IN THE HIGH COURT OF KERALA AT ERNAKULAM
ITR.No. 3 of 2006()
1. THE COMMISSSIONER OF INCOME TAX,COCHIN
... Petitioner
Vs
1. M/S.SITARAM TEXTILES, TRISSUR
... Respondent
For Petitioner :SRI.P.K.R.MENON,SR.COUNSEL,GOI(TAXES)
For Respondent :SRI.K.R.SUDHAKARAN PILLAI
The Hon'ble MR. Justice C.N.RAMACHANDRAN NAIR
The Hon'ble MR. Justice HARUN-UL-RASHID
Dated :26/11/2008
O R D E R
C.N.RAMACHANDRAN NAIR &
HARUN-UL-RASHID, JJ.
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I.T. Reference Nos. 3 & 4 of 2006
....................................................................
Dated this the 26th day of November, 2008.
JUDGMENT
Ramachandran Nair, J.
These Income Tax Reference Cases arise from orders of the
Income Tax Appellate Tribunal issued for the assessment years 1989-
90 and 1990-91. Loss returns filed by the assessee for the above two
years were accepted by the Assessing Officer and intimations were sent
under Section 143(1)(a) of the Income Tax Act. Regular assessment
was completed for the assessment year 1990-91 under Section 143(3)
of the Act after issuing notice under Section 143(2) of the Act. Later,
the Assessing Officer noticed that the intimations sent were incorrect in
as much as adjustments towards prima facie inadmissible items namely,
disallowance under Rule 6B, 6D and Section 37(2A) were not made.
Accordingly notices were sent under Section 154(1)(b) of the Act and
assessments were rectified vide two orders dated 8.2.1994 produced as
Annexure A to the Reference Case. In the appeals filed by the
assessee, the C.I.T.(Appeals) held that the proceedings sent under
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Section 143(1)(a) on 31.8.1990 and 28.2.1991 for the respective
assessment years do not constitute intimations under Section 143(1)(a)
of the Act. Consequently he cancelled the rectification orders in which
additional tax was demanded under Section 143(1A) of the Act. In
second appeal filed by the Department before the Tribunal, Tribunal
confirmed the orders of the C.I.T.(Appeals). It is against these orders
reference was sought by the Department and the Tribunal has referred
the following two questions of law for our decision:
1. Whether, on the facts and in the circumstances of the
case, is the intimation statutorily invalid?
2. Whether, on the fact and in the circumstances of the
case, the Tribunal is right in-law and fact in cancelling the
rectification order?
2. When the cases came up before us, counsel for the assessee
pointed out that the Tribunal decided the appeal based on their order in
KERALA STATE COIR CORPORATION’s case which is confirmed
by decision of this court reported in (2001) 252 ITR 503. However,
Senior Standing Counsel appearing for the Income Tax Department
submitted that the decision of this court does not apply to the facts of
this case because in that case there was no proceedings issued under
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Section 143(1)(a) and acknowledgment only was issued by the officer
on the returns filed.
3. On going through the Tribunal’s order, the decision of this
court abovereferred and after hearing both sides, we feel the Tribunal
has committed errors not only on facts but with reference to statutory
provisions also. In the first place, on going through the records
available with the assessee we find that returns were acknowledged on
the date of filing it i.e. on 29.12.1989 for the year 1989-90 and on
31.12.1990 for the year 1990-91. It is seen from Annexure-A
produced for both the years that the returns were processed and
intimations were sent, though without demand, on 31.8.1990 and
28.2.1991. The Commissioner of Income Tax (Appeals) and the
Tribunal have also referred to these intimations issued under Section
143(1)(a) which are not acknowledgments of filing of returns. The
question, therefore, to be considered is whether a proceedings sent
pursuant to filing of returns without demand of tax or interest is an
intimation under Section 143(1)(a) of the Act. We notice that there is a
specific proviso in Section 143(1) which is as follows:
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“Provided further that an intimation shall be sent to the
assessee, whether or not any adjustment has been made under
the first proviso and notwithstanding that no tax or interest is
due from him.”
The above proviso makes it clear that besides acknowledgement of
receipt of return, issue of an intimation under Section 143(1)(a) is
contemplated under the Act. If that be so, then the question is whether
such an intimation can be rectified under Section 154(1)(b) of the Act.
It is pertinent to note that the above provision specifically authorises
rectification of mistakes in such intimations issued. In fact, prior to the
amendment with effect from 1.6.1999, Section 154(1)(b) provided for
amendment of any intimation sent by the officer under sub-section (1)
of Section 143 or to enhance or reduce the amount or refund granted by
it under that sub-section. Apparently, an intimation sent without
demand of tax or interest also could be rectified under Section 154(1)
(b) of the Act. Since the C.I.T.(Appeals) and the Tribunal have
misunderstood facts and have not referred to the statutory provisions
applicable at the relevant time, we are constrained to set aside the order
of the Tribunal and remand the matter back to the Tribunal for
reconsideration for the year 1989-90.
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4. So far as the case for 1990-91 is concerned, one additional
feature noticed by the Tribunal in the reference order is that after
issuing intimation under Section 143(1)(a), the Assessing Officer had
completed a regular assessment under Section 143(3). The question,
therefore, is whether after issuing a regular assessment, the proceedings
issued under Section 143(1)(a) can be rectified. The decision of the
Supreme Court in COMMISSIONER OF INCOME-TAX V.
GUJARAT ELECTRICITY BOARD (2003) 260 ITR 84 relied on by
the Tribunal does not apply to the facts of this case because there what
was decided was not the right of the Assessing Officer to rectify under
Section 154(1)(b) of an intimation after issuing a regular assessment.
On the other hand, what Supreme Court has held is that after making a
regular assessment, there is no scope for issuing intimation under
Section 143(1)(a) of the Act. On the other hand, if proceedings issued
under Section 143(1)(a) is an independent proceeding and is not
superceded or merged in the assessment issued under Section 143(3),
still it will be open to the officer to rectify the intimation issued under
Section 143(1)(a). Since the decision of the Supreme Court relied on
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by the Tribunal is not on the issue, we feel the matter requires to be
reconsidered by the Tribunal by understanding the issue correctly
which is set out above. Therefore, the order of the Tribunal for this
year also is set aside and remanded to the Tribunal for reconsideration.
5. These reference applications are accordingly disposed of by
declining to answer the questions referred, but by setting aside the
orders of the Tribunal with direction to them to issue notice to the
parties, hear the matter afresh and issue orders.
A copy of this judgment under the seal of the High Court and
signature of the Registrar shall be forwarded to the Income Tax
Appellate Tribunal, Cochin Bench, Cochin.
C.N.RAMACHANDRAN NAIR
Judge
HARUN-UL-RASHID
Judge
pms