TMI Blog1998 (9) TMI 50X X X X Extracts X X X X X X X X Extracts X X X X ..... s mentioned without any summary assessment, for the assessment year 1988-89 governed by the earlier provisions, there was a provision for summary assessment under section 143(1) followed by regular assessment, if any, under section 143(3). The facts of the case with respect to the assessment year 1988-89 as stated in the petition in CWJC No. 493 of 1994 may be set out as follows : Petitioner No. 1, Parikh Engineering and Body Building Company Ltd., a company registered under the Indian Companies Act, 1956 (hereinafter referred to as "the company"), carries on business of body building of motor vehicles and is also a dealer of Maruti vehicles. It also carries on the business of bottling and selling/supplying of soft drinks to its customers in the course of its main business. It requires glass bottles and wooden crates for the purpose of supply and distribution of soft drinks. According to the petitioners, such glass bottles and wooden crates ordinarily last for 10-12 months whereafter they become unusable. The expenditure incurred on such bottles and wooden crates does not exceed Rs. 5,000 and, as such, the company is entitled to claim 100 per cent. depreciation on the actual co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and September 30, 1991. The notice stated that from the perusal of the records it appeared that there was a "mistake apparent from record regarding the calculation of book profit". The Act prescribes calculation of book profit in accordance with Schedule VI to the Companies Act but it was found that the company had taken the depreciation on bottles and crates at 100 per cent. which was not in accordance with the Companies Act. The calculation of book profit was, therefore, wrong and depreciation of 100 per cent. had been wrongly allowed while passing the order under section 143(1)(a). Against the former notice the petitioners moved this court in CWJC No. 1796 of 1991(R) taking the stand that after issuance of the intimation under section 143(1)(a) regular assessment under section 143(3) had been made and intimation had thus merged in the regular assessment order and was no more valid and operative and, therefore, the Assessing Officer had no jurisdiction to make any rectification in the intimation. By order dated August 30, 1991, this court directed the Assessing Officer (Assistant Commissioner of Income-tax, I. T. Circle II, Jamshedpur) to decide the question of jurisdiction by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessment year 1988-89, as stated above. Thereafter, consequential order giving effect to the said appellate order was passed by the Assessing Officer computing the taxable income of the petitioner-company at 30 per cent. of the book profit and allowing 100 per cent. depreciation and/or deduction on bottles and crates. On July 29, 1991 and September 30, 1991, respectively, notices, however, were issued to the company regarding the proposed rectification of the intimation under section 143(1)(a) of the Act in terms of section 154, as already stated above. Against the former notice the petitioners moved this court in CWJC No. 1796 of 1991(R), and later, in the light of the order of this court dated August 30, 1991, they filed objection questioning the jurisdiction of the Assessing Officer to make rectification in the regular assessment order under section 143(3) which was no more effective or operative and, therefore, could not be rectified. The Assessing Officer, however, vide his order dated January 28, 1992, held that as the computation of taxable income had not been made in accordance with the provisions of section 115J of the Act, the mistake was apparent from the record a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd if it was not so, then the mistake does not come within the purview of section 154. In any view of the matter the question as to whether the determination of the taxable income of the petitioner-company had been made in accordance with the provisions of section 115J of the Act or not, was a debatable question and lay outside the scope of sections 143(1)(a) and 154 of the Act. He submitted that in an appropriate case, after regular assessment order under section 143(3) is passed superseding the intimation under section 143(1)(a) there may be justification to make rectification in the order under section 143(3) but this cannot be done in a case where the order of the Assessing Officer under section 143(3) has merged in the appellate order of the Commissioner/Appellate Tribunal and order giving effect to the appellate order has already been passed. Dr. Pal relied on a number of decisions in support of his contentions. Mr. Debi Prasad, learned counsel for the respondents, submitted that the non-obstante clause contained in section 115J of the Act gives it overriding effect superseding other provisions of the Act. In the present case, inasmuch as the taxable income of the company h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the provisions of Parts II and III of the Sixth Schedule to the Companies Act, 1956 (1 of 1956), as increased by---. . ." By the Finance Act, 1989, the words "prepared in accordance with the provisions of Parts II and III of the Sixth Schedule to the Companies Act, 1956 (1 of 1956)" occurring in the Explanation were deleted and substituted by the words "prepared under sub-section (1A)", and new sub-section (1A) was inserted as follows : "(1A) Every assessee, being a company, shall for the purposes of this section prepare its profit and loss account for the relevant previous year in accordance with the provisions of Parts II and III of Schedule VI to the Companies Act, 1956 (1 of 1956)." By the Finance Act, 1990, the words "but before the 1st day of April, 1991" were inserted after the words "the 1st day of April, 1988" in sub-section (1). Thus, by virtue of this amendment, section 115J ceased to be operative from April 1, 1991, i.e., from the assessment year 1991-92 onwards. In other words, section 115J remained operative for the assessment years 1988-89, 1989-90 and 1990-91 alone. (These writ petitions relate to the aforesaid assessment years. While CWJC No. 493 of 1994(R) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee