1996 (7) TMI 128 - HC - Income Tax

Summary

Issues Involved:
1. Validity of the intimation/order u/s 143(1)(a) after issuance of notice u/s 143(2).
2. Whether simultaneous proceedings u/s 143(1) and 143(2) are permissible.

Summary:

1. Validity of the intimation/order u/s 143(1)(a) after issuance of notice u/s 143(2):

The assessee filed a return of loss for the assessment year 1993-94, claiming depreciation and setting off interest received against pre-operative expenditure. The Assessing Officer (AO) issued a notice u/s 143(2) to proceed with a regular assessment u/s 143(3). However, the AO later issued an intimation/order u/s 143(1)(a), rejecting the return and raising a demand of Rs. 1,30,83,741. The court held that once the AO opts to proceed u/s 143(3) by issuing a notice u/s 143(2), he forfeits the authority to act u/s 143(1). The AO must complete the assessment u/s 143(3) after issuing a notice u/s 143(2). The court quashed the intimation/order u/s 143(1)(a) and the demand raised.

2. Whether simultaneous proceedings u/s 143(1) and 143(2) are permissible:

The court examined the statutory provisions and concluded that simultaneous or parallel proceedings u/s 143(1) and 143(2) are not permissible. The issuance of a notice u/s 143(2) mandates the AO to proceed with a regular assessment u/s 143(3). The court referred to the Central Board of Direct Taxes (CBDT) Circular No. 549, which advises completing action u/s 143(1)(a) before issuing a notice u/s 143(2). The court emphasized that the AO must follow the procedure laid down in the Act and cannot revert to u/s 143(1) after initiating proceedings u/s 143(3).

Conclusion:

The court ruled that the AO could not issue an intimation/order u/s 143(1)(a) after issuing a notice u/s 143(2). The AO must complete the assessment u/s 143(3). The order and demand raised were quashed, and the AO was directed to proceed in accordance with the law. The court did not address other questions regarding depreciation and interest, focusing solely on the procedural issue. Rule made absolute to the extent discussed, with no order as to costs.