Sri.sajith Kumar v. This Tax Reference Having Been Finally Heard Along

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE C.N.RAMACHANDRAN NAIR & THE HONOURABLE MR. JUSTICE HARUN-UL-RASHID WEDNESDAY, THE 26TH NOVEMBER 2008 / 5TH AGRAHAYANA 1930 ITR.No. 3 of 2006() ------------------- AGAINST THE ORDER IN RA.279/COCH/1998 IN ITA.692/COCH/1994 of I.T.A.TRIBUNAL,COCHIN BENCH .................... APPLICANT(S): -------------- THE COMMISSIONER OF INCOME TAX,COCHIN. BY ADV. SRI.P.K.R.MENON,SR.COUNSEL,GOI(TAXES) SRI.GEORGE K. GEORGE, SC FOR IT RESPONDENT(S): --------------- M/S.SITARAM TEXTILES, THRISSUR. ADV. SRI.K.R.SUDHAKARAN PILLAI SRI.SAJITH KUMAR V. THIS TAX REFERENCE HAVING BEEN FINALLY HEARD ALONG WITH ITR NO.4/2006 ON 26/11/2008,THE COURT ON 26/11/2008 DELIVERED THE FOLLOWING: C.N.RAMACHANDRAN NAIR &HARUN-UL-RASHID, JJ. ....................................................................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 theIncome Tax Appellate Tribunal issued for the assessment years 1989-90 and 1990-91. Loss returns filed by the assessee for the above twoyears were accepted by the Assessing Officer and intimations were sentunder Section 143(1)(a) of the Income Tax Act. Regular assessmentwas 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 inas 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 andassessments were rectified vide two orders dated 8.2.1994 produced asAnnexure A to the Reference Case. In the appeals filed by theassessee, the C.I.T.(Appeals) held that the proceedings sent under Section 143(1)(a) on 31.8.1990 and 28.2.1991 for the respectiveassessment years do not constitute intimations under Section 143(1)(a)of the Act. Consequently he cancelled the rectification orders in whichadditional tax was demanded under Section 143(1A) of the Act. Insecond appeal filed by the Department before the Tribunal, Tribunalconfirmed the orders of the C.I.T.(Appeals). It is against these ordersreference 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 thecase, is the intimation statutorily invalid? 2. Whether, on the fact and in the circumstances of thecase, the Tribunal is right in-law and fact in cancelling therectification 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 inKERALA STATE COIR CORPORATION's case which is confirmedby decision of this court reported in (2001) 252 ITR 503. However, Senior Standing Counsel appearing for the Income Tax Departmentsubmitted that the decision of this court does not apply to the facts ofthis case because in that case there was no proceedings issued under Section 143(1)(a) and acknowledgment only was issued by the officeron the returns filed. 1. Whether, on the facts and in the circumstances of thecase, is the intimation statutorily invalid? 2. Whether, on the fact and in the circumstances of thecase, the Tribunal is right in-law and fact in cancelling therectification 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 inKERALA STATE COIR CORPORATION's case which is confirmedby decision of this court reported in (2001) 252 ITR 503. However, Senior Standing Counsel appearing for the Income Tax Departmentsubmitted that the decision of this court does not apply to the facts ofthis case because in that case there was no proceedings issued under Section 143(1)(a) and acknowledgment only was issued by the officeron the returns filed. 3. On going through the Tribunal's order, the decision of thiscourt abovereferred and after hearing both sides, we feel the Tribunalhas committed errors not only on facts but with reference to statutoryprovisions also. In the first place, on going through the recordsavailable with the assessee we find that returns were acknowledged onthe date of filing it i.e. on 29.12.1989 for the year 1989-90 and on31.12.1990 for the year 1990-91. It is seen from Annexure-Aproduced for both the years that the returns were processed andintimations were sent, though without demand, on 31.8.1990 and28.2.1991. The Commissioner of Income Tax (Appeals) and theTribunal have also referred to these intimations issued under Section143(1)(a) which are not acknowledgments of filing of returns. Thequestion, therefore, to be considered is whether a proceedings sentpursuant to filing of returns without demand of tax or interest is anintimation under Section 143(1)(a) of the Act. We notice that there is aspecific proviso in Section 143(1) which is as follows: "Provided further that an intimation shall be sent to theassessee, whether or not any adjustment has been made underthe first proviso and notwithstanding that no tax or interest isdue from him." The above proviso makes it clear that besides acknowledgement ofreceipt of return, issue of an intimation under Section 143(1)(a) iscontemplated under the Act. If that be so, then the question is whethersuch an intimation can be rectified under Section 154(1)(b) of the Act.It is pertinent to note that the above provision specifically authorisesrectification of mistakes in such intimations issued. In fact, prior to theamendment with effect from 1.6.1999, Section 154(1)(b) provided foramendment of any intimation sent by the officer under sub-section (1)of Section 143 or to enhance or reduce the amount or refund granted byit under that sub-section. Apparently, an intimation sent withoutdemand 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 havemisunderstood facts and have not referred to the statutory provisionsapplicable at the relevant time, we are constrained to set aside the orderof the Tribunal and remand the matter back to the Tribunal forreconsideration for the year 1989-90. 4. So far as the case for 1990-91 is concerned, one additionalfeature noticed by the Tribunal in the reference order is that afterissuing intimation under Section 143(1)(a), the Assessing Officer hadcompleted a regular assessment under Section 143(3). The question,therefore, is whether after issuing a regular assessment, the proceedingsissued under Section 143(1)(a) can be rectified. The decision of theSupreme Court in COMMISSIONER OF INCOME-TAX V.GUJARAT ELECTRICITY BOARD (2003) 260 ITR 84 relied on bythe Tribunal does not apply to the facts of this case because there whatwas decided was not the right of the Assessing Officer to rectify underSection 154(1)(b) of an intimation after issuing a regular assessment.On the other hand, what Supreme Court has held is that after making aregular assessment, there is no scope for issuing intimation underSection 143(1)(a) of the Act. On the other hand, if proceedings issuedunder Section 143(1)(a) is an independent proceeding and is notsuperceded or merged in the assessment issued under Section 143(3),still it will be open to the officer to rectify the intimation issued underSection 143(1)(a). Since the decision of the Supreme Court relied on by the Tribunal is not on the issue, we feel the matter requires to bereconsidered by the Tribunal by understanding the issue correctlywhich is set out above. Therefore, the order of the Tribunal for thisyear 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 theorders of the Tribunal with direction to them to issue notice to theparties, hear the matter afresh and issue orders. A copy of this judgment under the seal of the High Court andsignature of the Registrar shall be forwarded to the Income TaxAppellate Tribunal, Cochin Bench, Cochin. C.N.RAMACHANDRAN NAIRJudge HARUN-UL-RASHIDJudge