TMI Blog2005 (12) TMI 202X X X X Extracts X X X X X X X X Extracts X X X X ..... sued/deemed to have been issued on the basis of the returned income. Subsequently, the Assessing Officer formed an opinion that claim of the assessee under section 80-IB without deducting depreciation on fixed assets for the respective years under consideration was not correct. According to him it was a colourful device to defraud the revenue to which the decision of the Supreme Court in the case of McDowell Co. Ltd. v. Commercial Tax Officer [1985] 154 ITR 48 applied. The Assessing Officer, therefore, invoked the provisions of section 154 and recomputed the income of the assessee by deducting the depreciation and, consequently, reduced the net profit and the consequent reduction of section 80-IB deduction of the assessee in the years under consideration. He referred to in this connection the decision of the Supreme Court in Carnbay Electric Supply Industrial Co. Ltd. v. CIT [1978] 113 ITR 84 and the decision of jurisdictional High Court of Bombay in the case of Indian Rayon Corporation Ltd. v. CIT [2003] 261 ITR 982. 3. On appeal the CIT(A) upheld the orders of the Assessing Officer in page No. 13 of his order (for assessment year 1999-2000), by concluding as under:- "23 ... ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... resorting to rectification provisions was not valid much less when the issue as to whether the depreciation can be thrust upon the assessee when it does not want to claim the same was debatable one. Shri S.A. Bohra, the ld. Departmental Representative, however, supported the action of the Assessing Officer in the view of the decisions referred to by the Assessing Officer and the Special Bench decision of the Tribunal in the, cases of Vahid Paper Converters [IT Appeal No. 1686 (Ahd.) of 2004, dated 9-11-2005] wherein the Tribunal held that depreciation has to be deduced while computing the income of an assessee for determining the amount of deduction under Chapter VI-A of the Act of which section 80-IB is a part irrespective of the fact whether it was claimed by the assessee or not. 5. The parties are heard and their rival contentions considered. Records were also gone through. The rectification orders passed by the Assessing Officer are in connection with the proceedings under section 143(1). The provisions of section 143(1) as they were in force at the relevant time are as under:- "143. Assessment.-(1) Where a return has been made under section 139, or in response to a notice ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... able to him on the basis of such return." 7.1 As we see that the original idea was to make an assessment under section 143(1) without requiring the presence of the assessee or production of any evidence and where the Assessing Officer was satisfied that the return is correct and complete, he was to determine the sum payable by an assessee or refundable to him on the basis of such return. 7.2 It was amended with effect from 1-4-1971 by the Taxation Laws (Amendment) Act, 1970 to the following:- "143. Assessment.- Where a return has been made under section 139, the Assessing Officer may, without requiring the presence of the assessee or the production by him of 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 refunda ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... due on the basis of such return, after adjustment of any tax deducted at source, any advance tax paid and any amount paid otherwise by way of tax or interest, then, without prejudice to the provisions of sub-section (2), an intimation shall be sent to the assessee specifying the sum 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; Provided that in computing the tax or interest payable by, or refundable to, the assessee, the following adjustments shall be made in the income or loss declared in the return, namely:- (i) any arithmetical errors in the return, accounts or documents accompanying it shall 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 availabl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... st is found due, an intimation shall be sent to the assessee 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, it shall be granted to the assessee: Provided that an intimation for any tax or interest due under this clause shall not be sent after the expiry of four years from the end of the financial year in which any such adjustments were made or any such order was passed." 7.5 A somewhat new scheme was introduced by this time with a primary purpose of reducing workload of the Department by greater reliance on voluntary compliance by the assessees with a limited number of cases of scrutiny assessments. The concept of making prima facie adjustments by way allowing or disallowing deductions, allowances or relief on the basis of information available in the return or the accompanying accounts or documents was introduced along with a liability to additional tax on such adjustments, if made. Even rectification or consequential amendments were provided for. 7.6 The Legislature again intervened present section as reproduced a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... limited and restricted only to determine tax on the basis of the return of income filed by the assessee. The Assessing Officer cannot look beyond the return but to compute tax or interest after adjustment of pre-paid taxes by the assessee. On a bare look of the provisions of section 143(1) itself, it is apparent that Assessing Officer has no jurisdiction to compute the income by allowing or disallowing an expenditure including depreciation not claimed or claimed in the return nor to vary the amount of claim by the assessee in any other way. Under this section, it is beyond his power to disturb the income declared by an assessee in the return. In fact, he is not computing the income of the assessee by issue of intimation on the basis of return. He is just to take income as declared by the assessee as base for computing tax. Any adjustment made with respect to depreciation or allowing the same for computing relief under section 80-IB of the Act at a different figure than claimed in the return of income filed for the years under consideration or disturb the income otherwise is not warranted and would be in violation of provisions of section 143(1) of the Act. 8. In this background a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se of Choice Acquaculture (P.) Ltd. [IT Appeal No. 1476 (Ahd.) of 2005 vide order dated 29-11-2005]. In this case the Division Bench of the Tribunal declined to allow depreciation on the higher written down value because of the adjustment of the capital expenditure in the earlier year. It was stated that such an adjustment was not permissible under section 143(1) because it was not be reflected in the return filed by the assessee and consequently, the provisions of rectification sought for by the assessee cannot be invoked. The controversy in this case is also similar, with an only difference that there the assessee was claiming deduction but in this case, the Revenue sought adjustment of the depreciation by invoking the provisions of section 154 making a change in the returned income and consequent determination of tax under section 143(1). Therefore, the principle as canvassed in the Division Bench case would also hold good in the present case. 11. The Tribunal observed that the proposition of law is well-settled that what cannot be done "per directum" is not permissible to be done "per obliquum", meaning thereby whatever is prohibited by law to be done, cannot legally be effec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s proposition was also applied for reopening the proceedings on the basis of change of opinion in the case of CIT v. Kelvinator of India Ltd. [2002] 256 ITR 1 (Delhi) (FB). It was held by Hon'ble Delhi High Court that such assessment could not be reopened as it was based on change of opinion, the Assessing Officer did not have such power as it will be tant amounting to do an act which could not be done directly under the statute. The Assessing Officer was held to be lacking jurisdiction to achieve the object of making addition on the issue that was well considered during the course of original assessment by adopting the recourse to reassessment proceedings. Again, it was, applied by the Supreme Court in proceedings under section 245E in the case of CIT v. Paharpur Cooling Towers (P.) Ltd. [1996] 219 ITR 618. While discussing the powers of Settlement Commission in this case it was held by the Supreme Court that penalty proceedings do not fall within the ambit of section 245E of the Act and the Commission exceeded its jurisdiction in dropping penalty proceedings for assessment years 1970-71 to 1974-75 while deciding settlement application for assessment year 1975-76 and further assum ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
