Tamil Nadu Magnesite Ltd v. The Commissioner Of Income-Tax,67A Race Course,Coimbatore – 641 018

IN THE HIGH COURT OF JUDICATURE AT MADRAS THE HONOURABLE MR.JUSTICE S.NAGAMUTHU Tamil Nadu Magnesite Ltd.,5/53 Omalur Main Road,Jgir Ammapalayam,Salem – 636 302.Rep. By its Managing Director .. Petitioner vs. 1.The Commissioner of Income-Tax,67A Race Course,Coimbatore – 641 018. 2.The Joint Commissioner ofIncome Tax,Special Range III,Salem. .. Respondents Prayer:- Writ Petition filed under Article 226 of the Constitution ofIndia praying for the issuance of a writ of Certiorarified Mandamuscalling for the records of the petitioner C.No.1411(46)/99-2000 onthe file of the first respondent and quash the impugned order dated22.03.2001 and consequently direct the first respondent to cancel theadditional tax levied under Section 143(1A) of the Act for theassessment year 1993-94. For Petitioner :Mr.R.VenkatanarayananFor Respondents:Mr.J.Naresh Kumar, Senior Standing Counsel (Income Tax) The short question which arises for consideration is, “whetheran order of rectification under Section 154 of the Income Tax Actcould be passed to rectify the intimation given under Section 143(1)(a) of the Act, after a final assessment order under Section 143(3)of the Act has been passed.” https://hcservices.ecourts.gov.in/hcservices/ 2.The petitioner is a Government of Tamil Nadu undertaking.It is an income tax assessee. For the accounting year ended with31.03.1993, the petitioner submitted the tax return admitting Nilincome. The said return was accepted by the second respondent on07.03.1994 by issuance of an intimation in terms of Section 143(1)(a)of the Income Tax Act, 1961. Subsequently, the second respondentissued a notice under Section 143(2) of the Act on 31.03.1994. Thepetitioner later on filed a revised return of the income on04.07.1995 wherein, the deduction originally claimed for theprovisions created for bonus and gratuity was reversed. The secondrespondent acting on the revised return, completed the scrutinyassessment under Section 143(3) of the Act on 22.11.1995. 3.While so, later on, the second respondent issued a noticeunder Section 154 of the Act, with a view to rectify the originalintimation dated 07.03.1994 issued under Section 143(1)(a) of theAct. The petitioner objected to the same. Rejecting the saidobjection, the second respondent passed an order of rectification on14.12.1998 thereby levying an additional income tax to the tune ofRs.4,70,346/-. Aggrieved over the said order, the petitionerpreferred a revision under Section 264 of the Act to the firstrespondent. The said revision was also dismissed. Challenging thesame, the petitioner has come forward with this writ petition. 4.The learned counsel for the petitioner would submit that ifthere had been no notice under Section 143(2) of the Act, then,within the period of limitation of four years, the intimation underSection 143(1)(a) of the Act can be amended by the AssessingAuthority under Section 154 of the Act. But, if once, after the saidintimation, a notice is issued under Section 143(2) of the Act and anassessment order is passed under Section 143(3) of the Act, theintimation under Section 143(1)(a) of the Act merges with the orderunder Section 143(3) of the Act. Therefore, after such merger,Section 143(1)(a) of the Act does not survive for rectification underSection 154 of the Act. 5.But the learned Senior Standing Counsel (Income Tax)appearing for the respondents would submit that there is no legalimpediment for the Assessing Authority to invoke his jurisdictionunder Section 154 of the Act to rectify the intimation under Section143(1)(a) of the Act notwithstanding the fact that subsequent to thesaid proceeding, a final assessment order has been passed underSection 143(3) of the Act. 5.But the learned Senior Standing Counsel (Income Tax)appearing for the respondents would submit that there is no legalimpediment for the Assessing Authority to invoke his jurisdictionunder Section 154 of the Act to rectify the intimation under Section143(1)(a) of the Act notwithstanding the fact that subsequent to thesaid proceeding, a final assessment order has been passed underSection 143(3) of the Act. 6.The learned counsel for the petitioner would rely on ajudgment of the Hon’ble Supreme Court in Commissioner of Income Taxv. Gujarat Electricity Board (2003 ITR (Vol.260) 84) wherein, it hasbeen held as follows:- “Even otherwise, the view taken by theGujarat High Court seems to be correct onprinciple. There is no dispute that section 143(1)(a) of the Act enacts a summary procedure forquick collection of tax and quick refunds. Underthe scheme if there is a serious objection to anyof the orders made by the Assessment Officerdetermining the income, it is open to theassessee to ask for rectification under Section154. Apart therefrom, the provisions of section143(1)(a) indicate that the intimation sent undersection 143(1)(a) shall be without