THE COMMISSSIONER OF INCOME TAX,COCHIN vs. M/S.SITARAM TEXTILES, TRISSUR
What did the High Court hold?
The High Court found that the Tribunal had committed errors concerning both facts and statutory provisions. The Court noted that the intimations issued under Section 143(1)(a) were not mere acknowledgments but were processed returns, even without a tax demand. The proviso to Section 143(1) clearly states that an intimation shall be sent whether or not any adjustment has been made and notwithstanding that no tax or interest is due. The Court also observed that Section 154(1)(b) specifically authorized the rectification of mistakes in such intimations. For assessment year 1990-91, the Court addressed the issue of rectification after a regular assessment under Section 143(3), stating that the Supreme Court decision in COMMISSIONER OF INCOME-TAX V. GUJARAT ELECTRICITY BOARD (2003) 260 ITR 84 was not applicable to the facts. The Court held that if the Section 143(1)(a) proceedings were independent and not merged with the Section 143(3) assessment, rectification would still be permissible. Consequently, the High Court set aside the ITAT's orders and remanded the matters back to the Tribunal for fresh consideration.
What were the facts?
The assessee, M/s. Sitaram Textiles, filed loss returns for assessment years 1989-90 and 1990-91, which were initially accepted by the Assessing Officer (AO) with intimations under Section 143(1)(a) of the Income Tax Act. Subsequently, the AO initiated rectification proceedings under Section 154(1)(b) to disallow items prima facie inadmissible under Rule 6B, 6D, and Section 37(2A). The Commissioner of Income Tax (Appeals) cancelled these rectification orders, holding that the initial intimations were not valid under Section 143(1)(a). The Income Tax Appellate Tribunal (ITAT) confirmed the CIT(A)'s order. The Department sought a reference to the High Court against the ITAT's decision.
What were the issues?
1. Whether, on the facts and in the circumstances of the case, is the intimation statutorily invalid? (Question of law/mixed law and fact, concerning Section 143(1)(a) of the Income Tax Act). 2. Whether, on the facts and in the circumstances of the case, the Tribunal is right in law and fact in cancelling the rectification order? (Question of law/mixed law and fact, concerning Section 154(1)(b) of the Income Tax Act). Assessee's contention: The Tribunal's decision was based on the Kerala High Court's order in the case of KERALA STATE COIR CORPORATION, which was confirmed by the High Court in (2001) 252 ITR 503. Revenue's contention: The decision in KERALA STATE COIR CORPORATION's case does not apply as in that case, only acknowledgments were issued, whereas here, intimations under Section 143(1)(a) were issued.
Which sections of the Income-tax Act were involved?
Section 143(1)(a),Section 143(3),Section 154(1)(b),Section 37(2A)
AI-generated summary — verify with the full judgment below
Cause title — parties, addresses and appearances
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 2 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:
Whether, on the facts and in the circumstances of the case, is the intimation statutorily invalid?
Whether, on the fact and in the circumstances of the case, the Tribunal is right in-law and fact in cancelling the rectification order?
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 3 Section 143(1)(a) and acknowledgment only was issued by the officer on the returns filed.
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:
4 "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. 5
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 6 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.
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
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