TMI Blog2005 (5) TMI 56X X X X Extracts X X X X X X X X Extracts X X X X ..... SETH., SOUMITRA PAL. JUDGMENT D.K. Seth J.- The background: This appeal has been preferred against an order dated July 28, 2003, passed in Writ Petition No. 446 of 2002 by the learned single judge. In the writ petition, the initiation of the proceeding under section 263 of the Income-tax Act, 1961 in respect of an order contemplated under section 143(1) was challenged on the ground that in respect of such an order, section 263 has no manner of application. The learned single judge rejected the plea on the ground that if an improper assessment order has been made under section 143(2), Revenue is lost and the State cannot prefer an appeal against such a decision. If despite mistake having been committed in exercising power under section 143(2), the Assessing Officer does not exercise his power under section 154, no action in appeal can be taken against it. In order to save the Revenue from such an eventuality, the Legislature has embodied section 263 in the Act. Such a case is definitely prejudicial to the Revenue sufficient for invoking section 263 even in respect of an order passed under section 143(1). Fiscal statute; Principle of interpretation: Before we proceed to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rectifying any mistake apparent from the record. Therefore, even in section 154, the intimation or acknowledgement has not been treated as an order. Sending an intimation or acknowledging receipt of the return is a ministerial act and not an order passed by the Assessing Officer. In support, Dr. Pal relied on the decisions in Pradeep Kumar Har Saran Lal v. Assessing Officer [1998] 229 ITR 46 (All) at pages 52-54; CIT v. Punjab National Bank [2001] 249 ITR 763 (Delhi) at pages 771-772; CIT v. K.V. Mankaram and Co. [2000] 245 ITR 353 (Ker) and Kalyanpur Cement Ltd. v. Joint CIT [2005] 276 ITR 49 (Cal) at page 54. The fiction created by the Explanation to section 143 is limited only to the extent for which the fiction was created. It cannot be 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. v. State of Kerala [1966] 60 ITR 262 (SC) and CIT v. C.P. Sarathy Mudaliar [1972] 83 ITR 170 (SC). By reason of the Explanation, an intimation or an acknowledgment is a deemed order by fiction created thereunder for the purpose of section 246 providing for an appeal against an intimatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... proceedings by the Assessing Officer finally determining the rights of the assessee and as such is an order passed by the Assessing Officer. Whether the Explanation to section 143 is attracted: In the aforesaid context, we may examine the situation having regard to the provisions of the Act as it stood prior to the 1999 Amendment. The amendment was brought about with effect from June 1, 1999. The assessment related to the assessment year 1999-2000 pertaining to the financial year 1998-99. It is a well-settled proposition of law that the law as it stands on 1st of April of the financial year that would govern the assessment of a return for the financial year commencing 1st of April of that year. Admittedly, the amendment was introduced in the financial year 1999-2000 and as such the unamended provision would apply in the present case. In order to support this proposition, we may look at the decision in Karimtharuvi Tea Estate Ltd. v. State of Kerala [1966] 60 ITR 262 (SC) where the apex court had held that the law as 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 afte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cting upon the return filed. The adjustments permissible are simply of ministerial in nature. This neither envisages initiation of any proceedings nor passing of any order. The scope of activities conferred on the Assessing Officer dealing with a case under section 143(1)(a) is confined only within the rectification of arithmetical error and making of adjustment on the basis of the return as filed or allowing of deduction or allowance of relief etc. without any power to make an assessment on the basis of such return. There is much difference between an assessment and an intimation contemplated under section 143(1)(a). The use of the expression "intimation" by the Legislature is to distinguish the same from an assessment. Under section 143(1)(a), no hearing is contemplated and an intimation sent without hearing cannot be an assessment since assessment would mean conferring power on the Assessing Officer to add, alter and that too only after giving opportunity through a process of regular assessment under section 143(3) after resorting to section 143(2). We may find support for the above proposition in the decision in Pradeep Kumar Har Saran Lal [1998] 229 ITR 46 (All). In K.V. M ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... proceeding, after obtaining approval of the Inspecting Assistant Commissioner, recognizing the interim dividend declared after 12 months from the close of the relevant accounting year. Therefore, though not an assessment order it was an order passed in a proceeding for or in the process of assessment where the Income-tax Officer was free to pass any order without being confined to the limitations provided in section 143(1)(a). Inasmuch as, section 143(1)(a) after 1989 confines the scope within the powers enumerated under sub-clauses (i), (ii) and (iii) of the first proviso to section 143(1)(a) under which only an intimation is to be send under the second proviso. The very scheme of section 143(1)(a) confining the power enumerated under the first proviso makes a distinction between an order under section 143(1)(a) and those under section 143(3) under which an assessment is permissible after issue of notice under subsection (2). Thus, the provision of section 143(1)(a) is contrary to the power conferred under section 143(3), the provisions whereof are completely incompatible and diametrically opposite to section 143(1)(a). Therefore, we do not think that this decision can help us in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Dr. Pal on the said decision, is of no avail. From the above discussions, it appears that