prejudice tothe provisions of sub-section (2). TheLegislature, therefore, intended that, where thesummary procedure under sub-section (1) has beenadopted, there should be scope available for theRevenue, either suo motu or at the instance ofthe assessee to make a regular assessment undersub-section (2) of section 143. The converse isnot available; a regular assessment proceedinghaving been commenced under section 143(2), thereis no need for a summary proceeding under section143(1)(a).” (Emphasis supplied) 7.A glance through the said judgment would make it clearlyunderstandable that if once an assessment order is made under Section143(3) of the Act, preceded by due notice under Section 143(2) of theAct, then there is no scope at all to proceed under Section 143(1)(a)of the Act. 8.The learned counsel for the petitioner nextly relied on ajudgment of the Kolkatta High Court in C.E.S.C. Ltd., v. Deputy C.I.T(2003 ITR (Vol 262) 243) wherein, the High Court had an occasion toconsider the judgment of the Hon’ble Supreme Court in Commissioner ofIncome Tax v. Gujarat Electricity Board (cited supra) case, besidesthe judgments of various other High Courts. The relevant portion ofthe said judgment is extracted below:- “A further question therefore arises whether“summary assessment or the provisional assessmentor to be more precise, the assessment made on thebasis of the return itself under Section 143(1)(a) of the Act accepting appropriation to contingency reserve as an allowable expendituremerged in the order passed under section 143(3)of the Act wherein the aforesaid appropriation tocontingency reserve was disallowed ? “ What wasaccepted in the intimation has been reversed inthe regular assessment and the assessee haspreferred an appeal which is pending. I am firmlyof the view that this is a case where the theoryof merger is bound to apply because theintimation issued under section 143(1)(a) is nolonger operative in respect of the assessmentyears 1990-91 and 1992-93. The only order whichis effective and operative is the one passedunder section 143(3) of the Act.” 9.To hold that the intimation made under section 143(1)(a) ofthe Act merged with the order made under Section 143(3) of the Act,the Gujarat High Court has relied on the following judgments: “(1)CITv. Arihant Industries Ltd., (2002 (255) ITR 458 (Punjab & Haryana);(2)Gujarat Poly-AVX Electronics Ltd., v. Deputy CIT (Assessment)(1996 (222) ITR 140 (Gujarat) and (3)CIT V. Punjab National Bank(2001(249) ITR 763 (Delhi).” 10.The Kolkatta High Court after having analysed many morejudgments and also after having a scientific analysis of all therelevant provisions of the said Act, has ultimately held as follows:- 9.To hold that the intimation made under section 143(1)(a) ofthe Act merged with the order made under Section 143(3) of the Act,the Gujarat High Court has relied on the following judgments: “(1)CITv. Arihant Industries Ltd., (2002 (255) ITR 458 (Punjab & Haryana);(2)Gujarat Poly-AVX Electronics Ltd., v. Deputy CIT (Assessment)(1996 (222) ITR 140 (Gujarat) and (3)CIT V. Punjab National Bank(2001(249) ITR 763 (Delhi).” 10.The Kolkatta High Court after having analysed many morejudgments and also after having a scientific analysis of all therelevant provisions of the said Act, has ultimately held as follows:- “It follows that the effective and operativeorder is the one under section 143(3) of the Actand therefore the question of seeking to rectifythe order under section 143(1)(a) of the Act cannever arise.” 11.In view of the law laid down by the Hon’ble Supreme Courtin Commissioner of Income Tax v. Gujarat Electricity Board (citedsupra), after passing of an order under Section 143(3) of the Act,intimation under Section 143(1)(a) of the Act gets merged with thesaid order under Section 143(3) of the Act and the intimation underSection 143(1)(a) of the Act does not any more independently survivefor rectification by the Assessing Authority under Section 154 of theAct. To put it precisely, after an order has been passed in terms ofSection 143(3) of the Act, no rectification order under Section 154could be passed to rectify the intimation under Section 143(1)(a) ofthe Act. Thus, I agree with the law laid down by the Kolkatta HighCourt in Commissioner of Income Tax v. Gujarat Electricity Board(cited supra). In such view of the matter, since the rectification iswholly without jurisdiction, I hold that the impugned order passed bythe second respondent and confirmed by the first respondent is liableto be interfered with. 12.In the result, the writ petition is allowed and theimpugned order is set aside. No costs. Sd/-Asst.Registrar/True Copy/Sub.Asst.RegistrarjbmTo1.The Commissioner of Income-Tax,67A Race Course, Coimbatore – 641 018.2.The Joint Commissioner ofIncome Tax, Special Range III,Salem.+ 1 cc to M/s. R. Venkatnarayanan, Advocate SR.61854+ 1 cc to M/s. J. Neresh Kumar, Advocate SR.61512W.P.No.17819 of 2001KJ(CO)EU 2.09.2010.