2001 (2) TMI 126 - HC - Income Tax

Summary

Issues Involved:
1. Legality of action u/s 154 after issuance of notice u/s 143(2).
2. Interpretation of sections 115J, 143(1)(a), 143(1A), 143(2), 143(3), and 154.
3. Validity of intimation u/s 143(1)(a) after notice u/s 143(2).
4. Propriety of the order u/s 154 after notice u/s 143(2).
5. Whether the Tribunal's order is perverse and contrary to law.
6. Justification of recomputing book profit u/s 154/143(1)(a) for section 115J.
7. Mutual exclusivity of sections 154 and 143(2).
8. Correctness of the Assessing Officer's interpretation of section 115J.
9. Violation of principles of natural justice.

Summary:

1. Legality of Action u/s 154 After Issuance of Notice u/s 143(2):
The Tribunal held that after the commencement of proceedings for making assessment u/s 143(3) by issuance of notice u/s 143(2), the assessing authority cannot rectify any intimation u/s 143(1)(a). The High Court affirmed this view, emphasizing that once notice for scrutiny of accounts is issued, relying on the intimation u/s 143(1)(a) is improper.

2. Interpretation of Sections 115J, 143(1)(a), 143(1A), 143(2), 143(3), and 154:
The Tribunal interpreted that sections 143(1) and 143(2) should be read together, indicating that even when intimation u/s 143(1)(a) has been issued, the power u/s 143(2) can still be exercised. The High Court agreed, noting that the intimation u/s 143(1)(a) is without prejudice to the provisions of section 143(2).

3. Validity of Intimation u/s 143(1)(a) After Notice u/s 143(2):
The Tribunal held that if the Assessing Officer has already issued a notice u/s 143(2), he cannot send any intimation on the basis of a return filed. The High Court supported this, stating that the right of the Assessing Officer to proceed u/s 143(2) is preserved and not taken away by the intimation u/s 143(1)(a).

4. Propriety of the Order u/s 154 After Notice u/s 143(2):
The High Court noted that the order u/s 154 was passed after the issuance of notice u/s 143(2) and during the pendency of the proceedings for assessment u/s 143(3). It concluded that any change permissible should be effected in the assessment u/s 143 and not by exercising power u/s 154.

5. Whether the Tribunal's Order is Perverse and Contrary to Law:
The High Court did not find the Tribunal's order to be perverse or contrary to law. It upheld the Tribunal's decision that the action u/s 154 was not in order after the issuance of notice u/s 143(2).

6. Justification of Recomputation of Book Profit u/s 154/143(1)(a) for Section 115J:
The High Court did not delve into whether the rectification done by the Assessing Officer could be termed a mistake apparent from the record. It noted that the Commissioner of Income-tax (Appeals) himself was unsure if the mistake was an arithmetic error or a matter of law requiring deliberations.

7. Mutual Exclusivity of Sections 154 and 143(2):
The High Court agreed with the Tribunal that sections 154 and 143(2) are mutually exclusive. Once proceedings u/s 143(2) are initiated, recourse to section 154 is not warranted.

8. Correctness of the Assessing Officer's Interpretation of Section 115J:
The High Court did not specifically address the correctness of the Assessing Officer's interpretation of section 115J, focusing instead on the procedural aspects of sections 143 and 154.

9. Violation of Principles of Natural Justice:
The High Court did not explicitly address the violation of principles of natural justice but implied that the procedural safeguards in sections 143 and 154 were sufficient to protect the assessee's rights.

Conclusion:
The High Court dismissed the appeal, affirming the Tribunal's decision that the action u/s 154 was not permissible after the issuance of notice u/s 143(2). The court emphasized the procedural integrity of sections 143 and 154, ensuring that the Assessing Officer's powers are