1-4-1989, the scheme of summary assessment was omitted along with the assessee's right to object to the summary assessment, and only an intimation was to be sent without prejudice to section 143(2) which authorizes the Assessing Officer to scrutinize the return and consider all the claims and pass an order of assessment under sub-section (3) dealing with the issues involved in the assessm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ceeding to attract section 263. The fiction in the Explanation to section 143 was created to treat an intimation or acknowledgement as an order only for the purpose of sections 246 and 264. Even in section 154, the intimation or acknowledgement has not been treated as an order rectifiable; it is treated in its original character as an intimation alone. The phrase 'all the provisions of the Act shall apply accordingly' qualifies section 156 referred to in section 143(1)(a). Inasmuch as the phrase 'all the provisions of the Act shall apply accordingly' means that all the provisions of the Act as are applicable in respect of a notice of demand under section 156 when issued would apply. It does not widen the scope of application of the Act in all respects contrary to the confines created by the amendment substituting section 143(1) in 1987. The statute has created a distinction between orders contemplated in sections 263 and 264, and the application of one mutually excludes the other. Therefore, an order, which is subject to section 264, can never be subjected to section 263. When the Legislature through clear expression created a fiction to treat an intimation or acknowledgement und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed the assessment in December, 1986. On a writ petition against the order: Held, that the assessee had shown his income from dearness allowance and ad hoc dearness allowance. However, he claimed deduction and exemption from the liability of paying the tax. There was no case of concealment of income or evasion of tax. The amended provision defining "salary" came into force in the year 1989 and was not available for reopening the case which was already closed by the Assessing Officer by passing a well reasoned order. Moreover, the action of Commissioner of Income-tax pertained to the year 1986. The amendment came into force in the year 1989. In the year 1986, Circular No. 176 was in operation. The Commissioner of Income-tax, being an income-tax authority, was bound by the said view of the Board depicted by the said circular. Secondly, when the same matter came to the notice of the Commissioner of Income-tax, it was obviously a matter touching the provisions of section 143(1) of the Act. When that was so, there was no reason for the Commissioner of Income-tax to think of invoking the provisions of section 263 of the Act, because he was to follow the instructions conveyed by the said ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 143(1)(a)." 9. The ld. Counsel for the assessee further submitted that even the direction given by the ld. CIT was erroneous because ultimately he has again directed to pass a fresh order in de novo assessment, that means assessment is again to be made under section 143(1). There was no legal justification to issue above direction. The ld. Counsel supported the proposed order of the ld. A.M. 10. Smt. Shefali Juneja, Ld. Sr. DR supported the impugned order of the ld. CIT. She referred to and relied upon the following decisions:- (i) Rajkumar Deepchand Phade's case. (ii) Anderson Marine Sons (P.) Ltd.'s case. (iii) Jai Bharath Tanners' case. (iv) Sri Mahasastha Pictures' case. She emphasized that Assessing Officer had issued intimation without application of mind and without considering cash credits and introduction of money in the books of account. Therefore, action of the ld. Commissioner under section 263 was fully justified. She supported the proposed order of the ld. JM. 11. I have heard both the parties and examined the material available on record. After intimation is issued under section 143(1), the Assessing Officer had full power to issue notice under s ..... X X X X Extracts X X X X X X X X Extracts X X X X
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