ORDER
R.M. Mehta, Accountant Member
1. This appeal is directed against the order passed by the DC (Appeals) whereby the latter has refused to entertain the appeal on the ground that order passed by the Income-tax Officer under Section 143(1)(a) of the Income-tax Act was not appealable under Section 246 of the Income-tax Act.
2. The appellant in this case is an individual deriving salary income from USAID. He filed a return of income showing gross salary income of Rs. 58,700, but claimed exemption under Section 10(8). In the statement of income appended along with the return the assessee by means of a note referred to the judgment of the Delhi High Court in the case of CIT v. Prem Bandhu Gupta [1985] 156 ITR 737 : 21 Taxman 228 in support of the claim for exemption. The other income shown by the assessee in the return was from “other sources”, but after claiming deductions under Sections 80C, 80L and 80CCA the returned income was Rs. Nil.
3. The Income-tax Officer proceeded to complete the assessment under Section 143(1)(a) at a net taxable income of Rs. 26,565 rejecting in the process the claim for exemption under Section 10(8). A tax demand of Rs. 2,510 was also created.
4. Being aggrieved with the aforesaid order the assessee preferred an appeal to the DC (Appeals) raising grounds pertaining to the non-allowance of exemption under Section 10(8). In the statement of facts appended along with the memo of appeal, he once again invited attention to the decision of the Hon’ble Delhi High Court in Prem Bandhu Gupta’s case [supra). The DC (Appeals) rejected the appeal on the ground that order passed under Section 143(1)(a) was not appealable under Section 246 of the Income-tax Act, 1961. It is in these circumstances that the assessee is presently in appeal before the Tribunal.
5. The learned counsel, at the outset, contended that the DC (Appeals) had mis-interpreted the relevant provisions of law inasmuch as it was the assessee’s stand that appeal under Section 246 lay in case an assessee denied his liability to be assessed under the Act. For this purpose, the learned counsel invited attention to the provisions of Section 246(1)(a). The further submission on his part was that the provisions pertaining to the right of appeal were required to be liberally construed in the light of the decision of the Hon’ble Supreme Court in the case of CIT v. Ashoka Engg. Co. [1992] 194 ITR 645. It was further stated that although the income from salary had been offered to tax in the preceding assessment years the assessee had staked his claim for exemption under Section 10(8) in view of the decision of the Hon’ble Delhi High Court in Prem Bandhu Gupta’s case (supra) and which was required to be adjudicated upon by the Income-tax Officer rather than rejecting it by passing a summary order under Section 143(1)(a). It was accordingly urged that the matter be restored back to the file of the DC (Appeals) directing him to decide the appeal on merits. The learned Departmental Representative, on the other hand, supported the action of the DC (Appeals) in rejecting the assessee’s appeal on the ground that the same was not maintainable under Section 246.
6. I have examined the rival submissions and have also perused the orders passed by the tax authorities. In my opinion, there is substantial merit in the assessee’s line of argument since he has denied his liability to be assessed under the Act by filing a return showing Nil income on the ground that the only source of income viz., salary was not taxable under Section 10(8) in the light of a decision of the Hon’ble jurisdictional High Court. In spite of a specific note having been placed on the statement of assessable income accompanying the return the Income-tax Officer proceeded to make a summary assessment under Section 143(1)(a) observing that the claim was wrong. According to me this was not an adjustment/modification which an Income-tax Officer was empowered to make under the summary assessment scheme since the issue raised was a debatable one and the assessee had placed reliance on a decision of the Hon’ble Delhi High Court. Under these circumstances the Income-tax Officer should have issued a notice under Section 143(2) and given an opportunity to the assessee to substantiate its claim and inasmuch as this was not done the said order cannot be approved in law. I would also go to the extent of saying that the order passed under Section 143(1)(a) in fact tantamounts to an order passed under Section 143(3) which otherwise has no legs to stand on since no formal notice was issued to the assessee and no opportunity was allowed to him to explain his case vis-a-vis the exemption claimed. Under normal circumstances, I would have proceeded to restore the matter back to the file of the DC (Appeals) directing him to treat the appeal as admitted within the meaning of Section 246 and dispose the same of on merits, but since the order passed by the Income-tax Officer under Section 143(1)(a) is otherwise not supportable under the provisions of law it would be more appropriate to set aside the same and restore the matter to the stage of the return having been filed and awaiting an order from the Income-tax Officer. It is ordered so.
7. In the result, the appeal is allowed, for statistical purposes.