ORDER
1. The only issue arising in this appeal is whether the Assessing Officer was justified in rejecting the application of the assessee Under Section 154 of the Income Tax Act, 1961 (Act) on the ground that intimation issued Under Section 143(1)(a) of the Act cannot be rectified after the issue of notice Under Section 143(2) of the Act in view of the decision of the Hon’ble Gujarat High Court in the case of Lakhanpal National Ltd. 222 ITR 151.
2. Briefly stated the facts are, that the assessee filed its return of income for the year under consideration on 20.11.1997, declaring loss of Rs. 61,79,21,010/-. The said return was processed Under Section 143(1)(a) on 20.7.1998 and the intimation Under Section 143(1)(a) was issued on that date determining the net loss of Rs. 47,21,63,130/- after making adjustment in respect of the following amounts.
(i) Provisions for doubtful debts Rs. 13,70,72,460/-
(ii) Difference of provisions for gratuity
and actually paid Rs. 1,54,420/-
(iii) Disallowance Under Section 43-B Rs. 85,31,000/-
------------------
Rs. 14,57,57,880/-
------------------
Subsequently, the case was selected for scrutiny and notice Under Section 143(2) dated 19.8.1998 was served upon the assessee. After the issue of notice Under Section 143(2), the assessee moved an application for rectification of the intimation Under Section 143(1)(a) since, in the opinion of assessee, the adjustments could not be made by the Assessing Officer. The Assessing Officer, relying on the decision of the Hon’ble Gujarat High Court in the case of Lakhanpal National Ltd. (supra) as well as the decision of the Hon’ble Madhya Pradesh High Court in the case of Regional Soya Bean Products Coop. Union 239 ITR 217, held that rectification is not possible Under Section 154 after the issue of notice Under Section 143(2) of the Act. Accordingly, the Assessing Officer rejected the application of the assessee vide order dated 30.9.1999.
3. The matter was carried in appeal before the Learned CIT (A), before whom, it was contended that reliance placed by the Assessing Officer on the aforesaid two judgments of the High Courts was completely misplaced in as much as the cases before the High Courts were not the cases where the Assessing Officer originally lacked the jurisdiction. It was pleaded that in the present case, the original jurisdiction of the Assessing Officer itself is being questioned and, therefore, those decisions are inapplicable to the present case. In other words, it was contended that if the Assessing Officer’s view is accepted, it would mean that the Assessing Officer who had originally acted without jurisdiction, would be able to validate its earlier lack of jurisdiction and place it beyond challenge by mere act of suo-moto issuance of a notice Under Section 143(2) of the Act. It was further submitted that in none of the cases, relied upon by the Assessing Officer, the facts were similar to the present case. Lastly, it was submitted that it was impossible for the assessee to have moved an application Under Section 154 against the intimation Under Section 143(1)(a) prior to issuance of the notice Under Section 143(2) as both the intimation Under Section 143(a) as well as the notice Under Section 143(2) were received by the assessee on the same date i.e., 27.8.1998. The Learned CIT (A) accepted the contentions raised by the assessee and consequently, the Assessing Officer was directed to consider the application of the assessee Under Section 154 after allowing reasonable opportunity of being heard to the assessee. Aggrieved by the same, the Revenue is in appeal before the Tribunal.
4. The Learned Sr. D.R. has relied on the reasonings given by the Assessing Officer in rejecting the application of the assessee while the Learned Counsel for the assessee has reiterated the stand taken by the assessee before the Learned CIT (A). We have already narrated the same in detail and, therefore, the same need not be repeated.
5. Rival submissions of the parties have been considered carefully. The question for our consideration is whether intimation issued Under Section 143(1)(a) can be amended Under Section 154 on the basis of application moved by the assessee after the issue of notice Under Section 143(2) of the Act. There is no dispute that such intimation falls within the scope of rectification Under Section 154 of the Act. Such rectification can be made either suo-moto by the Assessing Officer after issue of notice Under Section 154(3) of the Act or on the basis of the application moved by the assessee. There can’t be any dispute to the legal position that so long as any order/the intimation is in existence, the same can be rectified unless the context / legislative intent otherwise require. In this legal background, let us consider whether the decisions of the High Courts relied upon by the Assessing Officer help the case of Revenue.
