2002 (11) TMI 34 - HC - Income Tax

Whether after the notice was issued under section 143(2) of the Income-tax Act, 1961 (hereinafter referred to as the Act ), proceedings under section 143(1)(a) of the Act can continue. we see that there is no necessity for the continuance of section 143(1)(a) proceedings after the notice under section 143(2) is issued. To the above effect, there is a decision reported in Modern Fibotex India Ltd. V. Deputy CIT - We dismiss the appeal filed by the Department.

Summary

Issues:
- Whether proceedings under section 143(1)(a) of the Income-tax Act, 1961 can continue after the notice was issued under section 143(2).

Analysis:
The High Court of Kerala deliberated on the issue of whether proceedings under section 143(1)(a) of the Income-tax Act, 1961 could continue after the issuance of a notice under section 143(2). The case involved a co-operative society running spinning mills that filed a return showing a total loss for a specific assessment year. The return was processed under section 143(1)(a) by intimation, resulting in a net loss even after adjustments. The assessee appealed against the adjustments and additional tax levy, leading to further proceedings. The crux of the matter was whether the notice under section 143(2) barred the continuation of section 143(1)(a) proceedings.

The court analyzed the relevant provisions of the Income-tax Act, particularly Chapter XIV, which outlines the procedure for assessment. Section 139 mandates the filing of income returns, while section 143(1)(a) pertains to summary assessments. On the other hand, section 143(2) deals with regular assessments and controls the freedom of the assessee. The court emphasized that under section 143(1)(a), assessments are made based on produced records, whereas section 143(2) necessitates further inquiry through the issuance of a notice if deemed necessary.

The court referred to a decision by the Calcutta High Court in Modern Fibotex India Ltd. v. Deputy CIT, where it was held that once a notice under section 143(2) is issued, authorities cannot make prima facie adjustments or issue intimation under section 143(1)(a). This distinction was deemed deliberate by the legislature due to the nature of the two sections - summary assessment under 143(1)(a) and assessment preceding under 143(2). The court concluded that the word 'shall' in section 143(2) must be interpreted in the context of the Act's provisions and the consequences of non-compliance, leading to the dismissal of the appeal by the Department.

In light of the above analysis and legal interpretation, the High Court of Kerala dismissed the appeal filed by the revenue, affirming that section 143(1)(a) proceedings cannot continue after the issuance of a notice under section 143(2) of the Income-tax Act, 1961.