AGRA, FEB 23, 2009: ON account of difference between the Members of Agra Bench, this matter has been referred to the President as third Member u/s 255(4) of the Income Tax Act.
2. The facts of the case briefly stated are that the assessee filed return for AY 2002-03 declaring income of Rs.37,037 on 01.09.2003. The return was accepted u/s 143(1) and an intimation was sent to the assessee. Subsequently, the Commissioner of Income Tax called for record and noticed that
i) AO had failed to take note of low net profit from liquor business;
ii) Capital contribution of Rs.27,50,000/- shown in the names of partners;
iii) cash credits of Rs.11,95,512/.
He, therefore, issued show cause notice to the assessee to explain as to why the assessment framed without application of mind be not set aside and fresh assessment may be passed. The assessee objected to this course and one of the main pleas raised was that provisions of Section 263 could not be applied to the case where intimation u/s 143(1) is issued. CIT rejected the contention and ultimately issued the following directions:-
"7. I am fully satisfied to conclude that the order as passed u/s 143(1) on 1.9.03 was erroneous and prejudicial to revenue. Accordingly, the same is set aside de novo u/s 263 of the Act to be passed afresh."
The impugned order u/s 263 was challenged in appeal before the Appellate Tribunal. The JM was of the view that in the proposed order intimation sent by the AO was an "assessment" and, therefore, provision of Section 263 was rightly invoked by the CIT. She placed reliance on the decisions of Bombay and Madrash High Court.
The A.M., on the other hand, held that no action could legally be taken u/s 263 where summary assessment was made u/s 143(1) and intimation was sent to the assessee. He relied upon Calcutta and Allahabad High Court decisions. Ultimately, he held that intimation dated 01.09.00 issued u/s 143(1) was neither erroneous nor prejudicial to the interest of the revenue to apply provisions of Section 263 of the I.T.Act. The AM accordingly set aside the impugned order and allowed the appeal of the assessee in the proposed order.
On the above difference, the Members could not agree on the question which should be referred u/s 255(4) of the I.T.Act. There is unfortunate and acrimonious correspondence between the two learned Members on the question to be referred. However, no decision could be reached between the members and, ultimately, both the Members were transferred out of Agra Bench. The Registry, therefore, noted that this file was pending for disposal and sent the file to the President for disposal.
The President noted that the only question that arises for his determination is whether provisions of Section 263 are applicable to an intimation sent u/s 143(1) of the Income Tax Act.
He observed,
After intimation is issued u/s 143(1), the AO had full power to issue notice u/s 143(2) and make a regular assessment in terms of Section 143(3). The AO can also proceed where provisions of Section 147/148 are applicable. The DR. could not satisfy as to why provisions were not applied in this case. It was her opinion that time to invoke above provisions had expired and perhaps for that reason, proceedings u/s 263 were taken.
He referred to various decisions and noted that various High Courts in India are not unanimous whether provisions of Section 263 are applicable where only intimation u/s 143(1) has been issued, whether such intimation is in order or assessment to attract provisions of Section 263.
The President humbly stated, “As there is difference of view between different Hon'ble High Courts, I feel I am too small a person to resolve the legal controversy. I am very sure, that Hon'ble High Court, at an appropriate time, will take up and settle the issue.”
For the time being, it is clear from record that two reasonable views of the matter are possible. In such a situation, it has been laid down by Supreme Court in umpteen number of cases that the view which is favouring the assessee has to be taken. Accordingly, in the light of above principle, he agreed with the order proposed by the Accountant Member.
The matter was thereafter placed before the regular Bench which held, “The ld. Third Member has, vide paragraph no.11 of his order, endorsed the view taken by the ld. Accountant Member, i.e., that the Intimation under section 143(1)(a) of the Act cannot be sought to be revised under section 263 of the Act. In the result, assessee succeeds and the impugned order by the ld. CIT is set aside”
In the result, the assessee's appeal is allowed.
CAclubindia