an intimation is not an assessment order. Mr. Shome in his usual fairness did never contend it to be an assessment order. At the same time, the issue of intimation under section 143(1)(a) does not involve any drawing up of any proceedings. Neither is any proceeding initiated. The issue of the intimation is not an order passed in any proceeding for or in the process of assessment, which the Assessing Officer could do under section 143(3) after notice under section 143(2). Nor could there be any error beyond the scope of the first proviso to section 143(1)(a) non-rectifiabie under section 154(1). The issue of intimation or acknowledgement, therefore, is not an order within the meaning of section 263 by reason of the Explanation to section 143 for the reasons hereafter noted. Section 263: When attracted: Section 263 can be exercised in relation to a proceeding in which the Assessing Officer has passed an erroneous order prejudicial to the Revenue. Therefore, in order to attract section 263, the following four conditions need be satisfied viz., (1) there should be a proceeding; (2) there shou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rectifiable; it is treated in its original character as an intimation alone. Section 156: Deemed notice of demand: The impact: Under section 156 of the Act, a notice of demand can only be issued where any sum becomes payable by reason of any order passed under the Act. The intimation was not considered as an order as would be evident from section 143(1)(a) itself which provided that the sum specified as payable in such intimation shall be deemed to be a notice of demand under section 156 of the Act and all the provisions of the Act shall apply accordingly. If the intimation was considered as an order then in respect of any amount specified therein as payable a notice of demand in the prescribed form under section 156 of the Act had to be issued. Since an intimation was never intended by the Legislature to be treated as an order, a fiction was created in section 143(1)(a)(i) by treating the intimation as a deemed notice of demand under section 156 and provided that all the provisions of the Act shall apply accordingly. This fiction is also to be interpreted strictly. It has to be construed having regard to the context; and it must draw its colour from the purpose for which the f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nation to section 143 where the intimation is treated as an order within the meaning of sections 246 and 264 and nothing more. The said decision deals with section 143(1) as quoted therein omitting the Explanation to section 143 and its impact altogether. Therefore, we do not think that the said decision could persuade us to agree with the reasoning given therein for the purpose of holding an intimation to be an order within the meaning of section 263. Mr. Shome, however, contended that the intimation is not an order of assessment; still, however, it is an order for the purpose of section 263. Inasmuch as, while issuing intimation, the Assessing Officer does not merely discharge a ministerial act since it involves a process to determine the liability to pay tax or refund of the excess tax paid or to accept the self-assessment as submitted, which involves application of mind and taking a decision. There cannot be any liability to pay or refund unless there is a direction or order to that effect. Therefore, though not an assessment order, an intimation is nevertheless an order. Since it was not an order of assessment, therefore the assessee is entitled to file a revised return unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7, which was a deliberate and clear departure from the summary assessment contemplated under section 143(1) brought about with a particular purpose and object as reflected in the Explanation to section 143. In order to attract section 263, the order must be an order passed by the Assessing Officer in the proceeding. A proceeding is to be understood in its common ordinary dictionary meaning as is understood in common parlance. The word "proceeding" has not been defined in the Act. According to the Shorter Oxford Dictionary, the word "proceeding" means "the formal manner in which legal proceedings are conducted". A proceeding can be said to be initiated and conducted only when the Assessing Officer proceeds to assess the income, but when the return is accepted, there is no assessment nor any process for assessment undertaken by the Assessing Officer or in other words the Assessing Officer does not proceed to assess the income. On the other hand, the adjustment made is only a ministerial act. It does not partake of the character of an assessment nor of a proceeding nor of any process ancillary thereto. On the other hand, it is only a calculation for the purpose of adjustment of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ving been confined only to the extent enumerated in clauses (i), (ii), and (iii) of the first proviso to section 143(1)(a). The fiction is self-explanatory to limit itself to construe an intimation as a deemed order by reason of the fiction only to the extent of sections 246 and 264 and an order amenable to section 264 is outside the purview of section 263. Therefore, so long the Explanation to section 143 remains operative, an intimation/acknowledgement cannot be treated to be an order for the purpose of exercising power under section 263. Therefore, the initiation of the proceeding under section 263 is wholly without jurisdiction and a nullity and void and cannot be sustained. Order: In the result, the appeal succeeds and is allowed. The order dated July 28, 2003 passed by the learned single judge in WP No. 446 of 2002 is hereby set aside. The writ petition is hereby allowed. The notice dated February 15, 2002, issued by respondent No. 1 under section 263 of the Income-tax Act, 1961, relating to the assessment year 1999-2000 and all proceedings thereunder or in pursuance thereof are hereby quashed. Let a writ of certiorari do issue accordingly. There will, however, be no or ..... X X X X Extracts X X X X X X X X Extracts X X X X
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