a notice under sub-section (2). In other words, he could either accept the return, as filed, and make summary assessment or make a regular assessment after notice under section 143(3). But, unlike the provisions as they stand now, he had no power to make any adjustment. After April 1, 1971, by virtue of the amendment in section 143(1)(a), the Income-tax Officer was competent to make certain adjustments to the income or loss declared in the return, and also rectify any arithmetical error in the return or accounts or documents accompanying it. He could also allow any deduction, allowance or relief which on the basis of information available in the return, accounts and documents were prima facie admissible but was not claimed, and similarly, he could also disallow any deduction, allowance or relief claimed in the return, which on the basis of information available in such return, account or documents was prima facie inadmissible. He was, however, required to make an assessment unlike the present provision by virtue of which without making any such assessment he is merely required to send an intimation after making adjustments, if any. As per the amended provisions effective ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ith the power to make prima facie adjustments under that section. The court in this connection referred to a circular of the Central Board of Direct Taxes (Circular No. 581, dated September 28, 1990) and observed : "The circular states that instances have come to the notice of the Board where deduction claimed under section 43B of the Income-tax Act was disallowed as prima facie inadmissible under section 143(1)(a) as the assessee had not furnished evidence of payment of taxes, duty, etc., along with the return. However, later on, the deduction claimed was allowed under section 154 as the assessee subsequently furnished such evidence. This, according to the Board, is not in accordance with law. The sums disallowed as prima facie inadmissible under section 143(1)(a), in the absence of requisite evidence of the payment, cannot be subsequently allowed under section 154. This is because the scope of the powers to make prima facie adjustment under section 143(1)(a) is somewhat coterminous with the power to rectify a mistake apparent from the record under section 154. Therefore, the Board itself has viewed the power to make adjustments as coterminous with the power to rectify mistakes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essing Officer [1998] 229 ITR 46. In JKS Employees Welfare Fund v. ITO [1993] 199 ITR 765 (Raj), while issuing intimation under section 143(1)(a) the Income-tax Officer had assessed the tax at a higher rate in accordance with the provisions of section 167B of the Act. On behalf of the Revenue it was contended that the assessment had been made on the same figure as was declared by the assessee, and it was only on account of the maximum marginal rate of tax as against the normal rate shown by the assessee that the demand had been raised. The High Court held that under section 143(1)(a) the Income-tax Officer had to accept the return as it is or to make prima facie adjustments within the ambit of the proviso but he cannot create a demand in terms of a disputed provision, namely, section 167B of the Act. The court observed that the dispute regarding application of a particular provision of the Act lies outside the scope of section 143(1)(a) of the Act. In Modern Fibotex India Limited v. Deputy CIT [1995] 212 ITR 496 (Cal), the assessee-company had received cash compensatory support to the tune of Rs. 7,99,144 from the Government. In its return for the assessment 1988-89 the company ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the taxable income had not been computed and shown by the petitioner in its returns in accordance with the provisions of section 115J of the Act, the Assessing Officer had jurisdiction to reject the return and redetermine the income disallowing 100 per cent. depreciation on bottles and crates under section 143(1)(a) or in the course of summary assessment as per the earlier provisions. If the answer to this question is in the negative, as it has to be, it would follow that he cannot revise the intimation and recompute the income in purported exercise of power under section 154. What could not have been done directly cannot be done indirectly in the garb of rectification power. It is true that the provisions of section 115J obliged the Assessing Officer to compute the income of the petitioner-company in a particular manner but this only meant that the Assessing Officer should have issued notice under section 143(2) to it and proceeded to assess the income accordingly. As a matter of fact, as stated above, the Assessing Officer did issue notice and made regular assessment. If such assessment was not in accordance with section 115J, remedy could be else where but certainly not by way ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r section 154(1)(b) of the Act ... Therefore, the impugned notices deserved to be quashed and set aside." Recently in CIT v. Hero Cycles Pvt. Ltd. [1997] 228 ITR 463, the Supreme Court has also observed that rectification is not possible if the question is debatable. Before I conclude, I must notice the cases cited by Mr. Debi Prasad, on behalf of the Revenue. He firstly placed reliance on a decision of this court in CIT v. Tiwary Bechar and Co. [1987] 165 ITR 78. In the aforesaid case this court held that failure to charge interest under section 139(8) of the Act amounts to failure to exercise jurisdiction, which is an error apparent from the record and can be rectified under section 154 of the Act. The decision, in my opinion, has no application in the present case. Interest is charged to compensate the loss of revenue on account of non-payment of tax within time. It does not involve any adjudication. The provisions of section 115J, therefore, cannot be treated at par with section 139(8). Mr. Debi Prasad also relied on two decisions of the Andhra Pradesh High Court in V. V. Traits-Investments (P.) Ltd. v. CIT [1994] 207 ITR 508 and Suryalatha Spinning Mills Ltd. v. Union of In ..... X X X X Extracts X X X X X X X X Extracts X X X X
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