6. In the case of CIT v. Regional Soya Beans Products Co-op. Union Ltd. 239 ITR 217 (M.P), the Assessing Officer issued notice Under Section 143(2) of the Act on 29.5.1992 for assessment year 1991-92. During the pendency of assessment proceeding, the Assessing Officer also issued intimation Under Section 143(1)(a) on 18.12.1992, wherein certain adjustments were made which also resulted in levy of additional tax Under Section 143(1 A) of the Act. On these facts, the question arose whether the Assessing Officer could issue such intimation Under Section 143(1)(a) after the issue of notice Under Section 143(2). Their Lordships of the Hon’ble Madhya Pradesh High Court held that once the process of assessment is initiated by the Assessing Officer by issue of notice Under Section 143(2), he cannot revert back to the process prescribed Under Section 143(1)(a). The ratio laid down by the Court cannot be applied to the present case since we are concerned with a situation where intimation had been issued prior to the issue of notice Under Section 143(2) of the Act which is sought to be rectified by the assessee Under Section 154 of the Act. The question before the Hon’ble Court was entirely different from the question which is required to be adjudicated by us. Hence, the said decision nowhere helps the case of Revenue.
7. In the case of Lakhanpal National Ltd. 222 ITR 151 (Guj.), the Assessing Officer accepted the loss declared by the assessee for the assessment year 1993-94 vide order dated 31.3.1994 Under Section 143(1)(a) of the Act. The Assessing Officer, thereafter, issued notice Under Section 143(2) of the Act on 12.7.1995. During the pendency of assessment proceedings Under Section 143(3) of the Act, the Assessing Officer issued notice Under Section 154 on 24.1.1996 proposing the rectification of order Under Section 143(1)(a). The question arose before the Hon’ble Gujarat High Court as to whether such notice Under Section 154 could be issued by the Assessing Officer after issue of notice Under Section 143(2) of the Act. Their Lordships held that notice Under Section 154 could not be issued after the issue of notice Under Section 143(2) by observing as under:
Reading this provision, it is clear that adjustment can be made without prejudice to the provisions of Sub-section (2). Thus, the right to issue notice under Section 143(2) of the Act is with the Assessing Officer even after making the adjustment, Section 154(1)(b) refers to amendment in the intimation sent by the authority under Section 143(1) and the powers are conferred to rectify any mistake which is apparent from the record and not otherwise. Thus, after rectifying the mistake, the order would remain an order under Section 143(1)(a) of the Act, and in view of the language, it would be open for the Assessing Officer to issue notice under Section 143(2) of the Act even thereafter to the assessee for making assessment under Sub-section (3) of Section 143 and in that case, he will have to complete the assessment as laid down under Sub-section (3) of Section 143. We have taken the view that once notice is issued under Section 143(2), he Assessing Officer has to complete the assessment under Section 143(3) in our decision rendered in Special Civil Application No. 425 of 1996 – Gujarat Poly-AXV Electronics Ltd. v. Dy. CIT (Assessment) [1996] 222 ITR 140, decided by us on July 4/5, 1996, and, therefore, we do not discuss in detail about the same in this judgment. If the Assessing Officer would have rectified the order with the aid of Section 154(1)(b) of the Act, even then certainly he could have exercised the power under Section 143(2) of the Act. Once having issued the notice under Section 143(2), he has to complete the procedure of assessment as laid down under Section 143(3) of the Act. In the instant case, the order of assessment is passed by the Assessing Officer and thus he has completed the assessment after scrutinizing the evidence with proper application of mind. Therefore, in a case like this, after issuance of notice under Section 143(2) of the Act, there is no question of issuing notice under Section 154(1)(b) of the Act but the assessment is to be made under Section 143(3) of the Act. Therefore, the impugned notices deserve to be quashed and set aside.
