TMI Blog1994 (3) TMI 17X X X X Extracts X X X X X X X X Extracts X X X X ..... able it may be assessed subject to the company's right of appeal or other remedy available under the law. The stand of the company that the cash compensatory support was not taxable was based on the decision of the Special Bench of the Income-tax Appellate Tribunal in the case of Gedore Tools (India) (P.) Ltd. v. IAC [1988] 25 ITD 193 (Delhi). In the company's return, the company disclosed business loss on the ground that cash compensatory support was not taxable. Even if cash compensatory support was treated as taxable, the company would still have suffered a loss for the assessment year. Subsequent to the company submitting its return, the Finance Act, 1990, was enacted by which the provisions of section 28 of the Act were amended with effect from April 1, 1967, making cash compensatory support taxable. On June 22, 1990, the Deputy Commissioner of Income-tax, Special Range, respondent No. 1, issued notice under section 143(2) of the Act to the company for the assessment year 1989-90. The company prayed for an adjournment and the hearing was fixed on July 24, 1990. The hearing in fact took place on July 27, 1990. On July 31, 1990, the Deputy Commissioner of Income-tax, res ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed the constitutionality of section 143(1) and section 143(1A) of the Act on the ground that they are violative of articles 14, 19 and 265 of the Constitution. It is submitted that the nature of the provisions were determinable with reference to a circular issued by the Income-tax Department being Circular No. 549 dated October 31, 1989, in which the amendments made in section 4 of the Act and the insertion of section 143(1A) were sought to be explained. The passages in the circular which have been highlighted by the petitioners in support of their arguments read as follows : " The new section 143, as substituted by the Amending Act, 1987, while dispensing with the necessity of passing assessment orders in all cases, did not contain any deterrent provision against filing of incorrect returns to show lesser tax liabilities. Consequently, the new scheme of assessment was liable to be misused by unscrupulous taxpayers, who might return lesser income by making obvious mistakes or by claiming obviously incorrect deductions and taking a chance that if the same are detected by the Department, they would have to pay the correct tax only. The Amendment Act, 1989, has, therefore, inserted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... defaulters were being subjected to the levy of additional tax. To treat the provisions as deterrent would be to ignore cases where an assessee may have bona fide and innocently made a mistake in their return as filed. (3) The petitioners have also submitted that the impugned provisions could not be justified as a tax on negligence as sought to be done as the tax not being an income could not be justified with reference to entry 82 of List I of the Second Schedule to the Constitution. It is further submitted that a tax on negligence could not be justified with reference to the residuary entry 97 of List I. Negligence would be a wrongful act or omission which could be penalised by subjecting the perpetrator of the negligent act to damages or fine but could not be a subject-matter of taxation. In any event, the taxable event and the subject-matter of tax would be vague, indefinite and uncertain. (4) It is then contended that if the imposition was sought to be justified on the basis of it being a fee even then the impugned provisions would be unconstitutional as a fee could only be levied for any services rendered. The performance of statutory duties under the Act to collect tax, a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to events subsequent to the filing ; and (v) that having regard to the object of the imposition of additional tax, the respondents should have given the assessee an opportunity of being heard before making the adjustment ; and (vi) that no adjustment could, in any event, be made in the facts of the case as the question of adjustment would have to be considered on the basis of the law as it stood when the return was filed and when the company had filed the return cash compensatory support was not taxable as income at all. Before countering the petitioners' submissions, the respondents have strenuously contended that the writ application was not maintainable not only because the company had an alternative remedy under the Act but was actively pursuing such alternative remedy. The submission is made with reference to the appeal pending before the Tribunal from the impugned order dated December 27, 1991, and the application for stay pending before respondent No. 1. Reliance has been placed on the decisions reported in Sheo Nath Singh v. AAC of I.T. [1968] 67 ITR 254 (Cal) [FB] ; Laxmi Industries and Cold Storage Co. (P.) Ltd. v. ITO [1971] 79 ITR 248 (All) and Purshottam Thackers ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he respondents that section 143(1) nullified rights under section 139(5) or (9). It is said that the objects of the sections were different and that there was no question of the one nullifying the other. As the question of alternative remedy raised by the respondents is in the nature of a demurrer, that issue is taken up at the outset. There can be no doubt that once a petitioner has exercised his option to proceed with the alternative remedy, he cannot be permitted to proceed under article 226 at the same time. But this principle proceeds on the basis that the authority before which the alternative remedy had been invoked had the jurisdiction to determine the issues raised in the application under article 226. In this case, the petitioners have challenged the constitutionality of various provisions of the Act and have asked that they be struck down. Now, the Tribunal before which the company's appeal is pending, is a creature of the Act and the Act does not envisage the Tribunal determining such issues. The courts have refused to entertain writ applications only when the alternative remedy is truly alternative, i.e., equally efficacious. The remedy prayed for by the petitioners ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... all be rectified ; (ii) any loss carried forward, deduction, allowance or relief, which, on the basis of the information available in such return, accounts or documents, is prima facie admissible but which is not claimed in the return, shall be allowed ; (iii) any loss carried forward, deduction, allowance or relief claimed in the return, which, on the basis of the information available in such return, accounts or documents, is prima facie inadmissible, shall be disallowed ; . . . . Provided also that an intimation for any tax or interest due under this clause shall not be sent after the expiry of two years from the end of the assessment year in which the income was first assessable. " The jurisdiction of the Assessing Officer under section 143(1)(a) to make an adjustment and to issue an intimation is, in my view, limited not only to the obvious but also to that which is deducible from the return as filed, without doubt or debate. This is clear from the language of the section and is supported by the authority as well as the circulars issued by the Central Board of Direct Taxes in this connection. In the case of Khatau Junkar Ltd. v. K. S. Pathania [1992] 196 ITR 55, a D ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is concerned is final and it entails immediate and drastic consequences unless corrected or revised by a higher authority under section 154 or section 264, as the case may be. The exercise of power under section 143(1)(a) is, therefore, required to be scrutinised carefully and kept strictly within the bounds of the statute, any dispute being resolved in favour of the assessee. Now the question is whether there was such a clear case on the basis of the return which justified the making of an adjustment under section 143(1). In the original return filed by the petitioner-company on December 29, 1989, the computation of business income for the assessment year in question was made as follows : " Computation of business income Business Speculation income income Rs. P. Rs. P. Net profit/loss as per profit and loss account (--) 1,55,144.00 1,50,165.00 Rs. P. Depreciation to be considered separately 50,746.00 Charity and donation 774.00 Articles presented in excess of Rs. 50 as per clause 4(iv) of the pay audit report 847.00 Travelling expenditure disallowable as per rule 6D as per clause 4(iv) of the pay audit report 10,829.30 Expenses (net) pertaining to earlier ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... still does not come within the four categories of claims in respect of which adjustments are permissible under section 143(1)(a). Deductions, allowances and reliefs have been dealt with under separate headings under the Act. Deductions are covered by Chapter VI-A, sections 30, 31 et sequitur. The word allowance has been used interchangeably with the word deduction and is referred to in section 33A and the sections following. Chapters VIII, IX and XVIII deal with relief. The respondents have submitted that the claim relating to cash compensatory support fell within the category of loss carried forward or relief. It is not necessary for this court to determine the issue. Suffice it to say that the point raised is a debatable one and not one which could or should have been decided prima facie or summarily by the Assessing Officer in exercise of the power under section 143(1)(a) of the Act. There is a second limitation on the power under section 143(1)(a) and that is the Assessing Officer must determine the question of adjustment thereunder by applying the law prevailing when the return was filed. This follows first from the nature of the obligation to which an assessee is subj ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t sought to be achieved by the section. One of the objects of the introduction of sections 143(1A) and 143(1)(a), having regard to Circulars Nos. 549 and 581 appears to be to put assessees on guard against filing incorrect returns. In the decision of C. B. Gautam v. Union of India [1993] 199 ITR 530 (SC), for the purpose of elucidating the object for the introduction of section XXC of the Act, the Supreme Court referred to an instruction issued by the Central Board of Direct Taxes in this context. There may also be some substance in the petitioner's arguments that the object of the provisions was penal in nature. It is to be noted that in the decision of Indo-Gulf Fertilizers and Chemicals Corporation Ltd. v. Union of India [1992] 195 ITR 485 (All), it was argued by the respondents income-tax authorities that additional income-tax was indeed charged by way of penalty. Without going into the question as to whether the provisions are penal in nature, but keeping in mind the consequences of an adjustment made and the insistence upon the assessee filing a correct return, it would follow that the date for judging the question of adjustment must be the actual date of the return in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... suance would, therefore, amount to admission of the debatability of the claim made by the petitioner in its return. The notice issued under section 143(2) dated June 22, 1990, required the assessee to produce further information because the Income-tax Officer found certain points in connection with the return of income submitted by the assessee for the assessment year in question. It appears from the copy of the notice which was scheduled to be held on June 28, 1990, was adjourned twice. The income-tax authorities' explanation for issuing the notice under section 143(2) appears to be a submission that the notice under section 143(2) is issued as a matter of course, without any application of mind merely because the period for limitation for issuing the notice was liable to expire at an early date. The court cannot act on a submission which is not borne out from the records nor will it accept reasoning other than that given in the notice under section 143(2). That more information was in fact required before the assessment of the petitioner's return could be made must be taken to have been conceded. In my view, apart from the concession in this case, generally, this is the thi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... specifically providing that the issuance of an intimation under section 143(1)(a) would be without prejudice to section 143(2) was, in my view, deliberate because of the difference in the nature of the jurisdictions exercised by the Assessing Officer under the two sections. The jurisdiction under section 143(1)(a) as already seen is a summary one, whereas section 143(2) precedes an assessment under section 143(3) or what has been described as the scrutiny or regular assessment. The language of section 143(3) shows the object of the issuance of notice under section 143(2) and reads : " 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 Assessing Officer may require on specified points, and after taking into account all relevant material which he has gathered, the Assessing 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 on the basis of such assessment." The respondents' submission that the issuance of an intimation is compulsory is incorrect. To accept t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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