ORDER
M.A. Ajinkya, Accountant Member
1. This appeal raises an interesting question of law. The assessment in this case was completed under Section 143(1) of the Act. No assessment order as such was passed but a demand notice raising a demand of Rs. 6,472 dated 15-4-1987 was issued. This demand notice bore a stamp to the effect that the calculation of tax was made at 20 per cent plus surcharge as the option required under Chapter XII-A is not exercised. When the matter went in appeal, the AAC dismissed the appeal on the preliminary ground that under Section 246(1) an order passed under Section 143(1) is not appealable. The short question for consideration is whether on facts of the present case the order passed under Section 143(1) is an appealable order.
2. It was the case of Shri V.H. Patil, the learned counsel for the appellant, that while accepting the income returned the ITO had levied tax at 20 per cent on the whole income without granting reduction under Chapter VI-A or granting the basic exemption of Rs. 18,000 ostensibly on the ground that the appellant had not exercised his option available under Chapter XII-A. The 1TO has applied the flat rate of 20 per cent of the total income. He has not looked into the fact that the income of the appellant is not from or any investment made from any external account maintained by the appellant. In fact, according to the learned counsel, the appellant does not have any non-resident external account at all. All the income of the appellant is from investments made by him from out of the Indian funds before his departure abroad and as such the provisions of Chapter XII do not apply to the appellant. Apparently, the appellant is a non-resident and it was, therefore, argued that the fact that the appellant had filed a return of income showing computation of income at normal rates and claiming refund would by itself amount to his exercising option not to be taxed under Chapter XII-A. Before going into the merits of the case, the preliminary and the main point that we have to decide is whether an appeal lies against such an order under Section 143(1). Shri Patil has relied on a decision of the Madras Bench of the Tribunal in Venkatesa Vilas v. ITO [1983] 5 ITD 644 where a similar issue arose. In para 19, on which considerable reliance was placed by Shri Patil, the Tribunal observed as follows:
19. Similarly we hold that the AAC is also not justified in holding that no appeal (against order) under Section 143(1) lies. The reason is that no doubt an assessment order under Section 143(1) is not shown as appeasable under Section 246; but it does not mean that the Legislature has denied the assessee the right of appeal against orders passed under Section 143(1). Since, the right of appeal is vested right which can be taken away only by the Legislature, provided that the Legislature has made express or formal provision in the Act to the effect that no appeal lies against an order under the particular and specific section of the Act or under Section 143(1). It cannot be denied by implication, saying that there is no appeal provided under Section 246 and, therefore, against the order under Section 143(1), the Legislature has denied the right to the assessee to file an appeal against the order of the ITO under Section 143(1). Furthermore, the assessment order under Section 143(1) is summary assessment where the ITO is bound to accept it and if he feels not to do so, then he should give the assessee a reasonable opportunity of being heard, which in this case is not given; in taking away the status of the assessee of registered firm, effecting the quantum of tax for the assessment year under consideration, which is nothing else than enhancement of the assessment, which the ITO is not empowered to do under Section 143(1). And if he has acted otherwise, then the assessee is aggrieved against such order and being so his grievances should be remedied due to the system of justice, prevalent in our country, which is possible only if he has right to make an appeal. Therefore, the denial of it is constitutional, and against the principles of natural justice. In view of the fact that in such situation the assessee is discriminated being given different treatment than that of another or other assessee or assessees in the same situation when in their cases the orders are under Sections 143(3) and 144 of the Act.