8. Perusal of the above judgment reveals as under:
(i) The order Under Section 143(1)(a) of the Act can be rectified Under Section 154 of the Act if there is any mistake apparent from the record. Even after the amendment, the order would remain an order Under Section 143(1)(a);
(ii) The order Under Section 143(1)(a) of the Act is without prejudice to the provisions of Sub-section (2) of Section 143 and, therefore, the Assessing Officer is not precluded from making assessment Under Section 143(3) after issuing notice Under Section 143(2);
(iii) Once the notice Under Section 143(2) is issued, the assessment is to be completed in accordance with the provisions of Section 143(3) of the Act and not in any other manner. Thus, if there is any mistake in the order Under Section 143(1)(a), the same can be rectified in the process of assessment Under Section 143(3) by making suitable additions in the total income of the assessee;
(iv) Therefore, once notice is issued Under Section 143(2), the Assessing Officer cannot issue notice Under Section 154 proposing rectification in the order Under Section 143(1)(a) of the Act.
The above judgment is an authority for the proposition that suo-moto powers of Assessing Officer Under Section 154 cannot be exercised for amending the order / intimation Under Section 143(1)(a) after the issue of notice Under Section 143(2) but there is nothing in the said judgment so as to curtail the right of assessee to seek rectification of such order / intimation if any mistake is committed by the Assessing Officer in the said order/ intimation.
9. The intimation issued under Section 143(1)(a), in our humble opinion, is not obliterated by the issue of notice Under Section 143(2) of the Act. So long as it is not quashed or cancelled by Courts / Appellate Authorities, it would always remain in force. That being the legal position, such intimation would always be amenable to rectification where a mistake apparent from record has been committed by the Assessing Officer. This view is also fortified by the provisions by the provisions of Clause (b) of Sub-section (1A) of Section 143 which provides that where, as a result of orders mentioned therein including Section 154, the amount on which additional tax is payable under Clause (a) of Section 143(1A) is increased or decreased then the additional tax so payable shall also be increased or decreased accordingly. It is, therefore, clear that intimation Under Section 143((1)(a) can be amended Under Section 154 at any point of time within the period of limitation. The powers of the Assessing Officer are therefore unfettered except where the context otherwise requires.
10. The judgment of the Hon’ble Gujarat High Court puts a fetter on the power of Assessing Officer Under Section 154 considering the scheme of assessment Under Section 143 to the extent the mistake is curable Under Section 143(3) of the Act. The logic behind the judgment of the Hon’ble Gujarat High Court appears to be that after the issue of notice Under Section 143(2), the interest of Revenue is not prejudiced in so far as the mistake committed by the Assessing Officer in not making prima-facie adjustments Under Section 143(1)(a) can be rectified by making addition while computing the total income of assessee.
11. However, where a mistake has been committed by the Assessing Officer by making adjustments which legally could not be made by the Assessing Officer, the interest of assessee is prejudiced on account of levy of additional tax Under Section 143(1A) which could not be cured Under Section 143(3). As already Observed, the intimation Under Section 143(1)(a) is not obliterated by the assessment Under Section 143(3) and consequently the prejudice caused to the assessee on account of mistake committed by the Assessing Officer can be cured only by making suitable rectification Under Section 154 or in appeal Under Section 246 of the Act. The scope of Section 143(3) is quite different in the sense the Assessing Officer is required to adjudicate the issue with reference to the evidence brought on record not only filed with the return but also the evidence which have been brought on record in the course of assessment as well as with reference to the legal position prevailing on the date of assessment. On the other hand, Under Section 143(1)(a) the scope is limited to the evidence filed with the return and the legal position prevailing on the date of intimation. Thus, the disallowance of expenditure or claim of assessee may be permissible Under Section 143(3) but may not be permissible Under Section 143(1)(a). Hence, the mistake apparent from record committed by the Assessing Officer Under Section 143(1)(a) may not be curable Under Section 143(3) and the assessee would not be able to get relief unless he is allowed to move Under Section 154 or file an appeal Under Section 246 of the Act. Both the remedies are open to the assessee. Such rights are unfettered and there is nothing in the Act to even suggest that prejudice caused to assessee can be cured otherwise. Accordingly, we hold that if any mistake has been committed by the Assessing Officer in making adjustments Under Section 143(1)(a) which is prejudicial to the assessee, the same can be rectified Under Section 154 on the basis of application moved by the assessee in this behalf. Thus, the Learned CIT (A) was justified in directing the Assessing Officer to consider the application of the assessee Under Section 154 of the Act. The order of the Learned CIT (A) is, therefore, upheld.
12. In the result, appeal stands dismissed.
Pronounced on 6th March 2007.