Reliance was also placed on a decision of the Bombay Bench of the Tribunal in the case of fifth ITO v. D.M.C.C. Employees Medical Aid Trust [1987] 22 ITD 273. The Tribunal therein held that where the ITO rejected a claim under Section 80L without giving an opportunity and therefore although the section mentioned in the assessment order is 143(1), in substance, the assessment was made under Section 143(3) and, therefore, the assessee was entitled to file an appeal before the AAC. Shri Patil argued that the assessee was denying his liability to be assessed at 20% on the interest on fixed deposits which assessment was based on the wrong assumption that they were deposits made from nonresident external accounts. The learned Departmental Representative, on the other hand, relied on a decision of the Ahmedabad Bench of the Tribunal in Choitram G. Asrani v. ITO (sic), where the Tribunal held that according to the scheme of Section 143(1), in a case where are turn has been made under Section 139 and the ITO is satisfied without requiring the presence of the assessee or the production by him of any evidence as to the correctness and completeness of such return, the ITO can assess the total income or loss, as the case may be, and work out the tax payable by or refundable to on the basis of the such return. The ITO is further empowered to carry out adjustments under Section 143(1)(b). If the assessee is not satisfied with such adjustments, he can make an application under Section 143(2)(a) objecting to the assessment made under Section 143(1). If the assessee has not filed any such objections but had come in appeal, it could be said that he had not availed of the remedies available to him under the law in the form of provisions of Section 143(2)(a) or Section 154 or 264. Therefore, in such cases, the AAC is justified in holding that the ITO’s order under Section 143(1) was not appeasable. After relying on this decision of the Ahmedabad Bench of the Tribunal, the learned Departmental Representative referred to the observations of the learned authors Chaturvedi & Pithisaria at page 2764 of Vol. Ill of Third Edition. While discussing the question of remedies available to assessees under Section 143(1), the learned authors have expressed the same view as has been expressed by the Ahmedabad Bench of the Tribunal. In reply to this argument of the learned Departmental Representative, Shri Patil referred to Section 246(c) of the Act which, as it stood at the relevant time, read as follows :-
246. Appeasable orders.- (1) Subject to the provisions of Sub-section (2), any assessee aggrieved by any of the following orders of any Assessing Officer may appeal to the Deputy Commissioner (Appeals) against such order –
(a) ** ** **
(b) ** ** **
(c) an order against the assessee, where the assessee denies his liability to be assessed under this Act or any order of assessment under Sub-section (3) of Section 143 or Section 144, where the assessee objects to the amount of income assessed, or to the amount of tax determined, or to the amount of loss computed, or to the status under which he is assessed.
It was Shri Patil’s case that the appellant was denying his liability to be assessed to tax at the rate of 20% under Chapter XII-A and, therefore, had filed an appeal against the assessment under Section 143(1) which had raised the demand on the wrong assumption that the assessee, who was a non-resident, had not exercised his option under Chapter XII-A. Shri Patil relied on a decision of the Supreme Court in the case of Central Provinces Manganese Ore Co. Ltd. v. C1T [1986] 160 ITR 961 to argue that if the assessee denied his liability to be assessed, he could always file an appeal.
3. We have considered the submissions made on either side. No doubt, the procedure laid down under Section 143(2)(b) provides for a remedy to the assessee who is assessed under Section 143(1) after adjustments or after applying rates which, according to him, are wrongly applied. However, if the appellant does not or fails to pursue the remedy available under the law in the form of Section I43(2)(b) or apply for rectification under Section 154 or apply to the CIT under Section 264, such failure on his part does not ipso facto mean that his right of appeal under Section 246(c), where he denies his liability to be assessed at a particular rate of tax or in a particular manner, is not available to it. Any variation of tax liability which is incorrectly made in an assessment under Section 143(1) and which causes grievance to the appellant can be challenged by the assessee in appeal under Section 246(c) because he is, in effect, denying his liability to tax in a manner that the Assessing Officer intends to do, though such tax is raised in what is ostensibly an order under Section 143(1). We are, therefore, of the opinion that in filing an appeal before the AAC the assessee was denying his liability to be taxed at 20% which was done by the ITO on a wrong assumption that his income was from non-external account deposits. In this view of the matter, we hold that the first appellate authority erred in dismissing the appeal in limine. We would direct the first appellate authority to admit the appeal and decide it on merits. For this purpose, we would set aside the AAC’s order and restore it to the file of the first appellate authority.
4. In the result, the appeal will be treated as allowed for statistical purposes.